L&T to partner domestic oil giants

Engineering and construction major Larsen & Toubro is seeking alliances with domestic oil and gas majors such as Oil and Natural Gas Corporation, Indian Oil Company and GAIL India to bid for international projects.

A M Naik, chairman and managing director, said the company would approach ONGC and GAIL India very soon. "We will revive our understanding with IOC as well," he said.

"We had a memorandum of understanding with IOC and Engineers India long ago to work together outside the country. The pact possibly died its natural death because of dearth of projects outside India. Now with new projects gaining momentum, we will revive the understanding," Naik said.

The initiative will give an impetus to L&T's hydrocarbon division, which has a turnover of Rs 2,500-3,000 crore (Rs 25-30 billion). L&T has already started working on a consortium model.

Recently, its consortium with Outokumpu Technologies of Germany and Paul Wurth Italia won Rs 1,550-crore (Rs 15.5 billion) contracts for the expansion of Tata Steel.

Naik further said L&T and EIL would shortly go in for an international bidding. He clarified that L&T would not sign a formal arrangement with ONGC as the latter, being a public sector company, cannot strike an official deal on this.

The broad contours of the proposed understanding indicate that L&T would associate with these companies when they would bid for overseas projects. The association would, however, be confined to those countries in which they had no formal tie-ups with local players.

"In case we have a formal arrangement with a local player, we will participate through competitive bidding," he explained.

Industry sources said the model -- a familiar arrangement among Japanese bidders, who have practised this for years -- was expected to yield results shortly.

A consortium, when wins a contract, brings the best technology and saves time as well. An industry expert opined that the consortium, especially in engineering, was the fashion of the age of super-specialisation.

L&T is attaching huge importance to its international operations. It has set a target of trebling its international business turnover to Rs 4,500 crore (Rs 45 billion) from the current Rs 1,500 crore (Rs 15 billion) in five years.

ONGC Videsh, ONGC's international operations arm, along with its partner, IPR Energy Red Sea Inc, a Texas Independent IPR subsidiary, recently signed the North Ramadan Concession Agreement with the Egypt government.