ONGC Secures Top Position and Intends to Stay There

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Researched by Industrial Info Resources (Sugar Land, Texas)--The Indian economy has seen several post-recession success stories and Oil & Natural Gas Corporation (BSE:500312) (ONGC) (New Delhi) has one such story to be proud of. Earlier this month, Platts (New York, New York), the global energy and metals information provider, released its international rankings of energy and coal firms around the world. ONGC secured the top position and has become Asia's foremost oil and gas production company. ONGC was also ranked as the fastest-growing Asian oil company in the Exploration and Production (E&P) category. In an interview with Industrial Info Resources, officials from ONGC tell us about the company's growth strategies, future E&P plans, downstream efforts, forward integration and planned international alliances.

Receiving this ranking from Platts on a global scale was no easy task. What was ONGC's strategy to achieve this?

Definitely, it is a big recognition for ONGC and its constant endeavor for sustained growth. Our strategy focused on strengthening the core. ONGC has been taking concerted measures and intensifying its domestic exploration and production activities, and at the same time aggressively pursuing global E&P activities through its wholly owned overseas arm, ONGC Videsh Limited (OVL) (New Delhi).

In the E&P category, ONGC moved from #3 to #1. What specifically led to such a significant jump?

The Platts ranking of Top 250 global energy companies is based on four key metrics: assets, revenues, profits, and return on invested capital. Companies having assets worth more than $2 billion are shortlisted for evaluation.

In fact, all along, ONGC maintained leadership based on these parameters. This is the third year in last five years that ONGC has been ranked the No. 1 E&P company in the world. Earlier, ONGC was ranked No. 1 E&P by Platts in the years 2006, 2008 and now this year, 2010. However, during the last year, we slipped to the No. 3 position due to a higher subsidy burden.

With oil and gas exploration being a strong point, what is ONGC's plan in this sector going forward?

We are focusing on all the areas of E&P activities in India or abroad. There are four pillars of our growth in the future:

a. Establishing new hydrocarbon reserves

b. Expeditiously bringing new discoveries to production

c. Maintaining production levels from the old fields, and

d. Aggressively pursue our global E&P opportunities.

ONGC is aggressively pursuing its strategic goal to double its in-place hydrocarbon reserves from 6 billion tons of oil equivalent to 12 billion tons by the year 2020. As per our strategic vision, ONGC is focused on improving reserve-replacement ratio, production enhancement, arresting decline in matured fields and expeditious development of discovered fields.

OVL is also aggressively looking for available E&P opportunities globally. Presently OVL is operating in 15 countries with 40 oil and gas assets. OVL is targeting a production of 20 million tons of oil equivalent per annum from overseas assets by 2020.

What efforts is ONGC making on downstream value additions and forward integration?

As far as downstream projects are concerned, the basic strategy has been pursuing value-integration projects to unlock the potential of our own products and monetize idle resources. ONGC is establishing two state-of-the-art petrochemical plants, one at Dahej and another at Mangalore, for value multiplication of feedstock from its plants at Hazira, Uran and Mangalore Refinery and Petrochemicals Limited (BSE:500109).

ONGC has also promoted a 726-megawatt (MW) gas-based power plant in Tripura to monetize the huge gas reserves which it has established in the area. All these projects are on track and have huge potential to provide impetus for integrated growth of ONGC.

Are there any plans to explore newer avenues of energy? What are they?

ONGC has taken structured initiatives towards developing new sources of energy like coal bed methane (CBM), underground coal gasification (UCG), shale gas, etc.

CBM production from the pilot Parbatpur, Jharia, project started in January 2010. Environmental clearance for the UCG pilot project at Vastan, Gujarat, has been obtained and the pilot project is under finalization. ONGC has also taken a lead in the exploration of shale gas in the country by launching an integrated pilot shale gas project in Damodar Valley. The first well was spudded on September 21, 2010.

Looking beyond hydrocarbons for green and sustainable energy solutions is yet another priority for ONGC. ONGC Energy Centre has taken up a number of research projects in the area of new and alternate energy. After commissioning of a 50-MW windfarm in Gujarat, ONGC is now planning to set up a photovoltaic solar farm of 10 MW and another windfarm of 102 MW capacity. Three solar thermal engines, for the first time in India, have been commissioned at the Solar Energy Centre, Ministry of New and Renewable Energy campus at Gurgaon. We are also pursuing hydrogen from various sources.

Is OVL forging any new alliances? What are they and when are they slated to begin work?

OVL's focus has always been to constantly explore available opportunities the world over basedon the merits of the opportunities. Whenever we found win-win opportunities, we have gone for that. We are looking for such opportunities and keep all concerned informed whenever we go for a new global opportunity.

What will allow ONGC to maintain its present high global rankings in the future?

Success of any E&P company is dependent on its new reserve accretion and increase in production. ONGC has accreted some good reserves in the recent past and is going ahead with its development plan for reaping production from these reserves. ONGC's oil and gas production is going to significantly increase in 2012-13 and 2015-16. Good results and good rankings will automatically follow the good performance. Of course, market-driven prices for ONGC's products and less under-recoveries will further help to achieve such recognitions.

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. IIR's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.