COMPANY ANAlYSIS About ONGC: Oil and Natural Gas Corporation Limited (ONGC) (incorporated on June 23, 1993) is an Indian

public sector petroleum company. It is a Fortune Global 500 company ranked 335th, and contributes 77% of India's crude oil production and 81% of India's natural gas production. It is the highest profit making corporation in India. It was set up as a commission on August 14, 1956. Indian government holds 74.14% equity stake in this company. ONGC is the flagship company of India; and making this possible is a dedicated team of nearly 40,000 professionals who toil round the clock. It is this toil which amply reflects in the performance figures and aspirations of ONGC. The company has adapted progressive policies in scientific planning, acquisition, utilization, training and motivation of the team. At ONGC everybody matters, every soul counts. Over 18,000 experienced and technically competent executives mostly scientists and engineers from distinguished Universities / Institutions of India and abroad form the core of our manpower. They include geologists, geophysicists, geochemists, drilling engineers, reservoir engineers, petroleum engineers, production engineers, engineering & technical service providers, financial and human resource experts, IT professionals and so on. ONGC PERFORMANCE IN LAST TWO YEARS theCompany has been the first and only Indian company to be enlisted in Fortunes Most Admired Companies 2008. The Fortune Global 500, 2008 list has ranked your Company at 335, 34 notches higher than the previous year. The fiscal 2008-09 was yet another year of growth and success for your Company, which along with other group companies, excelled in all its endeavours; particularly in the core activity of Exploration and Production (E&P) of Crude Oil and Natural Gas. the Company maintained

a Reserve Replacement Ratio (RRR) of more than one, for the fourth consecutive year. During the year, your Company registered RRR at 1.32, with Ultimate reserve accretion (3P reserves) of 63.82 Million Metric Tonnes (MMT) against production of 48.28 MMT of Oil & Oil Equivalent Gas (0+OEG). ONGC has accreted 182.23 MMT of Initial In-place reserves, the highest in last decade and 7% more than the last years accretion of169.52 MMT, with 33 discoveries (Oil: 13, Gas: 20) spread across Indian sedimentary basins against 22 discoveries during 2006-07. Exploratory performance during ensuing fiscal 2008-09 also started on a high note with 11 discoveries in the first quarter of current fiscal.

During the year, O+OEG production of the Company, including the production from domestic joint ventures and overseas assets, was the highest-ever at 61.85 MMT, 1.84% more than the previous year. ONGC maintained the O+OEG production level at 48.28 MMT, marginally (0.4%) lower than last year, against the natural decline of mature fields. However, the oil and gas production from overseas assets increased by 10.7% and O+OEG production from domestic joint ventures also increased by 11.2%. The augmenting and enhancing efforts taken up by the Company, through Improved Oil Recovery and Enhanced Oil Recovery (IOR/EOR) schemes, implemented since 2001, have helped to arrest production decline in the mature fields. Twelve IOR/ EOR schemes have been completed and six projects are under implementation with an investment of Rs. 85,630 million. Out of the 165 marginal fields, 143 are either monetized or under delineation or under monetization on service contract. Remaining22 fields will be put on production by offer under new

marginal field policy. The new field Vasai East discovered in Western Offshore has commenced production from 7th July, 2008. ongc is setting up a 50 MW Wind Farm in Gujarat consisting of 34 wheeling units with an investment of Rs. 3,070 million. Power will be utilized in nearby ONGC installations. All 34 units have been erected, 10 have started wheeling power. The first CBM development well for CBM was spudded in Parbatpur pilot area on 1st December, 2007 near Bokaro Steel City of Jharkhand; production has commence from April 2009. PORTERS 5 FORCE MODEL

Threat of new entrants: Due mostly to the industry that ONGC is in, it’s hard for there to be many new entrants. The only real threat that might arise would be another government funded Oil and Gas company. The reason for this is that a government would not have as hard a time raising funds and gaining access to resources. This is assuming that the company would be researching and developing on domestic soil. The only other threat may not be from new entrants but from smaller competitors who already have access to resources and distribution channels. There is really not much of a threat because there are two main barriers to entry that would be stopping potential threats. These would be very high capital requirements as well as access to Cost disadvantages independent of scale.

Even though this industry if very attractive because of the high profits it would be very hard for a company to have enough capital to get in the market. Every part of Oil and Gas Exploration and Development is costly and not something that would be worth the costs as a new entrant into the industry. Going along with the high cost of capital are the cost disadvantages. The companies already in the industry already have the access to raw materials as well as desirable locations. This is something that would be very difficult for a new entrant to try and gain.

Bargaining Power of Suppliers:

ONGC is a vertically integrated company that really deals in all areas from finding the product to refining the product to selling the product. With this being said there is not much to worry about the bargaining power of the suppliers. Supplier power is high as the net margins are strongly dependent on the price of the crude. Due to crude price volatility and supply risks, a lot of the Indian companies are integrating backwards into E&P activities

Bargaining Power of Buyers:

Not too critical for most companies as refining operations are a part of the complete supply chain, with the refining operations supplying the product to the marketing company. However in case of standalone companies (which may no longer apply) long term contracts have to be signed with the marketing companies. The margins in such cases are dependent on such long term contracts. The industry that ONGC is a part of is different than many other industries. It is different in the fact that people really cannot go without their product. While over a long period of time it may be possible to find other fuels it is not really feasible in the short term. This has been seen in the US in the last few years. Gas companies can keep the prices high and consumers will still pay the high prices. When looking at the individual buyer they have almost no bargaining power because they are only buying such an extremely small portion of the industries total output. Another reason for this lack of bargaining power is that as of right now there is not a real alternative to Oil. All of these reasons make it very hard for the buyer to have much bargaining power at all.

Threat of Substitutable Products:

Although gas, solar power etc exist as substitiutes , none of them are big enough to impact the demand of the petroleum products. As stated above there is not a real alternative to oil at this time.

There is research being done to try and find substitutes. With the price of oil as high as it is at this time, it is only giving more reason to try and find other fuel sources. This is where the main players in this market must be careful. The prices are staying fairly high now because people really don’t have a choice and must pay. If other fuel sources do come out that are less costly, many people will go towards those alternatives. It does not seem that at this time there is a huge threat of this happening but it is definitely a possibility that any player in the market must be aware of. Intensity of Rivalry among Competitors:

The rivalry in the industry was low till as the industry was tighlty regulated by the government. However, the level competition has increased aggressive. The largest competitors in this industry for ONGC are Exxon Mobile and Royal Dutch Shell. ONGC is currently in 14 different companies whereas Exxon Mobile is in 20 different countries. While Exxon may be a larger company now ONGC is growing and is becoming a very important global player. with Reliance and other MNC becoming more

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