Energy giant

Print edition : March 14, 2008

The Bombay High South production complex of the ONGC off the Mumbai coast.-BY SPECIAL ARRANGEMENT

The Oil and Natural Gas Corporation, Indias number one oil producer, is in the select league of global oil majors.

THE Oil and Natural Gas Corporation (ONGC), Indias premier energy company, ranks first among the oil exploration and production (E&P) companies in Asia. It is in the select league of global oil majors producing more than one million barrels of oil equivalent a day. Its production of crude oil for 2006-07 stood at 26.05 million tonnes, accounting for 80 per cent of the domestic production. The ONGC is the highest profit-making corporate in India, with a net profit of Rs.15,643 crore in 2006-07. Its net profit touched Rs.12,000 crore in the first three quarters of 2007-08 itself.

R.S. Sharma, its Chairman and Managing Director, says: Over the last few years, the ONGC has scaled new highs in every sphere of corporate performance. While a part of this growth has been driven by oil price increase, it is mostly owing to well-studied plans, focussed hard work, and ambitious and integrated business strategies.

In order to ensure energy security for India, the ONGC operates globally through its wholly owned subsidiary, ONGC Videsh Limited (OVL), which has 35 oil and gas projects in 17 countries. R.S. Butola, Managing Director, OVL, calls it the international petroleum company of India and the nodal agency for acquiring equity oil and gas assets overseas.

If the ONGC has today built itself into one of the biggest hydrocarbon E&P companies in the world with a handful of geoscientists, it is because of the vision of K.D. Malaviya, Minister for Natural Resources and Scientific Research in the Jawaharlal Nehru Cabinet. Malaviya battled scepticism, bureaucratic roadblocks and the arrogance of some science administrators to put India on the oil map of the world. The issue of ONGC Reporter brought out in 1996 to celebrate 40 years of growth of the company says, From a small Directorate in 1956, it has become a monolith today. It has discovered six of the seven oil-producing basins in India. They are the Cambay Basin, the Rajasthan Basin, the Assam-Arakan fold belt, Mumbai offshore, the Krishna-Godavari Basin and the Cauvery Basin. The Assam Shelf was discovered in 1889.

The ONGC has been keeping pace with the technological changes in the global market, said M. Rajagopala Rao, Group General Manager (geophysics-surface). It has 11 world-class institutes for technology upgradation and five virtual reality centres to step up accuracy in its exploration efforts. These centres are among the top 10 in the world. An energy centre called Rajiv Gandhi Urja Bhavan would come up in New Delhi to undertake research on alternative sources of energy, he said.

The ONGC today is a full-fledged, vertically integrated company. It acquired a majority stake in an ailing Mangalore Refinery and Petrochemicals Limited in 2003 and turned it into Indias most efficient refinery in capacity utilisation (129 per cent). It is scripting three mega downstream Special Economic Zones in Mangalore in Karnataka, Kakinada in Andhra Pradesh and Dahej in Gujarat.

The ONGCs profitability would have been higher but for the subsidy burden faced by it. The net price it gets from the Centre for a barrel of oil produced by it is only around $55 against the international price of $90.

However, there are several issues that remain to be addressed. Its crude oil production has remained stagnant at about 26 million tonnes from 2002-03. It is not expected to be more than 26 million tonnes for 2007-08.

Although the ONGC has sunk more than $1 billion in the vaunted Sagar Samriddhi programme for exploration in the deep and ultra-deep waters off Indias coast, the result has only been a mixed bag of successes and failures. There has been only one significant gas find each in the Krishna-Godavari and the Mahanadi basins. Eight deep-water wells drilled in the west coast (the Kerala-Konkan coast) turned out to be dry.

Reliance, which got some blocks in the Kerala-Konkan coast, has also drawn a blank. But Reliance has demanded that the Kerala-Konkan coast should be declared a research and development (R&D) area. The ONGCs geoscientists are opposed to it. If Reliance wants the area to be declared R&D, it should not have bid for the blocks in the first place. If the government thinks that some more R&D is required to be done on the west coast, it should be done by the ONGC, which is well-equipped for it, one of them said.

Shortage of rigs for deep- and ultra-deep water exploration is an important issue that is plaguing the ONGC. Its officials suggested that the Centre re-orient the New Exploration Licensing Policy-VII (NELP) so that more exploration was done on land and shallow waters, thus converting a challenge into an opportunity.

The rigs that are being fabricated today for deep-water exploration will be ready only by 2010. A suggestion has been made that rigs can be shared by different oil companies. This, however, needs, big coordination, an official said.

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