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BW Businessworld

High Pressure Performance

Operational revenues for FY20 stood at Rs 96,213.6 crore while profit after tax (PAT) was Rs 13,444.5 crore. ONGC realised $58.61/bbl for domestic crude in FY’20 compared to $68.19/bbl in FY19.

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India’s largest producer of crude oil and natural gas, Oil and Natural Gas Corporation (ONGC) registered another robust year of performance in FY20, notwithstanding the unpredictability in global energy markets and a turbulent fourth quarter marked by the onset of Covid-19. Operational performance was comparable to that in FY19 while financials were a reflection of the low oil and gas prices in global markets. For ONGC FY2020 was another positive year in terms of reserve accretion — with more reserves being entered in its books than the annual hydrocarbon production. In all, ONGC made 12 discoveries — seven onshore and five offshore. The reserve accretion stood at 53.21 million tonne oil equivalent (MMTOE) with a reserve replacement ratio (RRR) of 1.19. The company says it is now equally focused on the timeline of monetisation as it is on the count or volume of the discoveries. As per the company’s latest annual report, ONGC is aggressively scouting for unappraised areas or layers within their mature basins and focusing on nearfield appraisal which will allow them to leverage nearby/ existing infrastructure for co-developing such finds.

Operational revenues for FY20 stood at Rs 96,213.6 crore while profit after tax (PAT) was Rs 13,444.5 crore. ONGC realised $58.61/bbl for domestic crude in FY’20 compared to $68.19/bbl in FY19. While the decline in revenues is largely a factor of lower crude prices, the significant drop in net profit was on account of exceptional item towards impairment loss of about Rs 4,900 crore in the final quarter to factor in estimated future crude oil and natural gas prices. It may be mentioned that the impairment is a temporary adjustment in the book value to reflect future price outlook and which may get reversed in future if the prices recover.

SIGNIFICANT SETBACKS: “In FY20, our capex stood at Rs 29,538.5 crore. Over the last five years, our cumulative E&P spend was close to Rs 1.5 lakh crore -- a period that witnessed significant cutbacks in investments by most players in the sector — global as well as domestic — due to the uncertain price regime and a secular slowdown in economic activity. This reaffirms our belief in the long-term prospects of the domestic upstream space while delivering on our mandate as the NOC to avert build-up of large-scale strain in the energy sector on account of investment freeze,” said Shashi Shanker, Chairman and Managing Director, ONGC addressing the shareholders in its latest annual report.

On the international E&P frontier, markets weathered a rough year on account of global trade tensions, lower demand on account of general economic slowdown, oversupplied gas markets and adverse fallout from the Covid-19 pandemic, the CMD said. However, the company’s international arm and 100 per cent subsidiary, ONGC Videsh, registered a good year in its overseas operations. ONGC Videsh produced its highest-ever 14.98 MMTOE of oil and gas in FY20. “Today, ONGC Videsh is invested in 37 projects across 17 countries. The future looks promising for ONGC Videsh in view of the significant developments during FY20 in some of its key investments,” Shanker said.

Going forward , ONGC is considering strategic restructuring of the organisation to leverage internal synergies and to respond better to new opportunities. “One such ambitious project with the objective of creating a ‘futureready organisation’ is the Integrated Shared Service Centre and Beyond, which will not only change the way of working but the structure of organisation too,” said Shanker. The project envisages shared and integrated services across HR, finance & accounts, materials management and infocom functions to begin with and will be subsequently extended to field services like drilling, well services, logging, workover, etc. along with high-performance computing in exploration.