1

CALD Series II Technical

Objective of CALD: to update expertise in EPC

Offshore Upstream Oil & Gas Business Training Module

Title

: Marketing and Business Development

(Domestic)

Faculty

: N. K. Chandwani and Rupchand Lohana

Date

: 29th August 2007

Venue

: MFF Hazira
Organized by: E&C - HR

OGSP E&C
Larsen & Toubro Limited

Marketing & Business Development

CALD

Introduction
What essentially is Marketing in the EPC Business Context?
Different from Marketing in the conventional sense

Focus Markets, Products and Services:

Focus Market: Domestic Upstream Offshore Hydrocarbon Sector
Products: Offshore Platforms and Modules
Services : Installation, Oil Field (Future)

Target Clients:
E&P Companies in India
Other EPC Companies for fabrication of Modules

OGSP E&C
Larsen & Toubro Limited

Marketing & Business Development

CALD

Focus Market: Indian Offshore Region

Western Offshore consisting

of fields such as Bombay

Gulf of
Cambay

INDIA
ONGC
Marginal
fields

High, Heera, Neelam, Panna,

Bassein, Tapti Fields

KG Basin

Eastern Offshore consisting

of fields such as the KG

Basin, Cauvery Basin, Deen

Dayal Field
MHN, MHS,
Vasai, Bassein
& Satellite,
Neelam, Heera,
Panna, Mukta,
Tapti fields

OGSP E&C
Larsen & Toubro Limited

Cauvery
Basin

Marketing & Business Development

CALD

Understanding EPIC and LSTK

EPIC:
Engineering, Procurement, Installation and Commissioning

LSTK: Lumpsum Turnkey: Total Project responsibility

Fixed Price
Fixed Scope
Fixed Schedule
Usually the funding responsibility of the Project is with Customer

From an Offshore Perspective:

Technical Capability
Experience
Risk Appetite

OGSP E&C
Larsen & Toubro Limited

Marketing & Business Development

CALD

The Clientele
Oil and Natural Gas Corporation Limited:
Largest E&P Company operating in India, owns 95% of assets in
the region
Over 130 Well platforms and 38 Process Platforms

Reliance Industries:
First deepwater asset in India, East Coast

British Gas India:

Operate mainly in western Offshore

Cairn Energy:
Offshore/Onshore Upstream

GSPC:
New entrant, enterprise of Gujarat Govt.
Other Private Companies: HOEC, Niko
New Players in Offshore explorations: HPCL, GAIL
OGSP E&C
Larsen & Toubro Limited

Marketing & Business Development

CALD

Business Prospects and Trends

Over 8 billion USD (Rs. 35,000 Cr.) of Investment in
Conventional Offshore Projects expected in India over the
next 5 years
Types of investments:

Development of Marginal fields

Revamp and Turnaround Projects
Pipeline Projects (Replacement and Greenfield)
New Field Development

Large value Tenders from ONGC becoming more common

Initiative through NELP will further bolster Capex in Upstream.
OGSP E&C
Larsen & Toubro Limited

Marketing & Business Development

CALD

New Exploration and Licensing Policy

NELP: formulated by the
GoI in 1997-98 to provide a
level playing field, on which
all parties would compete,
for the award of exploration
acreage.

Since then , this policy has

well evolved and six rounds
have been completed
More than 70% of Offshore
blocks in NELP VI are in
Deep Water
OGSP E&C
Larsen & Toubro Limited

Marketing & Business Development

CALD

NELP Discoveries
Bidding
Round

Operator
Cairn

Pre NELP

NELP I

NELP III

Oil

Oil/Gas

Grand Total

13

19

Essar Oil Limited

FOCUS

GSPC

HARDY

Cairn

ONGC

RIL
NELP II

Gas

19

GSPC

1
1

2
1
2

4
1
1

20
2

ONGC

RIL

GSPC

RIL

OGSP E&C
Larsen & Toubro Limited

3
As on March 2007

Marketing & Business Development

CALD

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NELP VI - Results
OPERATOR
ONGC
RIL

Deep Water

On Land

Shallow Water

Grand
Total

12

10

24

OIL

NAFTOGAZ

SANTOS

GSPC

ESSAR OIL

GSPC - GAIL

FOCUS

CAIRN ENERGY INDIA

PETROGAS

PRIZE PETROLEUM

GEOGLOBAL

Grand Total

OGSP E&C
Larsen & Toubro Limited

21

25

52

Marketing & Business Development

CALD

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Competition
The Old Biggies Global EPC Companies:
J Ray McDermott, Saipem, Technip, Hyundai

Companies from the Middle East:

NPCC, IOEC

Indian Companies:
Punj Lloyd, EIL

Other New World Companies:

Samsung, Clough Offshore, Sime Darby, Naftogaz, Leighton

OGSP E&C
Larsen & Toubro Limited

Marketing & Business Development

CALD

Strengths and Challenges

Our USPs:

Strategic Location of MFF, Hazira

Yard at Oman Functioning from April 2007
Good Track Record of Projects in recent past
Extensive Experience with ONGC, familiarity and acceptance to
Terms and Conditions
Price Preference and In-bond manufacturing
Better grasp of Local Laws and Taxation methods

Areas of Growth and improvement:

Increase in-house content in Projects

Convert Capacity Constraint as an opportunity to expand
Develop Installation Capabilities
Enter new areas e.g. Oil Field Services
OGSP E&C
Larsen & Toubro Limited

Marketing & Business Development

CALD

12

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Bidding cycle

Pre-qualification
Purchase of Tender Documents
Technical Evaluation of Tender followed by queries
Contractual Evaluation of Tender followed by queries
Pre-bid conference with Customer
Develop Bidding Strategy in terms of Partnering, Consortium
Proposal Engineering, Estimation, MTOs etc
Floating RFQs and Costing
Pricing and Bid Submission
Techno-contractual Bid Opening
Evaluation by Client
Price opening of qualified Bids
Award of Contract

OGSP E&C
Larsen & Toubro Limited

Marketing & Business Development

CALD

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Marketing Functions
Tendering of Bids:

Bidding strategy, Schedule and execution Methodology

Contractual study
Comprehensive Pre-bid Risk Analysis
Pricing and Margins
Coordinate with Internal and External agencies for all bidding
activities

Developing and maintaining relationship with Customers

Keep a close watch on the Market to understand Spends and
Trends of Customers
Real-time competition study to pre-empt their moves
Look for possible and viable partnerships
Pre-qualify with new Clients or for new Jobs
Monitor the Progress of other Ongoing Projects
Set sales target and order booking during SBU Budgeting
Participate in various forums to exhibit L&Ts capabilities in the
Sector
OGSP E&C
Larsen & Toubro Limited

Marketing & Business Development

CALD

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The EPC Contract

The Contract is the most important document and forms the
basis to any Project undertaken
Contains the exhaustive Terms and Conditions that require
the parties involved to abide by under various Project
circumstances.
Some of the key terms and conditions are:

Bid Bond requirement

Performance Bank Guarantee
Liquidated Damages
Payment terms and Milestone formula
Currencies and Taxation
Force Majeure
Consortium

OGSP E&C
Larsen & Toubro Limited

Marketing & Business Development

CALD

16

Key Contractual Aspects

Bid Bond:
Issued by Bank
Value Rs. 2 Cr.
Validity: 120 days from Date of Bid Submission

Solvency Certificate:
Measure of financial condition, issued by Bank
30% of Annualized Contract value as a minimum for solvency

Performance Bank Guarantee:

Issued by Bank
5% of Contract value, valid up to Project Completion date + 60
days
5% of Contract value, valid up to Project Completion date +
Warranty Period +60 days

OGSP E&C
Larsen & Toubro Limited

Marketing & Business Development

CALD

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Key Contractual Aspects

Liquidated Damages:
Recovery of 0.5% of Contract value per week of delay or pro rata
for part thereof, subject to a maximum of 10%

Force Majeure:
Enlists cases under which either party can terminate the
Contract without being liable to any terms and conditions, under
circumstances beyond the Control

Payment Terms:
Milestone based payments, important from a working capital
point of view

OGSP E&C
Larsen & Toubro Limited

Marketing & Business Development

CALD

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Business Development
Program Lakshya Strategic Plan:
Lays down growth targets and plans for the SBU
Upstream cluster targets to achieve a annual turnover of USD 1
Billion by 2009-2010.
Identify newer areas of growth in line with the vision, mission
and ethos of the Company

New Initiatives:

Installation JV
Oman Yard JV
Deep Water foray
FPSO & Rigs
Other possible M&As

Currently, OGSP contributes to more than 10% of the L&T

Turnover and is all set to grow even more. Highest Turnover
per employee
OGSP E&C
Larsen & Toubro Limited

Marketing & Business Development

CALD

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Best wishes
Thank you!!

OGSP E&C
Larsen & Toubro Limited

Marketing & Business Development

CALD