Birth of offshore in India - part 2

The next big challenge in building the offshore industry was to master the practical side of the offshore work and part 2 tells how we did it.

============

Mastering offshore technology

While we had continued to make progress indeveloping our capabilities in the offshore area in

EIL, the fact was that our team had little practicalexperience in actually designing new offshore

installations. It was then that I came face to face with another facet of working in a developing country – no domestic company and certainly not the government owned public sector companies wanted to hire domestic consulting companies.

“Look,” one of the chief executives of an Indian public sector company explained to me, “I am responsible for quality and cost of all major investments and design, and engineering costs are generally less than 10% of the investment. By hiring your company, I may save perhaps 1%, which while large is really insignificant in terms of the total projected investment. But if anything should go wrong – a design mistake, an equipment failure due to your inexperience - the cost to my company would be huge. And worse, the same self reliance crowd today urging me to develop domestic capability will be braying for my blood! If I were, however, to hire the best international consultancy company, I would pay a higher fee but if anything went wrong, at least I would not be pilloried

and investigated by the parliament. So, quite frankly, there is really no incentive for me in the present

system to promote domestic design or engineering competence.”

Recognizing these limitations, we formulated a different strategy- we would buy this experience

and expertise by associating with an international consulting company. We looked around and found

a number of the international companies who were willing to work with us on a longer term basis. For us, the gains were obvious: we would overcome the resistance of the Indian public sector by working with an experienced international company, we would acquire expertise on the job and the client would be satisfied that they were working with the best in the world. For the international consultancy company, the gains were less obvious. We argued that their association with us would provide them an entrée into the growing Indian offshore market, that we already had a core group of well-trained professionals who could work with their senior experts, and that our cheaper costs could be used by them for winning assignments with other clients around the world. I visited a number of international consulting companies in the next few months to select an appropriate back up consultant for our projects.

It was conventional wisdom that the best path for the acquisition of technology was to start with research and development and then develop basic engineering, followed by detailed engineering and fabrication. I decided that perhaps the process could be accelerated if we could do “reverse engineering”; that is start with performing detailed engineering and then integrate backwards into basic engineering. In this case, we could begin by supervising the design, fabrication and

installation of offshore platforms by an international contractor as a means of acquiring technology. During this period, with the help of the back up consultant, our team would understand and learn the practical side of engineering design and fabrication. We could then move on to designing the simpler facilities jointly with the international consultant. In the next stage of the reverse engineering approach, the proportion of work being done by the back up consultant could be reduced in direct proportion to the technology and confidence gained by EIL. And in the third stage, the entire work could be done by EIL with only limited assistance from the back up consultant. Also, we could, theoretically have the ability to alter the designs of platforms in a manner to ensure that local manufacturers and suppliers could provide necessary equipment and instrumentation, thus further localizing the effort.

We were lucky to be able to try out this strategy.ONGC had discovered oil offshore of Bombay High in 1974. This was its first offshore oil discovery. Though ONGC had more than adequate experience in oil production on land, it had none in the offshore area.

With a new chairman, NB Prasad, at the helm, and stimulated by the recent rise in oil prices, ONGC was in a hurry to develop this field at the earliest. They had decided to give a $100 million turnkey contract to McDermott, an American company with a tight time schedule. I made a case to Prasad that since this offshore development was going to be long term, EIL should be permitted to develop the engineering design capability for all offshore work. After all, EIL was a sister Government of India company; we had already started some work in the area, and had pulled together some Indians who had worked abroad in the industry. He was very reluctant, but was finally persuaded by Manmohan since we also had the back up consultant Crest Engineering already signed up.

Reluctantly, ONGC retained the EIL/Crest consortium to carry out a design review of the turnkey contractors work and also to supervise the total assignment on its behalf. We persuaded Prasad to require the turnkey contractor to submit all designs, calculations and drawings to EIL for approval as the designated ONGC representative. This approval of EIL was made compulsory before any payments were released to the contractor. Technically, the owner, ONGC, had the right and obligation under the contract to approve not only the design, but also the fabrication and construction. The trick was persuading ONGC and McDermott to let EIL play that role on its behalf. I am sure the presence of an experienced company like Crest working with us reassured both ONGC and McDermott, that their work would not be hampered. We on our part had already assured them that the turnaround on all issues would follow international norms and that there would be no delays ascribed to our team. But instructions to our team were clear – they were to learn everything about offshore

technology they could during the review process.

Meanwhile, there were changes afoot in EIL’s management. Manmohan Pathak had decided to

leave the company and left the senior managers a letter outlining the reasons for his abrupt departure.

He had come under increasing pressure, as he had also become member of the Planning Commission

in addition to his chairmanship of EIL. His eyesight had given way under the tension, he wrote, and he needed to move to the US for further evaluation and treatment. There were, of course, other unconfirmed rumors that he had fallen foul of the minister or prime minister on the issuance of some contracts. In OED, there was much concern that with his departure, we would find it difficult to persuade ONGC and others to continue to utilize EIL for the offshore effort.

Fortunately EIL was to emerge from these changes as a much more disciplined engineering organization and OED’s relationship with ONGC also improved.

With the success of the first well project, ONGC was now willing to hand over the design of the simpler well platforms to the EIL/Crest combine. Three projects, each of the order of $30-40 million, were awarded to EIL for basic engineering. EIL’s core team had now grown in confidence and with the increased workload, the total strength of OED soon reached 60-70. By the end of the decade, the EIL/Crest group was doing basic engineering for almost all the offshore platforms and, as EIL’s confidence grew, the role of the back up consultant declined sharply.

While our team had mastered the design of well platforms, we still felt that to be perceived as a

comprehensive consultative group, we needed to design major process platforms. Our opportunity

finally came in 1978 when ONGC summoned us to start work on the first major processing platform

in Bombay High, the BHN platform. This would be the hub of all production in the northern part of the Bombay High field and the key-processing center for all offshore oil production in the country at that time. We put together our main core team and started discussions with the ONGC staff in regard to the specifications. We soon ran into problems. The various departments of ONGC each had different ideas about the space and equipment they needed to be installed.

After two months of this, I decided to approach the chairman of ONGC to make a decision. I told him

that if we were to provide all that his staff wanted on the platform, we would need not one but two

platforms, and the cost would double. We suggested that ONGC follow the international specifications for offshore operations rather than trying to import the onshore systems they were familiar with. After a furious debate, the chairman ruled that as we were entering into a new area of technology and one in which neither ONGC nor the Russians, our consultants for all onshore work, were experts in, we would follow the offshore industry standards and norms in the design and layout of the platform.

With the completion of this process platform, we now felt that OED in EIL had acquired the

capability to design all types of offshore installations with increasingly limited help from our back up

consultants.

Along with this development, grew a demand from the local industry that they also be given the

opportunity to participate in this exciting new venture. 

Mazagaon Shipyard (MDL) in Bombay had an aggressive commercial director who told me he

wanted our help for getting into the fabrication of offshore platforms. We arranged a trip for him to

visit the shipyards in Dubai and Singapore with his team. But MDL, since they had no experience in the area of offshore fabrication, was reluctant to make the investment of $6-8 million required for setting up the special facilities needed. EIL then offered as their consultant, to help them plan and set up facilities and worked with them to persuade ONGC to take their production on a trial basis if it met international quality standards and was competitive. In the space of two years, MDL set up its fabrication yard and ONGC placed orders with them for four offshore platforms at a cost of about $7 million.

These platforms were the first ones to be designed by EIL and fabricated under their supervision in an Indian shipyard. Another shipyard, Hindustan Shipyard Limited, ventured into the fabrication of offshore supply vessels with the help of EIL.

Thus, in the short space of ten years, EIL’s OED had not only managed to acquire and digest this high

technology, it had also set up an aggressive R and D program. With staff of 130, it became involved in designing three to six platforms per year, accounting for a turnover of over $7 million. By the end of the decade, it had become the chief designer of all offshore installations in the country. 

We had started from scratch in 1970, put together a committed group of young professionals, worked with the best expertise the international industry had to offer and remained focused on our long-term objective - mastering offshore technology. 

Many of those who had helped build the OED in EIL had later gone onto become leaders of the offshore oil industry around the world – Saeed Khan retired as managing director of Kwaerner International in Singapore, S.C. Mathur and Vijaykumar worked as senior vice presidents in Hyundai Engineering in Korea, M. Nataraj became director of Mazagaon Dockyard, which we had put in the offshore business in the seventies, Dr Utpal Dutta became managing director of Triune, a private sector company set up in competition with EIL, and three of OED staff – Hari Kaul, P.K Agarwal and P. Mukerjhee- ended their careers as Directors of EIL.

It had taken us a decade, but we had shown that given an opportunity and the right leadership, India could acquire and master the most intricate of technologies.