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Oilcos get Shell shock on plant lift contract

8 May 2009, 0449 hrs IST, Rajeev Jayaswal, ET Bureau

NEW DELHI: The petroleum ministry has asked state-owned oil companies Indian Oil Corp (IOC) and Bharat Petroleum Corp Ltd (BPCL) to reverse their decision of awarding refinery upgadation contracts to Shell Global Solutions without inviting bids.

A ministry official confirmed the development. “The government has directed the Centre for High Technology (CHT) and refineries to invite global tenders to award the contract, he said, requesting anonymity.” 

CHT is the technical advisory body of the petroleum ministry that also coordinates refinery upgradation projects for state-owned oil companies. 

The IOC and BPCL boards have already approved the refinery upgradation projects for their Haldia and Mumbai refineries, respectively. But two other public sector companies- Mangalore Refinery & Petrochemicals (MRPL) and HPCL- have now decided against circumventing the tender route for awarding the contracts to Shell Global Solutions, a senior executive of an oil company, who didn’t wish to be named, said. 

Public sector companies are not allowed to award contracts to any entity without inviting open tenders. ET had reported on April 2 that the government was examining irregularities in awarding refinery upgradation contracts to Shell Global Solutions. 

The issue dates back to 2006 when petroleum ministry and its technical advisory body CHT had selected Shell Global Solutions to implement an integrated refinery business improvement programme (IRBIP) in four refineries; BPCL’s Kochi refinery, the Mathura refinery of IOC, HPCL’s Visakhapatnam refinery and the Manali refinery of Chennai Petroleum Corp Ltd

In July 2008, the CHT, chaired by the then petroleum secretary, decided to extend the IRBIP programme to four other refineries on nomination basis, a member of CHT who was present in the meeting said. The four refineries were HPCL’s Mumbai refinery, Haldia refinery of IOC, Mangalore refinery of MRPL and BPCL’s Mumbai refinery. 

CHT signed an agreement with Shell Global on modified term that included a fee of 5.2 million Euros and 7.5% of the benefits derived by the refineries due to implementation of the programme, he said, requesting anonymity.

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