ONGC is likely to lead from the front as India reduces dependence on imports
Prime Minister Narendra Modi’s vision of achieving a 10 per cent reduction in hydrocarbon imports by 2022 makes Maharatna Oil and Natural Gas Corporation (ONGC) take centre stage. The policy plank is to increase domestic production of oil and gas, promote energy efficiency and conservation and promote use of bio-fuels and other alternative fuels and renewable energy.
Even though every major player in the petroleum refining and marketing business seems to have gone upstream now, ONGC still accounts for 72 per cent of India’s crude oil production and 48 per cent of its natural gas output. The corporation that began as the Oil and Natural Gas Directorate of the Union Ministry of Natural Resources and Scientific Research in 1955, is today a transnational with interests spanning the hydrocarbon chain — from crude and natural gas to refinery products and renewable energy.
The exploration and production (E&P) giant has a foothold in petroleum products refining with its subsidiary, the Mangalore Refineries Petrochemicals, and a toehold in power generation with ONGC Tripura Power Company. The core business of E&P is what keeps ONGC among the top 20 global energy majors on the Platts list. It is also the reason why the company sits pretty on the third rung of the BW Real 500 rankings, based on its total income and assets.
Today ONGC is the largest exploration acreage and mining lease holder in the country, and owns 83 per cent of the established reserves of oil and gas. Its subsidiary ONGC Videsh is an Indian multinational that participates in 36 oil and gas properties in 17 countries such as Vietnam, Sakhalin, Columbia, Venezuela and Sudan. So, as India whittles down the 213 million tonne of crude oil it imports today, it is obviously the public sector pioneer in oil exploration and production that will be in the lead.
Crude oil imports jumped 5.2 per cent in 2016-17 and domestic crude oil production plummeted by 2.5 per cent. “In India, upstream investment has been lagging because of policy,” says Deepak Mahurkar, leader of Oil & Gas at Pricewaterhouse Coopers. “The Hydrocarbon Exploration and Licensing Policy (HELP) offers more hope than the New Exploration and Licensing Policy (NELP), which has not done much in 17 years,” he goes on to say.
Mahurkar is referring to the production sharing contracts that oil and gas exploration companies have to sign with the government of India. “We can drive a hard bargain, but we are likely to get less investment. Investment is dragging in as many as 129 contracts that were signed under the NELP,” muses Mahurkar, adding, “The transition to HELP may pass some of the tests … It is a step forward, but dark areas may emerge there too.”
The intent of the government and the new thrust in policy may be just what ONGC needs to conquer new territories. It gets an edge too, in having a field man at the helm. On 1 October, ONGC’s director of Technology & Field Services, Shashi Shanker, took charge as the chairman and managing director, at the end of a year in which the corporation drilled a record 500 wells.