ONGC Fuelling Growth
Sudhir Vasudeva, CMD, ONGC

ONGC has been billed as one of the best brownfield managers in the world petroleum industry, for managing the production from its old oilfields appreciably well, says Sudhir Vasudeva, CMD, ONGC

ONGC's Consistent Performance
ONGC's consistent production profile during last few years has been driven by technological interventions on its ageing fields. The company has taken tailored projects to improve oil recovery that has helped it to maintain production from its oil-fields, which are of 30-40 years vintage. If one looks at the last five years, the hydrocarbon conglomerate's production is stagnant at 52 -53 million tonnes of oil and oil equivalent gas from India and if ONGC adds overseas production of ONGC Videsh Limited (OVL) also then it comes to around 60 million tonnes. If it is stagnant at this level, it is only because of its aggressive efforts. Had ONGC not taken these efforts, domestic production would have gone down by at least 8 million metric tonnes (MMT), which is the normal decline from such old fields globally. ONGC's technological interventions like Increased Oil Recovery (IOR) and Enhanced Oil Recovery (EOR) efforts are giving it 8 MMT of additional oil. Its capex expenditure for these interventions is valued at around Rs 41,000 crore. Out of this, Rs 35,000 crore has already been spent. There are 24 schemes; 16 schemes have already been completed as it has started these back in 2000-01. Eight schemes are continuing. They have so far given the company 80 MMT and cumulatively, it expects 172 MMT would arrive from these oil-fields by 2030 .

Today, ONGC is producing from more than 110 fields but nearly 71 per cent of its production is coming from 15 major oil fields like Mumbai High, Neelam, Heera, Navagam, Geleki, Rudrasagar, Ankleshwar, Gandhar,etc. Among these fields, Mumbai High is the youngest - 37 years old, while Rudrasagar and Ankleshwar were the first ones that the company discovered and started production 52 years earlier. It is very challenging to maintain the production from these old fields at same level at which they were started.

Frontier in Shale Gas Exploration in India
ONGC's journey in Shale gas has gathered further momentum with the announcement of Shale Gas Policy by the Goverment of India in November, 2013 . As per this policy, ONGC and OIL are to explore and exploit shale resources in 176 identified on-land areas where these two companies are already engaged in either exploration or production of conventional oil and gas. ONGC has already drilled its first exploratory shale gas well in Cambay Basin area immediately after the new policy announcement. ONGC has plan of drilling 30 more wells in the next two years with an investment of about Rs 600 Crore. ONGC is quite hopeful to usher in a new era of energy for the country.

Plans for Foraying into Retail
ONGC has licenses for 1600 retail outlets between the company and its subsidiary MRPL. It had started and today it has outlets operating in Mangalore. But when it started, the issues of all this subsidy mechanism, regulated price for diesel and gas erupted, so it had put retail business on the backburner.

Today, the company has a refinery in Mangalore with 15 MMT capacity and ONGC has plans to make it 18 MMT during 12th five year plan; it will take it to 21MMT in 13th five year plan. India's energy anchor is also looking into Rajasthan refinery where HPCL has taken a majority stake. In Nagarjuna refinery in Kandalur, ONGC is doing the due diligence. So, ONGC is consistently increasing its refining foot-prints and with that, it wants to be in the marketing of the refined products as well. With license of 1600 outlets, as and when the diesel is fully de-regulated, it wants to be in retail business. ONGC doesn't have experience in retail and marketing and even MRPL has a limited experience. Hence, the company will see if it wants to float a separate company for retail; ONGC is studying that various dimensions of that.

Diversifying Business
ONGC is integrating energy value chain to strengthen its balance sheet, which is required for its core business of oil & gas exploration and production. To monetize its natural gas reserves in Khubal area in north Tripura, ONGC has entered into a Memorandum of Understanding (MoU) with Chambal Fertilisers and Chemicals Ltd (CFCL) and the Government of Tripura for setting up a urea fertiliser project in the state. Unless it monetises its gas reserves there, these would be stranded in the area due to poor industrial and evacuation avenues there. ONGC’s gas-based power project at Palatana in Tripura, the largest investment in north-east India, was the first project for monetisation of the stranded gas.

Expected Growth for Current Financial Year
During the current financial year 2013-14, ONGC has production target of 24 .08 MMT of crude oil (standalone), 6.75 percent higher than the last year's actual of 22.56 MMT. This year ONGC doesn't expect much growth in gas production, which may be of the same level as the last fiscal and its target is 23.44 Billion Cubic Metres (BCM). However, with the development of ONGC's new fields, gas production is expected to increase from 2014-15 onwards.

The capex plan for the year 2013-14 is around Rs 35,049 crore compared to actual utilisation of Rs 29,508 crore in 2012-13. Out of this, ONGC will be investing 30 per cent for survey and exploratory exploration drilling; 23 percent for development drilling; 42 per cent on capital projects and purchases and balance 5 per cent on research & development, domestic joint ventures and integration projects.

Impact of Rupee Depreciation
Depreciation of Rupee has a mixed impact on ONGC's financials. The positive side is that its gross realisable price for crude oil and gas increases. It has negative impact as well. ONGC’s cost of oil-field services or import of equipment increases. However, the biggest issue is that in case the existing underrecovery mechanism continues, subsidy burden may increase. As after the Government of India, ONGC bears maximum subsidy, ONGC's net realisation on crude sales will be affected.

Overseas Assets Acquisition
Diplomacy plays a very crucial role in acquiring energy assets worldwide. Instead of competition, collaboration may be a more effective option in the current global energy dynamics. ONGC is working with Chinese companies in various overseas projects like Sudan. ONGC is better to leverage the positive aspects of Chinese strengths for its benefit.

CSR Activities
The kind of work public enterprises companies are doing usually goes unsung. ONGC has been into community development even before the CSR term was coined . With a profit of over Rs 20,000 crore, ONGC has a budget of Rs 400 crore plus for CSR every year. Many state governments do not have that kind of budget for philanthropy. ONGC started in early 2000 when the company committed 0.75 percent and brought it up to 2 percent. Even today when the statutory range is between 0.5-2 per cent, ONGC has voluntarily stuck to 2 percent of the Profit-After-Tax (PAT). Today, ONGC has 12 verticals under CSR, where it has decided to invest in a projectised format. These include education, healthcare, women empowerment, entrepreneurship development, supporting artisans, preserving heritage monuments, sports promotion. In sports, ONGC has more than 100 active sports-persons and over 200 are on scholarships. Last year, ONGC was the principal sponsor of Indian contingent for the London Olympics. ONGC is also opening sports academy in Dehradun at a capital investment of Rs 50 crore and investing another Rs 20 crore in Tripura to build a stadium. The company is also contemplating opening an archery training academy in Jharkhand or Kolkata and opening another indoor academy in Bastar in Chhattisgarh. Maintaining Taj Mahal was ONGC's idea and finally the Minister of Tourism Chiranjeevi has now agreed upon that. Even if the project is valued over Rs 100 crore, ONGC has pride in maintaining the iconic heritage monuments of this great country.

Performance of Public Enterprise as a Whole
The fundamental strength of any organisation is tested in challenging times. In the difficult times, it is the public enterprises that have sustained investments for vital economic sectors in last few recessions. Today, 22 percent of the market cap of BSE is represented by public enterprises. And this is notwithstanding the fact that full value of public enterprise scrips are yet to be fully unlocked. As a Maharatna public enterprise, ONGC has been on top of value creation indices.

Sudhir Vasudeva, CMD, ONGC takes pride in articulating that we have to understand that the private company promoters are also playing on the public money while we are more accountable for the public money we are dealing with . For PSUs, I can only say that today we have a lot of constraints within which we are expected to perform and compete with private enterprises, which are relatively much less accountable. If anybody has any doubt on PSU capability, then I can only say bring competition. Just to give you example today in oil industr y in India, all those who are heading the private oil companies are basically groomed in the business by ONGC. So, we can justifiably say that ONGC is India's Energy.