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BW Businessworld

On The High Seas

FY18 was a year of recovery for E&P companies, but the ONGC, stands out in the clutter for its persistent investment in exploration

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The Oil and Natural Gas Corporation (ONGC) ranks seventh in the BW Businessworld list of the Most Respected Companies of 2018, but in the sphere of exploration and production (E&P) of oil and gas, it is a world leader this year. The Platts 250 Global Energy Rankings place ONGC at the top of the heap as the # 1 E&P Company. The Fortune Global 500 list for the year has ONGC straddling the 197th position, which of course, are just some of the many accolades India’s state-owned upstream oil and gas giant has won for itself. The Maharatna has been given the Environment Sustainability Company of the year award by the Federation of Indian Petroleum Industry for maximising wealth. As ONGC Chairman and Managing Director Shashi Shanker says, “The era of easy oil is over”, which prompts the company to take a cost-effective and operationally efficient and technology-led approach to find and produce oil and gas.

At the ONGC’s annual general meeting (AGM) on September 28, 2018, Shanker said, “FY18 was a year of recovery in the global energy landscape, particularly in crude oil markets. Value of crude oil registered a noticeable uptick following a prolonged period of downturn since mid-2014 when prices started to drop …” Profit margins of upstream (read oil exploration and production) companies have risen with the steady rise in crude prices since 2016.

Crude oil prices, which had plunged to as low as $30 a barrel in 2016, have since steadily climbed up to somewhere around $60 a barrel in 2017 and then to $75 a barrel in 2018. The ONGC recorded a nine per cent growth in revenue during 2017-18 of a whopping Rs 85,004.1 crore. It earned a net profit of Rs 19,945.3 crore, which was 11.4 per cent higher than in FY17. “2017 proved to be a resurgent year for the upstream sector largely due to increase in global crude oil prices,” explained Shanker.

 The ONGC, however, stands out in the clutter for its persistent pursuit of new oil and gas reserves. Upstream companies the world over had turned conservative about investing in new exploration ventures over the past few years, because of plummeting crude prices. The ONGC had, in keeping with the government’s mission to reduce hydrocarbon imports by 10 per cent by 2022, been persistently prospecting for oil and gas reserves all through the period of slump in oil prices.

To quote Shashi Shanker, “Despite the growth of renewables, Hydrocarbons will remain extremely vital for keeping the growing energy requirements of the country as well as the world. Being the country’s foremost energy exploration company, we will retain our focus on E&P as the primary avenue of business growth in the foreseeable future.” Shanker was of course, referring to the present government’s focus on promoting alternative fuels and renewable energy, like solar and wind power and bio-fuels. “With 12 discoveries and 2P Reserve Accretion of 67.83 MMtoe, your company recorded a strong exploration performance in FY18,” Shashi Shanker said at the AGM. Of the 12 hydrocarbon discoveries, production has already begun at two onland reserves.  

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 company is a transnational with interests spanning from crude and natural gas to refinery products and renewable energy. Today ONGC owns 83 per cent of the established reserves of oil and gas in India. Its subsidiary ONGC Videsh participates in 36 oil and gas properties in 17 countries, like Vietnam, Sakhalin, Columbia, Venezuela and Sudan.

 “The company is also seriously looking to unlock hydrocarbon prospects in new sedimentary basins,” according to Shashi Shekhar. The ONGC’s investments have not just flowed into oil and gas exploration. The company has spent Rs 503 crore during FY18 in corporate social responsibility (CSR) projects. It is also known for the exemplary facilities it provides its workforce like housing and education for wards and has of late taken progressive and meaningful steps to build a conducive and safe working ecosystem for women. As the company OSD, HR, Alka Mittal points out, “ONGC is one of the most women-friendly employers in India.”