A PROJECT REPORT ON

“COST STRUCTURE ANALYSIS, ALLOCATION OF COST AND PRICE MECHANISM OF CRUDE OIL AND NATURAL GAS”

SUBMITTED BY: PRANAV A. SHAH HARDIK K. SURATI

SUBMITTED TO:

PREFACE

Industrial Training refers to work experience that is relevant to professional development as an essential component in the development of the practical and professional skill required of a manger and an aid to prospective employment. The summer training is an ideal opportunity for the student to have a firsthand experience with the different function of the industry/corporate sector. It is famous saying that the “person who has read 1000’s of pages is not worth than the person who has travelled for 100’s of meters.” Teaching gives the knowledge of theoretical aspects of management but implementation of theory gives practical knowledge of management field. The aim of this training is to introduce the fundamentals and the basic principles of financial management and business accounting in real life day to day application of business transition.

Practical Knowledge of theory is of grater important for a finance student. We are thankful to our NAVANITLAL RANCHODLAL INSTITUTE OF BUSIESS MANAGEMENT (NRIBM) for arranging summer training before entering into the specialization field of MBA (FINANCE) program. This project report is an outline of what we have learnt during our training period at Oil & Natural Gas Corporation Limited (ONGC), one of the prestigious public sector companies running with strategy values and time management.

We are thankful to Oil & Natural Gas Corporation Limited for giving us such a valuable opportunity to work with them.

ACKNOWLLEDGEMENT
It has been rightly said, “Whenever people are willing but unable to perform particular task, they need cooperation and guidance of experienced people which is quite imperative in achieving the desired goals.”

We sincere acknowledgement to oil and natural gas corporation ltd. for giving us a valuable opportunity to work with them. This project report is dedicated to all the people, whom we met, took guidance, talked and gained knowledge from them.

We are indebted and whole-heatedly thankful for the assistance received from various individuals in making this project a success. We have no words to express our gratitude towards those who were constantly involved with us throughout our wonderful experience working with the project on “Cost structure analysis and allocation of cost”.

We would like to express my gratitude to my college Navanitlal Ranchodlal Institute of Business Management(NRIBM) & my faculty guider for giving me the golden opportunity of making project report on the “Cost structure analysis, allocation of cost and pricing of crude oil and natural gas” at ONGC as a part of summer internship so as to learn the various aspects on practical basis.

We Pranav shah and Hardik surati are highly thankful and deeply indebted to Mr. Shailendra and Mr. Mohanty Who incessantly guided us till last word of this project report and provided an estimable guidance. They made numerous valuable suggestions and corrections, which greatly improved the quality of our work. In spite of being busy with their routing work they spend quality time with us and never hesitated to cooperate and help us out with our problems as and when required. The practical and the theoretical knowledge that we have gained from them will help us in enhancing our career and managing things in a better way.

training and motivation of the team. ONGC is the flagship company of India in areas of exploration & production of oil & gas and related oil field services. It was established as a commission on August 14. acquisition. Within it proper management of finance is regarded as the lifeblood of business. This report has been prepared under the guidance of cost accounting department. with properly following the guidance note on accounting for Oil & Gas Producing Activities. its organization structure. recording and analyzing cost associated with the products of activities of an organization. development. The initial part of this report contains the brief information about the organization. cost accounting include tracking. production etc.EXECUTIVE SUMMERY In modern economy finance is one of the basic foundations of all kinds of economic activities. recording and analyzing costs associated with activates like acquisition. The company has adopted progressive policies in scientific planning. Objective of preparing summer internship project on “Cost Structure Analysis and proper allocation of Cost” at ONGC Ankleshwar Asset will give complete Review and Analysis of current trend acquainted in the cost structure. . exploration. 1956 and was change into corporation on June 23. type & different activates involved in formulation of cost structure and information about cost accounting process. issued by the Council of the Institute of Chartered Accountants of India. utilization. We have worked with the corporate and had good experience learning with them. We have got an opportunity to do my summer project in ONGC. In ONGC’s context. as cost accounting is the process of tracking. 1993. We have prepared this project report on “Cost structure analysis and allocation of cost” at ONGC. And to achieve monetary goal of organization. Costing is very important financial tool.

No.3 Pre audit section 3.2 Major players 1.3 SWOT analysis 2.2.8 Project ICE 2.2.2. .2.3 PEST analysis 1.4 Porter 5 forces model 2 INRODUCTION TO THE ONGC 2.5 Board of director 2.2 Introdution to various finance department 3.2 Cash and bank section 3.7 Financial performance 2.1 Ankleshwar finance department structure 3.4 Personal claim section PAGE No.4 Subsidiary and joint venture 2.R.6 ONGC structure 2.9 About Ankleshwar asset 3 BRIEF OVERVIEW OF FINANCE DEPARTMENT 3.TABLE OF CONTENT S.1 Budget section 3. 1 PARTICULARS INRODUTION TO OIL INDUSTRY 1.1 Evolution of oil and gas industry in india 1.2 Asset/Basins/Plants/Institute 2.1 ONGC History 2.

1 COSTING SECTION Costing structure 4.7 Costing allocation 4.No PARTICULARS PAGE No.9 Various cases that affect costing of well 5 SALES SECTION 5.2 CRC structure 4.5 Accounting process 4.8 Hypothetical costing of well 4.2 Price mechanism of oil and gas 5.1 Oil pricing 5.6 Costing in SAP 4.R.2.4 4. .1 Sales component 5.4 Cost object 4.2 Gas pricing 6 CONCLUSION TABLE OF CONTENT FOR FIGURES S.3 Cost component 4.2.

1 ONGC office in india 2.6 Share holding pattern 4.7.7.4.2 Financial performance 2.9.7.3 Net profit 2.7.6 Share holder pattern 2.1 ONGC group of companies 2.7.7.5 Dividend 2.3 Net profit 2.1 Ankleshwar asset TABLE OF CONTENT OF TABLES S.2.7.1 Net sales turnover 2.7.3.2 Financial performance 2.4 Oil and natural gas production 2.7.8 Hypothetical costing of well 5.7.7.R.No. PARTICULARS 2.7.1 Net sales turnover 2.4 Oil and natural gas production 2.2 Oil and gas pricing table PAGE No .1 Cost allocation 4.5 Dividend 2.2.7.

RESEARCH METHODOLOGY OBJECTIVES:• • • • To study the process of cost structure and to understand it at ONGC. . To understand the Allocation of cost towards various activities done by ONGC. To project the costing of WELL at Ankleshwar. To analyze the price mechanism of crude oil and natural gas of india.

paresh shah. replacement of equipments.paresh shah. introduction of new product and discontinuance of non profitable products. a service. • SHORT LITERATURE SURVEY:Cost Accounting is the process of accounting for cost. Cost accounting helps the management to have a clear indication of their economic performance. Author. book of management accounting. book of management accounting. Cost accounting systems are part of an enterprise’s information system and refer to the internal cost tracking and allocation systems to track costs and expenditures. Cost component. make or buy decision. These are internal rather than external accounting systems. and be helpful in solution of complex management problems.SCOPE:• • • • Analyzing cost structure of ONGC. such as determination of most profitable mix. Projecting the cost for WELL at Ankleshwar ONGC. cost accounting measures are the predominant financial drivers in day to day business decision making affecting every aspect of the firm’s activities. Good cost accounting is vital to understanding the profitability of current activities and to . Price mechanism used by government of india. and the direction in which they must move in order to improve their economic efficiency. Understand the Allocation of cost at ONGC. a process Or an operation. Author. Cost accounting is concerned with cost determination of something which may be a product.

Sixth week – projecting the manual costing of particular well.D. BENEFICIARIES:- .predicting the profitability of future activities. Noellette Conway-Schempf. Ph. PA 15213 RESEARCH DESIGN:• Descriptive research. TIME BUDGET:First Week – study about the oil industries and ONGC company Second week – study the annual report. Seventh week – conclusion.Carnegie Mellon University Pittsburgh. RESEARCH METHODOLOGY:• Secondary sources :o Annual report o Industrial publications o Costing manuals o Internet etc. Third week Forth week Fifth week – prepare research proposal and finalize the main objectives – understand the costing concept of ONGC – analyses the cost structure and allocation of cost towards various activities.

D.) To classmates To company (ONGC) A SHORT WRITE-UP ON THE RESEARCHER:We Pranav shah and Hardik surati student of MBA (FINANCE).Carnegie Mellon University Pittsburgh. Pranav shah. AHMEDABAD. Doing a project on cost structure analyses and allocation of cost at ONGC Ankleshwar. Ph. NRIBM (GLS).PA 15213\ 1.1 EVOLUTION OF OIL AND GAS INDUSTRY IN INDIA:- . BIBLIOGRAPHY:  Paresh shah book of “management accounting” Noellette Conway-Schempf. INRODUCTION TO OIL INDUSTRY 1.   To us (Hardik surati. to understand the practicality of real world organization and how they work on particular system to run effective and efficient business.

The entire production was from one state-Assam. Sixth. they had reached the stage of diminishing returns. Bombay High. 1954. However. that petroleum would be the core sector industry. Neelam. in pursuance of the Industrial Policy Resolution. Oil production had begun to decline whereas there was a steady increase in consumption and today the two NOCs are able to meet only about 35% of the domestic requirement. The problem had elements such as the administered oil price. India's domestic oil production was just 250. Geleki etc.). non-availability of appropriate technology.At Independence. In the early 70s. 1990 The Government launched the Petroleum Sector Reforms (PSR) in 1990. ONGC and OIL. Till then. Fifth. for others there was no money available for indigenously developing the fields. The Government had no money (FE) to give to the NOCs for the development of some of the then newly discovered fields. they supplied nearly 70% of the domestic requirement. the Fourth. under Industrial Policy Resolution. Preamble Petroleum exploration & production was controlled by the Government-owned National Oil Companies (NOCs). Most foreign experts had written off India as far as discovery of new petroleum reserves was concerned. The Government announced. Heera. . by the end of the 80s.000 tones per annum. Lakwa. Under the PSR. logistics etc. While some of these fields could be developed by ONGC (Gandhar. 1954. This was further compounded by the resource crunch in the beginning of the 90s. Petroleum Sector Reforms. three rounds of exploration bidding had been gone through with no success in finding new oil/gas deposits by the foreign companies who only were allowed to bid.

Foreign Companies in Exploration in India Foreign companies entered the Indian E&P scene since early fifties (Indo Stanvac Project. Some of the downstream companies like IOC. Opening of the Oil/Gas Fields for Development by Private Companies The Indian oil/gas fields discovered by the two NOCs. has taken the first step by joining up with ONGC in bidding for exploration as well as development ventures in India and abroad. The exploration blocks were in those areas for which the Petroleum Exploration License was with the NOCs and they were required to have a 25% to 40% Participating Interest from day one. Carlsbons Natomas for Bengal offshore in early seventies.Godavery Offshore).Texaco in Krishna . Development of fields is characterized by a . This was certainly not as much as elsewhere in the world. For the first time Indian companies with or without previous experience in E&P activities were permitted to bid starting with the Fourth Round. Shell for Kerala offshore and Chevronn. were first offered in 1992 under the First Offer. Assamerc for Cauvery offshore and Reading and bates for Kutch offshore also in early seventies and later since the first round in 1980.A Joint Venture between Government of India and Standard Vacuum oil Company for West Bengal onland in early fifties.Seventh and Eighth Rounds of exploration bidding were announced between 1991 and 1994. GAIL has entered also upstream in consort with ONGC and OIL. Reliance Petroleum Ltd. The second such offer was made in 1993. The Government then announced the Joint Venture Exploration Program in 1995. Indian E&P Companies Most of the Indian companies barring HOEC have been riding piggyback on the foreign companies for exploration and development ventures in India. In this regard.

5 MMT per year) and about 7 million cubic meters per day of gas production. field development contracts have upfront payments to be made to the NOCs for past costs as well as in the form of signature bonus. There are a total of 103 PSCs in operation. companies are also required to make production bonus payments. At the stage of oil/gas production. Today 74 Exploration Contracts and 28 Development Contracts are in operation. In terms of money about 4 billion dollars are expected to be pumped into these ventures over the next 10 to 15 years.comparative lack of business risk but is a cost intensive venture. Revenue (2008-09): 161263 million Employees: 41000 Recent news: • • ONGC achieve highest Reserve accretion in last two decades. This is a sizable number but unfortunately this is not made known to a large number of people/enterprises. contributing 77% of India’s crude oil production. Unlike the Exploration blocks.2 MAJOR PLAYERS:- ONGC It is a public sector petroleum company in India. . It would help Indian cause if the government were to introduce the practice of Pure Service Contract like in some of the other producing countries.000 barrels of oil per day (or about 7. 1. Lack of previous experience forces the Indian companies to seek foreign partners not only to work as Operator but also to share costs. The Development Contracts are likely to add about 150. Only those companies who have previous experience of field development can undertake such ventures. ONGC conferred with two SCOPE meritorious awards on the PSU day.

In some onland areas the ratio is 57 years. . IndianOil Technologies Ltd.the number of years its reserves will last with the current level of output . But it has yet to take a lead role that would give it more say and a bigger share of future production. • • Government officials say ONGC must boost its reserve-to-production ratio . despite some hiccups. where the oil majors are gaining ground abroad. • Oil Minister Mr Aiyar has pushed for Indian and Chinese firms to cooperate not compete. • • IndianOil is also strengthening its existing overseas marketing ventures and simultaneously scouting new opportunities for marketing and export of petroleum products to new energy markets in Asia and Africa.000 barrels per day (bpd) after an errant rig crashed into the facility during the monsoon. The race is gaining urgency both for India and ONGC as Chinese and other Asian competitors snap up plum properties in the face of stagnating domestic production. setting it on fire. Iran's Yadavaran Field and Sudanese properties abandoned by Western investors.100 formulations of SERVO brand lubricants and greases for virtually all conceivable applications meeting stringent international standards and bearing the stamp of approval of all major original equipment manufacturers. which pushed the country's biggest refiners into the red. reducing the company's output by 123. from Russia's Sakhalin-1. with a sales turnover of US $36. • A wholly owned subsidiary company. It has since restored half that production.by improving its drilling technology and management practices. • ONGC has gained junior shares in a host of projects.537 billion. IOCL It is India's largest commercial enterprise.• India's ONGC lags in global oil race. but his efforts appear to have met with little interest in Beijing. for overseas assets. India's largest oilfield. ONGC's setbacks in acquiring major oil resources are made worse by the Indian government's order to help shoulder the burden of subsidised fuels earlier this year. ONGC's ratio is 22 years. • ONGC lost a major offshore platform at Bombay High. is the 19th largest petroleum company in the world IndianOil's world-class R&D Centre has developed over 2.

E. ONGC is also being made by the GoI to focus on exploration and production (E&P) of oil and gas. in the country. the GoI deregulated the industry and took away the state protection policy that kept ONGC safe. The positive side of having the political backbone of ONGC is that it gives the company stability and some security. ONGC is stateowned but this does not mean that the GoI is good for ONGC or doing things in the best interest of ONGC right now. BPCL with ONGC.S.613 billion Employees: 12400 • In 1976. . it was renamed Bharat Petroleum Corporation Limited.3 P. Revenue (2005): $17. The proposed mergers of HPCL. and Oil India with IOC were the GoI’s ideas. but not without the GoI stating that the government will have to restrict the respective companies to their core businesses. • • 1. In 1977. the Burmah Shell Group of Companies was taken over by the Government of India to form Bharat Refineries Limited. This produced uproar and the mergers we set aside. This has lead to new opportunities but it has also opened the door to a lot more threats. It was the first refinery to process newly found indigenous crude (Bombay High).BPCL It is the 3rd largest oil company in India owned by the Government of India. ONGC had been starting to move downstream and diversify its business by going into the refining and retailing business but the GoI put a halt to this. When ONGC started they had multiply protection policies in place that kept them safe from global competition.T Analysis Political Environment The political environment in India is one of a federal republic. As the years went by.

India is a part of the B.R. This is not only due to cost advantage. which stands for Brazil. Through all this it shows a highly influential “owner” of ONGC who is commanding them to do things and not do things and not really knowing what’s best for the company. it is seemingly making E&P a core rigidity for the company.I. Sociological Environment Sociologically the environment in India is one of growth and advancing intellectually. This is a huge hindrance to ONGC.With the GoI focusing so much on oil and gas E&P and forcing ONGC to focus on it as well. The GoI also recently blocked ONGC from bidding on a Nigerian oil field that would’ve helped increase their gas and oil assets outside of India. This gives them a great advantage because there is a huge economic demand for oil and gas.000 workers in India. India and China. 2007 has found the GoI saying to ONGC that they need to “produce or perish” and that they will become a marginal player in the industry if they don’t comply. As mentioned before. which are four of the fastest emerging and rapidly growing countries. September 25. This creates a huge pool to pull from. But this is still a large workforce under one company and could be used for leverage when making decisions with the government. in which ONGC is the main player in India. India has been a major country for companies in other countries to outsource to. These are harsh words by the government and could be a fatal blow to ONGC for future business ventures and success. Compared to the amount of people that India has this number is not staggering. This does not mean the company has been good to work for though. The company was recently scrutinized by the GoI because “attrition over the last one year has been the highest in the past five years and 328 . Russia. The GoI did not feel this was a good choice and blocked the decision. India’s population has already reached over one billion people and continues to grow rapidly. the country has over one billion people and continues to grow. With all these economic developments have also brought about a huge demand for energy. Economical Environment India is one of the largest and fastest growing countries in the world right now..C. The Indian people are emerging as a learning people and the potential for success in this kind of environment creates a strong foothold for any company. but also to an education advantage. It’s interesting to note that ONGC employs approximately 40.

On the world market ONGC is not the biggest player. but has since put much needed money and focus on technology. One such example was the acquisition of technology to meet Euro II standards through the purchasing of MRPL. which is considered the one of the best in the world. not only because they are losing valuable workers. which is regarded as “one of the ten bests such systems in the world for applications in exploration. but also because it is getting them into even more trouble with the government. ONGC not only faces competition from the global market. ONGC also implemented a completely digitized magnetic media seismic library. Other great technological advances were the implementation of an ERP. ONGC has turned what once was a weakness into strength though.” This greatly enhances their ability for oil recovery and also for a competitive advantage. With the continued depletion of these non-renewable fossil fuels the competition to secure oil and gas reserves is very intense. They also are . that really gives them a competitive advantage is the Virtual Reality Interpretation Center. so also is the technology. the giant oil companies have seen integration into other downstream elements of the oil industry to create a competitive advantage. Technological Environment The technological environment in India is rapidly increasing. ONGC lost a bid to the Chinese company China National Petroleum Corporation to secure oil reserves in Canada and has since lost more battles such as this.” This is not a good spot for ONGC to be. Globally. This was a much needed improvement in technology over all their previous years to help compete on the world market. Another great technology that they implemented. In 2005. It cannot be emphasized enough how important technology is in a large corporation like this battling in a market that is very tough and depleting. ONGC also implemented advanced technologies such as Increased Oil Recovery.professionals have left the organization. With respect to the oil industry. As the country continues to grow. ONGC realized that they were behind in the technological environment and this was creating a huge weakness with respect to their competitors.” And that “the main reason for this was the inability of ONGC to meet compensation packages being offered by the industry. Global Environment The global environment is a very competitive environment with respect to oil and gas exploration. Enhanced Oil Recovery and Supervisory Control and Data Acquisition. ONGC was behind technologically. MIS and inventory control system.

The only real threat that might arise would be another government funded Oil and Gas company. 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. There is really not much of a threat because there are two main barriers to entry that would be stopping potential threats.in a race with each other with regards to integration and the way these major oil companies are run. Going along with the high cost of capital are the cost disadvantages. it’s hard for there to be many new entrants. The companies already in the industry already have the access to raw materials as well as desirable locations. 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. This is assuming that the company would be researching and developing on domestic soil.4 PORTERS 5 FORCE MODEL Threat of new entrants: Due mostly to the industry that ONGC is in. With this being said there is not much to worry about the bargaining power of the suppliers. This is something that would be very difficult for a new entrant to try and gain. 1. Supplier power is high as the net margins are strongly . 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. The only other threat may not be from new entrants but from smaller competitors who already have access to resources and distribution channels. The reason for this is that a government would not have as hard a time raising funds and gaining access to resources.

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. solar power etc exist as substitutes. 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. many people will go towards those alternatives. Due to crude price volatility and supply risks. Another reason for this lack of bargaining power is that as of right now there is not a real alternative to Oil. The prices are staying fairly high now because people really don’t have a choice and must pay. There is research being done to try and find substitutes.dependent on the price of the crude. 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. This has been seen in the US in the last few years. All of these reasons make it very hard for the buyer to have much bargaining power at all. The margins in such cases are dependent on such long term contracts. When looking at the individual buyer they have almost no bargaining power because they are only buying such an extremely small portion of the industrial output. This is where the main players in this market must be careful. with the refining operations supplying the product to the marketing company. it is only giving more reason to try and find other fuel sources. If other fuel sources do come out that are less costly. However in case of standalone companies (which may no longer apply) long term contracts have to be signed with the marketing companies. It is different in the fact that people really cannot go without their product. Gas companies can keep the prices high and consumers will still pay the high prices. With the price of oil as high as it is at this time. While over a long period of time it may be possible to find other fuels it is not really feasible in the short term. Threat of Substitutable Products: Although gas. The industry that ONGC is a part of is different than many other industries. .

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 2. The largest competitors in this industry for ONGC are Exxon Mobile and Royal Dutch Shell.Intensity of Rivalry among Competitors: The rivalry in the industry was low till as the industry was tightly regulated by the government. However. 2. the level competition has increased with Reliance and other MNC becoming more aggressive.1 ONGC HISTORY 1947-1960 . INTRODUCTION TO THE ONGC.

S. while framing the Industrial Policy Statement of 1948. the visiting Soviet experts drew up a detailed plan for geological and geophysical surveys and drilling operations to be carried out in the 2nd Five Year Plan (1956-57 to 1960-61). the Assam Oil Company was producing oil at Digboi (discovered in 1889) and the Oil India Ltd. K D Malviya. as a subordinate office under the then Ministry of Natural Resources and Scientific Research. which enhanced powers of the commission further. and to perform such other functions as the Central Government may. After independence. from time to time. were "to plan. Finally.During the pre-independence period. West Germany. In 1955.S. promote. assign to it ". In West Bengal. the then Minister of Natural Resources. The vast sedimentary tract in other parts of India and adjoining offshore remained largely unexplored. In Assam. organize and implement programs for development of Petroleum Resources and the production and sale of petroleum and petroleum products produced by it. an Oil and Natural Gas Directorate was set up towards the end of 1955. Romania and erstwhile U. In October 1959. (a 50% joint venture between Government of India and Burmah Oil Company) was engaged in developing two newly discovered large fields Naharkatiya and Moran in Assam.R visited India and helped the government with their expertise. the Indo-Stanvac Petroleum project (a joint venture between Government of India and Standard Vacuum Oil Company of USA) was engaged in exploration work. The major part of Indian sedimentary basins was deemed to be unfit for development of oil and gas resources. Foreign experts from USA. 1961-1990 . With this objective. Until 1955. the Assam Oil Company in the northeastern and Attack Oil company in northwestern part of the undivided India were the only oil companies producing oil in the country. Government of India decided to develop the oil and natural gas resources in the various regions of the country as part of the Public Sector development. the development of petroleum industry in the country was considered to be of utmost necessity. A delegation under the leadership of Mr. private oil companies mainly carried out exploration of hydrocarbon resources of India. the national Government realized the importance oil and gas for rapid industrial development and its strategic role in defense. Consequently. with minimal exploration input. The act further outlined the activities and steps to be taken by ONGC in fulfilling its mandate. The main functions of the Oil and Natural Gas Commission subject to the provisions of the Act. the Commission was converted into a statutory body by an act of the Indian Parliament. The department was constituted with a nucleus of geoscientists from the Geological survey of India. visited several European countries to study the status of oil industry in those countries and to facilitate the training of Indian professionals for exploring potential oil and gas reserves.

Since its inception. Consequent to this the Government sold off 10 per cent of its share holding in ONGC to IOC and 2. This paved the way for long-term strategic alliances both for the domestic and overseas business opportunities in the energy value chain. is its self-reliance and development of core competence in E&P activities at a globally competitive level. ONGC diversified into the downstream sector. In the inland areas. along with subsequent discoveries of huge oil and gas fields in Western offshore changed the oil scenario of the country. while adding new petroliferous areas in the Assam-Arakan Fold Belt and East coast basins (both inland and offshore). 1956 in February 1994. ONGC not only found new resources in Assam but also established new oil province in Cambay basin (Gujarat). now known as Mumbai High. after taking over MRPL from the A V Birla Group.a downstream giant and Gas Authority of India Limited (GAIL) . ONGC has been instrumental in transforming the country's limited upstream sector into a large viable playing field. Subsequently. After 1990 The liberalized economic policy. In the year 2002-03. which were present in the country. sought to deregulate and de-license the core sectors (including petroleum sector) with partial disinvestments of government equity in Public Sector Undertakings and other measures. This discovery. Indian Oil Corporation (IOC) . As a consequence thereof. ONGC . The most important contribution of ONGC.5 per cent to GAIL. adopted by the Government of India in July 1991. After the conversion of business of the erstwhile Oil & Natural Gas Commission to that of Oil & Natural Gas Corporation Limited in 1993. however. Subsequently. amongst themselves. ONGC went offshore in early 70's and discovered a giant oil field in the form of Bombay High. With this. the Government disinvested 2 per cent of its shares through competitive bidding. ONGC expanded its equity by another 2 per cent by offering shares to its employees. (OVL). ONGC has also entered the global field through its subsidiary.the only gas marketing company. During March 1999. with its activities spread throughout India and significantly in overseas territories. agreed to have cross holding in each other's stock. the Government holding in ONGC came down to 84. ONGC. over 5 billion tonnes of hydrocarbons.11 per cent. were discovered. ONGC will soon be entering into the retailing business. ONGC was re-organized as a limited Company under the Company's Act. ONGC Videsh Ltd.

14% equity stake in this company. In view of the growing demand of crude oil. A divide has thus been made in the petroleum industry between the function relating to exploration and production of crude oil and natural gas which is referred to as “up-stream”. It owns and operates more than 11. It is involved in exploring for and exploiting hydrocarbons in 26 sedimentary basins of India. discoveries were made in Nahorkatiya and Moran oilfields in the late 1950s and early 60s in the northeastern region. Indian government holds 74. While oil was struck at Digboi in 1889 marking the beginning of oil production in India. . The discovery of oil and gas in the offshore region was made by ONGC in 1974 in Mumbai High which opened up a new vista for oil and gas exploration and production in India. and refining transportation and marketing to the end consumer which are referred to as “downstream”. 1993) is an Indian public sector petroleum company. It produces about 30% of India's crude oil requirement. ONGC made the first discovery in 1958 in the Cambay onshore basin in Gujarat.000 kilometers of pipelines in India. Cauvery and Rajasthan sedimentary basins. The seeking and production of the crude oil and natural gas are generally referred to as exploration and production phase of the total grant of function of the petroleum industry. Oil and Natural Gas Corporation Limited (ONGC) (incorporated on June 23. the Government formed Oil & Natural Gas Commission (ONGC) in 1956 to boost the exploration of oil and gas in the country. It is a Fortune Global 500 company ranked 335th. Subsequently. more discoveries were made in the Krishna-Godavari. the Center’s liberalized economic measures opened up a few acreages to private and joint venture companies through various exploration bidding rounds for development of discovered fields. While the responsibility of carrying out exploration and production activities in the country was entrusted to the national oil companies (NOC’s) almost till the beginning of 1990’s. 1956. wherein they used to be granted the Petroleum Exploration License (PEL) on nomination basis. It is the highest profit making corporation in India. It was set up as a commission on August 14. ONGC is one of Asia's largest and most active companies involved in exploration and production of oil.has made major investments in Vietnam. ABOUT ONGC The search for oil in India began way back in 1866 in Upper Assam. During the 1960s. Sakhalin and Sudan and earned its first hydrocarbon revenue from its investment in Vietnam. and contributes 77% of India's crude oil production and 81% of India's natural gas production. oil production in the country was confined to only Assam and Gujarat.

is endeavoring to become a world-class oil and gas company in pursuit of E&P business in both domestic and international arena and related opportunity specific energy business. production. development. Naphtha (including Aromatic Rich Naphtha). The principal activities of ONGC include acquisition of mineral interests in properties. from rugged mountains to deserts and deep oceans. . development and production of crude oil.529 Crores in the year 2002-03. ONGC today. EthanePropane (C2-C3). Having accreted six billion tonnes oil and oil equivalent reserves in its first 45 years of operation. natural gas and some value added products. achieving the record of being the first Indian corporate to register a five digit profit figure of Rs. 1956 at Dehradun . both on land and offshore in diverse logistic condition. contributing 77 percent of India’s crude oil production and 81 per cent of India’s natural gas production. has been a leading National oil company of India engaged mainly in exploration. transportation and marketing crude oil and natural gas. Low Sulphur Heavy Stock (LSHS) at their crude & gas processing facilities To sustain its growth. Out of the six billion tonnes of oil and gas reserve accretion. natural gas and LPG. It also produces several value added products (VAP) like Liquefied Petroleum Gas (LPG). 10. which include doubling the oil and gas reserves. exploration (including prospecting). ONGC has drawn up ambitious strategic objectives. four billion tonnes is expected to come from Offshore and Deep Waters. Since its inception. The company became a corporate on June 23. ONGC now aims to double these reserves by 2020. 2. 1993 and now it has grown into a full-fledged horizontally integrated petroleum company. Today. ONGC is a flagship public sector enterprise and India’s highest profit making corporate. ONGC is India’s largest producer of crude oil. Natural Gas Liquid (NGL).000 crores in 15 re-development schemes. ONGC is the most valuable company in India. Sulphur.Oil and Natural Gas Corporation Limited (ONGC) was set up as a Commission on August 14.with strategic national objective to explore and exploit hydrocarbon resources of the country. Superior Kerosene Oil (SKO). ONGC is investing Rs. To improve the recovery factor from the existing fields. Currently. High Speed Diesel (HSD). ONGC has produced more than 600 million metric tonnes of crude oil and supplied more than 200 billion cubic metres of gas. The second strategic objective is to augment the global recovery factor from the existing 28 per cent to the global norm of 40 per cent in next 20 years. ONGC which is India’s number one corporate with significant contribution in industrial and economic growth of the country. ONGC explores and produces oil and natural gas.

Overseas Joint Venture: .ONGC Tripura Power Company (P) Ltd.(OMEL) ONGC . Domestic Joint Venture: .ONGC is an organization which has joint ventures domestic as well International like:a. .ONGC . (OTPC) Petronet LNG Limited Petronet MHB Limited Pawan Hans Helicopters Limited b.Mittal Energy Ltd.Mittal Energy Services Ltd. (OMSEL) BASIC INFORMATION Company name : Oil & Natural Gas Corporation Limited.

” Motto “Provide quality services with efficiency and transparency. ONGC Narmada Ltd. – Commercial Enterprises.ROC registration number Incorporation year Ownership Main Activity Subsidiary/is : : : : 55-54155 : 1959 Central Govt. ONGC VISION AND MISSION STATEMENT COMPANY’S VISION “To be a world class Oil & Gas Company Integrated in energy business with dominant Indian leadership and global presence. Exploration & Production of Oil and Gas Mangalore Refinery & Petrochemical Ltd.” MISSION World Class • Dedication towards leveraging competitive advantages in R&D and technology with involved people. ONGC Bonny Brahmaputra Ltd. . ONGC Videsh Ltd.

STRATEGIC VISION: 2001-2020 To focus on core business of E&P. ONGC has set strategic objectives of: • • • • Doubling reserves (i. as per a recent survey conducted by US-based magazine ‘Global Finance’. accreting 6 billion tones of O+OEG). Tie-up 20 MMTPA of equity Hydrocarbon from abroad. • • Provide value linkages in other sectors of energy business. Improving average recovery from 28 per cent to 40 per cent. The focus of management will be to monetize the money. • • Dominant Indian Leadership Retain dominant position in Indian Petroleum sector and enhance India's energy availability. safety and environment to enrich quality of community life. openness and mutual concern to make working a stimulating & challenging experience for our people. . • Striving for customer delight through quality products and services INTEGRATED IN ENERGY BUSINESS • Focus on domestic and international oil & gas exploration and production business opportunities. • Fostering a culture of trust. Create growth opportunities and maximize shareholder value.e. GLOBAL RANKING • It is Asia’s best Oil & Gas Company.• Imbibing high standards of business ethics and organizational values. • Abiding commitment to health.

According to a report published in 'The Asian Wall Street Journal (Hong Kong)'. 'they could not ignore the company representing India's energy security'. in current listings of Economic Times 500 (4th time in a row). ONGC's Public Issue brought in 20 Foreign Institutional Investors (FII’s) to India. • It owns and operates more than 11000 kilometers of pipelines in India. upstream as well as downstream.10.• It is placed at the top of all Indian Corporate listed in Forbes 400 Global Corporate (rank 133rd) and Financial Times Global 500 (rank 326th). • Crossed the landmark of earning Net Profit exceeding Rs. the respect ONGC's professional management commands among the global investor community. • It is targeting to have all its installations (offshore and onshore) accredited (certified) by March 2005. 000 Core. This was a landmark in Indian equity market. Net Worth and Net Profits. and the first to do so among all Indian Corporate. • It is recognized as the Most Valuable Indian Corporate. ONGC’s pioneering efforts ONGC is the only fully integrated petroleum company in India. operating along the entire hydrocarbon value chain: . Its 10 per cent equity sale (India's highest-ever equity offer) received unprecedented Global Investor recognition. The growth in ONGC's profits is not solely due to deregulation in crude prices in India. Business Baron 500 and Business Week. • • Has paid the highest-ever dividend in the Indian corporate history. by Market Capitalization. and a remarkable Net Profit to Revenue ratio of 29. as deregulation has affected all the oil companies. as (it was reported). by Market Capitalization.8 per cent. This will make ONGC the only company in the world in this regard. Business Today 500. establishing beyond doubt. No other company in India operates even 50 per cent of this route length. but it is only ONGC which has exhibited such a performance (of doubling turnover and profits). including nearly 3200 kilometers of sub-sea pipelines.

Baroda . Mumbai Uran Plant.  Owns 23% OF Mangalore-Hasan-Banglore product pipeline (MHBPL). Mumbai Western Onshore Basin.  Created a record of sorts by turning Mangalore Refinery in petrochemicals limited around from being a stretcher case for referral to BIFR to among the BSE top 30.  Contributes over 84% of India’s oil &gas production. Holds largest share (57. within year.  Every sixth LPG cylinder comes from ONGC. Ankleshwar Mehsana Asset. Karaikal Assam Asset. Assam Tripura Asset. connecting MRPL to the Karnataka hinterland. Ahmedabad Ankleshwar Asset. Mehsana Rajamundry Asset.2%) of hydrocarbon acreages in India. Rajamundry Karaikal Asset.2 ASSETS/BASINS/PLANTS/INSTITUTES: Assets/Plants Mumbai High Asset. Agartala Basins Western Offshore Basin. Hazira Ahmedabad Asset. Uran Hazira Plant. Mumbai Neelam & Heera Asset Mumbai Bassein & Satellite Asset. 2.  About one-tenth of Indian refining capacity.

Dehradun Institute of Drilling Technology. Dehradun Insititute of Reservior Studies. Dehradun Regions Mumbai Region. Jorhat CBM-BPM Basin. Uran. Plants Uran plant. Navi Mumbai Geo-Data processing & Interpretation centre.KG Basin. Institutes Keshava Deva Malaviya Insitute of Petroleum Exploration. Chennai Central Region. Goa Institute of biotechnology & Geotectonics studies (INBIGS). Baroda Eastern Region. Ahmedabad Institute of Oil & Gas Production Technology. Dehradun Institute of Petroleum Safety. Rajamundry Cauvery Basin. Dehradun Institute of Management development. Hazira. Nazira Southern Region. Hazira plant. Chennai Assam & Assam Arakan Basin. Kolkata Frontier Basin. kolkat. Navi Mumbai Institute of Engineering & Ocean Technology.Jorhat . Mumbai Western Region. Health & Environment Mangment.

Being an international company has sufficient resources and capital to invest.C has ISO-9001 & ISO 14001 registration. Regional Training Institutes.C LTD is perceived to be the leader in oil production industry.N. Centre for excellence in Well Logging (CEWL).School of Maintenance Practices (SMP). Vadodara. Services Drilling Services.G. Vadodara. . Sivasagar & Vadodara.N.C is facing difficulties to produce oil from aging reservoirs. Mumbai 2.G. Mumbai Well Services. 3) OPPURTUNITY • Energy utilization of buried coal resource (700 -1700M). Channai. O. estimated 63BT – Equivalent to 15000 BCM. Mumbai Geo-Physical. 2) WEAKNESS • O.3 SWOT ANALYSIS OF ONGC 1) STRENGTHS • • • • O. Navi Mumbai. It has a very efficient and professional management team. Dehradun Logging Services. Baroda Engineering Services.G.N.

high investment and high risks.3.1 ONGC OFFICE ALL OVER INDIA The Road Ahead ONGC is entering LNG (re-gasification). power generation. 2. it is also looking at the future promoting and . to have presence along the entire hydrocarbon value chain.4) THREATS • • Security of personnel & property especially crude oil continues to be a cause of concern in certain area. Some exploration Campaign Company involves high technology. high technology. While remaining focused on the core business of Oil & Gas E&P. as well as crude and gas shipping. Petrochemicals.

Taking into account the industry environment and other influencing factors. OVL’s efforts have been supported wholeheartedly by the Govt. which has allowed OVL single window clearance for overseas upstream projects irrespective of investments involved. It has 12 overseas assets and is actively seeking more opportunities. of India provide the basis for the strategic direction of OVL. . The strategic objective of parent company ONGC and the Govt. These efforts in integration are basically to exploit the core competency of the organization-knowledge of hydrocarbons. of India. CBM production would commence in 2006-07 and UCG in 2008-09.” OVL today is the “Second largest E&P Company in India”. both internal and external. ONGC Videsh Ltd. as it is one possible source that could make India self sufficient in energy.applied R&D in alternate fuels (which can be commercially brought to market). New Business ONGC has also ventured in Coal Bed Methane (CBM) and Underground Coal Gasification (UCG). on a sustained basis. of India. second only to ONGC in terms of Oil & Gas reserves. ONGC is also looking at Gas Hydrates. OVL has been designated as the Indian Nodal Agency for overseas petroleum business and is maintained as a permanent participant in all concerned bilateral interaction and joint working groups of Govt. gained over the five decades.(OVL) ONGC Videsh ltd is the wholly subsidiary of ONGC.”OVL is the first Indian company to produce oil & gas overseas. strategic direction has been formulated.4 SUBSIDIARIES AND JOINT VENTURE 1. 2. which is re-evaluated on a continuous basis given the rapidly changing nature of the global petroleum industry to better adapt to the scenario.

06 million in previous year. 2004. under the mutually agreed Debt Restructuring Package. thus inducing cohesion of the corporate objectives and goal congruence in both organizations.62% in June –July 2003 through the buy-back of lenders equity at par.The functional directors of ONGC serve as the directors on the OVL board as well. It is the third refinery in India to get this prestigious certification. Mangalore Refinery and Petrochemicals Ltd(MRPL).15 million as against a net loss of Rs. MRPL is no longer a potentially sick company as its accumulated losses have gone down below 50% of the net worth on 31st March 2004. ONGC’s shareholding has increased from 51% to 71.4118. Reformate. MRPL was awarded highest ‘Five Star’ rating the British Safety Council. Naphtha.4594.77% from Rs. 2. MRPL exported products (Motor Spirit. The finance for the operation is provided by ONGC in form of loans. Equity shares of MRPL are now traded under’ A’ category of Mumbai Stock Exchange (BSE) from 1st March 2004. OVL follows meritocracy and draws its human resource from the parent company. The performance in 2003-04 under all parameters was better than the projection made at the time of the acquisition. LSHS) worth Rs. FO. The Market capitalization of MRPL on the BSE touched Rs. were the functional directors are consulted for selection. MRPL.44720 million during the year (up 133. It earned net profit of Rs. a subsidiary of ONGC has turned back to a profit making company just in the 3rd quarter after ONGC management control.100 billion mark on 7th January. HSD. . MRPL has showed excellent performance in the very first year of its operation as a subsidiary of ONGC.19130 million) and has emerged as the second largest export of petroleum products. interest free advances and equity. ATF.

1 million till 31st March. (PHHL) . and the facility was dedicated to the nation on 9th February. the Department of Company Affair has not accepted application to wind up the ONGIO under section 560 of the Companies Act 1956. ONGC International Private Limited (ONGIO) This 50-50 JV with Indian Oil Corporation Ltd (IOCL). it will continue to exit without any activities till it is finally wound up. 2004. Hence.(PIL) Petro net LNG Ltd. incorporated on 8th June 2001 has incurred cumulative loss of Rs. Given Lukewarm copromoter support.3km product pipeline from Mangalore (MRPL) to Bangalore via Hassan. Commercial sale of re-gasified LNG from Dahej terminal has already commenced. on the ground that it had carried on business during the year 2003-04. 30. PLL also achieved financial closure. Petro net MHB Limited ONGC has acquired 23% equity in Petro net MHB Ltd. JOINT VENTURES Petro net LNG Ltd. However. it was decided by the ONGC Board of Director to withdraw from the JV which is to be dissolved. which is successfully operating the 362.MRPL has entered in MOU with ONGC for purchase of Mumbai High Crude at arms length price. Pawan Hans Helicopters Ltd. 2004. a joint venture co-promoted by ONGC completed the construction of India first LNG terminal at Dahej on time.

Sharma . 2.5% of equity capital of PHHL which provides Helicopter services primarily to ONGC.1 ONGC GROUP OF COMPANIES 2.5 BOARD OF DIRECTORS Mr.4. R.ONGC invested in 21.S.

Hazarika Director (Onshore) Mr.A.Chitale Director Mr.Sinha Director 2.M.K.A.P.K. U.Balyan Director (HR) Mr.6 ONGC ORGANOGRAM (CRC STRUCTURE) .N.P.K.Mitra Director (Offshore) Mr.K.D.M.Rajesh V.K. Sundararajan Director Mr.Nayyar Director Mr. Shah Director Mr.Deb Director Mr. Sunjoy Joshi Director Mr.Chairman & Managing Director Mr.K.Sharaf Director (Finance) Dr.N.K.

7 FINANCIAL PERFORMANCE OF ONGC 2.7.2.1 2.1 NET SALES TURNOVER OF ONGC FROM THE YEAR 2005-09 .6.

2 FINANCIAL PERFORMANCE Particulars Turnover 2008-07 2008-09 60.02 639493 Profit After Tax (PAT) Dividend 167016.7.39 2.59 6844.salesturover 700000 600000 500000 400000 482443 569123 601370 639493 e l a s 300000 200000 100000 0 2005-06 2006-07 yea rs 2007-08 2008-09 sales turover 2.39 161263 6844.7.3 NET PROFIT OF ONGC FROM THE YEAR 2005-09 .1373.

7.7.2.5 Dividend .4 OIL AND NATUTAL GAS PRODUCTION: 2.

D ividend
6900 6800 6700 6600 6500 6400 6300 6200 2005-06 2006-07 yea rs 2007-08 2008-09 6416.71
Dividend

6844.39 6630.51

6844.39

2.7.6 SHAREHOLDING PATTERN OF ONGC

2.8.1 PROJECT ICE: A BRIEF

The IT mission of ONGC is to develop integrated, flexible and standardized Information Technology architecture to position ONGC towards fundamental competitive. The project ICE (Information Consolidation for Efficiency) was conceived, with the aim to provide a comprehensive IT solution encompassing end-to-end business process requirements through a globally reputed ERP (Enterprise Resource Planning) package in which all the previous decentralized IT solutions were to be merged. It planned to address the expectations of the total Business transaction needs of ONGC ,enabling tactical and strategic decision making based on Online information, henceforth accessible from a single platform. The objectives of project ICE are: Optimization and standardization of business processes.  moving up the value chain.  Higher productivity.  Cost reduction.  Strengthening efficiencies.  Lowering of inventories.  Increasing customer service and satisfaction.

SELECTION OF ERP PLATFORM
Selection of the ERP software was of utmost importance. Keeping the requirements and overall World wide performance SAP was selected as the ERP package for this project and M/s SAP, India as the implementation partners. M/s SAP, AG is the 3rd largest independent software vendor in the world and is market leader in inter-enterprise software solutions. Most of the top petroleum companies in the world use SAP. The contract was signed with M/s SAP, India on 9th July 2002.

PROJECT ICE: BUSINESS AREAS
The following are the modules implemented for western onshore: Production Planning (PP)  Plant Maintenance (PM)  Financial Accounting (FI)  Controlling (CO)  Joint Venture Accounting (JVA)  Sales & Distribution (SD)  Project System (PS)  Material Management (MM)  Quality Management (QM)  ABAP (Advanced Business Application Programming)  Business Information Warehouse (BW)

PROJECT ICE : INTEGRATION
This project ICE integrates the whole gamut of activities of ONGC on a single ERP system. This system becomes the integrated source of online, on time, validated source of information for the whole of the organization. All the modules are integrated and interdependent for carrying out the activities/business processes. An example of procurement of materials for ONGC is replicated below in the form of a cycle: These integrated scenarios do not require the same data to be keyed in multiple times. All the data is captured during the transactions that are carried out on the system. All these processes are carried out online in the ERP system and are independent activities. These transactions result in a

2004. Optimization of inventory holding and working capital. The cost of all the activities. Benchmarking of ONGC’s activities to integration business and practices. resulting in cost reduction.2 SAP INTRODUCTION .data related to this particular activity which is available form a single data source. monthly and year to date basis. All the processes have single data center. Project ICE has been one of the biggest implementations of SAP in Asia. Aid in tracking key performance indicators to further enhance the performance of the company. To track and eliminate redundant activities.8. inventory and production of various products at the organizations level is available on daily. The envisaged gains from this implementation are:• • • • Online monitoring and analysis of ONGC’s activities and performance. 2. • • • Effective utilization of available resources. Enabling online review of activities for strategic decisions. The project ICE went live at Western Onshore on 1st April. on the touch of a button.

SAP stands for “Systems. The software consists of four major modules: - 1. SAP was chosen for its ability to cover the company’s end-toend business process needs. Financial Accounting 2. Manufacturing & Logistics 4. Toady SAP AG is the world leader in providing ERP software. The modules can be used to support processes that span different functional areas in the firm. SAP R/3 & ONGC In one of the largest ever SAP go-lives in Asia. in Mannheim. Human Resources 3. Its flagship product is R/3. the integrated ERP suite provides a single company wide platform to integrate and optimize all business processes. SAP AG – a little company that started back in 1972. R/3 is written in a unique computer language known as ABAP / 4. R/3 is built around a comprehensive set of application modules that can be used either alone or in combination. The R/3 applications are fully integrated so that data is shared between all applications. The figure below shows the modules of R/3. Because the modules are integrated and use a common database. Germany by three engineer’s with the idea to produce and market standard software for integrated business solutions.200 users. Oil and Natural Gas Corporation Limited (ONGC) had rolled out SAP for Oil & Gas solutions at more than 100 operative locations across its Western Offshore and Western Onshore operations in India. transactions processed in one area immediately update all other areas. Now serving more than 5. Applications and Product”. . Sales & Distribution.

ONGC was able to obtain almost real-time information about the state of its oil wells and pipeline network that is available throughout the country. Under the agreement.SAP got a US$19 million contract from ONGC. which required nearly two years to complete.com solution components to enable them to work seamlessly across boundaries as a single entity and integrate their sales and manufacturing processes. Business Need ONGC decided to implement SAP R/3 and mySAP. project related activities and maintain their assets to gain a competitive advantage.1 Current Reality transformation. ONGC has decided to implement SAP– Lifecycle Data Management module. SAP was supposed to help ONGC implement "Project ICE" (Information Consolidation for Efficiency). To maintain all the documents and document versions. My SAP Business Suite with tailored functionality helps the company across the globe to lower costs. ONGC had allocated an IT budget of more than US$120 million over the next two years for similar enterprise wide projects to bring about efficiencies in its operations. Once completed. increase profitability and improve competitiveness. Flexible and Standardised Information Systems architecture to position towards fundamental competitive advantage SAP For Enterprise .wide 4. Time lag between market realities and decision . Function based Organisation. Vision An Integrated. It was the largest contracts in Asia for SAP in terms of the size of the project. Multiple stand alone packages.

 Availability and accessibility to latest version of documents/drawings at the organization at any point of time. drawings. 2.Benefits  The user can plan and request changes to manuals / drawings and these can be accessed across the organization. specification sheets. As the drawings / specification can be viewed by many users.  viewing capability of documents across the organization. their comments / suggestions can be taken and saved into versions The documents can be searched quickly with respect to the ‘technical parameters’ Linking of documents. charts to other SAP objects.9 ABOUT ANKLESHWAR ASSET .

Ankleshwar Sector is divided in to Ankleshwar field and satellite fields. and Olpad which are as far as 50 kms away from Ankleshwar city.1 MAJOR OIL & GAS FIELDS:• • Ankleshwar field (found in 1960) Gandhar field (found in 1984) In addition 21 satellite oil and gas fields have been discovered around the main fields. Ankleshawar CTF has facility for processing of crude oil to meet refinery specification.GGS-IV.Ankleshwar asset or plant is mother of ONGC started in 1960. It is the largest onshore asset or plant on ONGC. It makes second highest profit after MUMBAI HIGH.GGS-II. Some GGS has low pressure gas compressors. Production of Oil & Gas was commenced in 1961. Surface facilities for Ankleshwar field comprises of Central Tank Farm.GGS-III. Low pressure gas is either compressed & sent to CTF or sent to CTF through low pressure gas lines & is compressed in Gas compressor plant at CTF. The Ankleshwar installations are located within distance of 30 kms from Ankleshwar city.2 ORGANISATION STRUCTURE OF ANKLESHWAR ASSET: . The processing of crude oil to meet refinery specification can be done only at CTF. Kim & Olpad are satellite fields. High pressure oil & gas is directly sent to CTF after separation. one LPG Plant. Low pressure oil is stored in the tanks &pumped to CTF.It comes under Baroda regional office of ONGC.GGS-VI.GGS Motwan. Andada and other installations namely Main Pump House.9. production installation namely GGS-I. 2. Gas compressor plant and one effluent treatment plant. Ankleshwar & Motwan-Sisodara are the major fields & Kosamba.(CTF) complex. GGS Kim.9. 2. Surface facilities of satellite fields include GGS Kosamba. Typical Anleshwar GGS has facility for receiving oil and gas from the wells. Water Treatment Plant and Intake well at Kathor on Tapi river.GGS-V.

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RAAMBABU.K.1 ANKLESHWAR FINANCE DEPARTMENT STRUCTURE: GENERAL MANAGE R (F&A) CHIEF MANAGE R (F&A) INCHARG E CENTRAL A/C INCHARG E ASSET A/C INCHARG E COSTING/ WELLS/ IUT INCHARG E CASH/BA NK INCHARG E PREAUDI T INCHARG E BUDGET INCHARG E PCS DESIGNATION (F&A) GENERAL MANAGER CHIEF MANAGER CENTRAL A/C ASSET A/C SALES/COSTING/WELL S/IUT NAME OF PERSON MR. SEKHAR MOHANTY. SHAILENDRA. JOY .BHATTACHARYA MR. MR.MR. MR. MR. JOY MR.3. SHEKHAR MOHANTY . BRIEF OVERVIEW OF FINANCE DEPARTMENT 3. IQBAAL AHMED MR. KUNAL SENGUPTA MR. A.

MULE 3.1BUDGET SECTION: Introduction Under the guidance of Mr. the budget section plays a very important and crucial role. MEENA MR. or to provide a basis for its revision. Budgeting Process in ONGC General Functioning or System or working of F&A department (especially in respect of Budgeting) .Due to restriction on number of pages for project report. VISHAL MR. The reason is that whenever there is requirement of any kind of material or service. proper arrangement of fund is required and for that purpose budgeting is done. Any differences/ variances are the responsibility of key individuals who can either exercise control action or revise the original budgets after providing necessary justifications to the top management. Budgetary controls – definition Budgetary control is a technique whereby actual utilization is compared with budgets to make the budget an effective financial control tool.CASH/BANK PREAUDIT BUDGET PERSONAL CLAIM SERVICE MR. either to secure by individual action the objective of that policy. Vishal sir. and the continuous comparison of actual results with budgeted results. JOGLEKAR MR. Budgetary control is defined by the Institute of Cost and Management Accountants (CIMA) as: The establishment of budgets relating the responsibilities of executives to the requirements of a policy. every detail of budget is not covered.2.2 INTRODUCTION OF VARIOUS FINANCE SECTIONS 3. we came to realize the importance of budgeting. In ONGC.

5. Major activities perform by cash & bank section: • • • • Cash withdrawal from bank. This budget done by the various departments like drilling department. surface department.2 CASH AND BANK SECTION: This section is responsible for the receipts and payments either in cash or cheque or by any other form. documents in respect of investments of corporation money and other important documents. Payments and receipts(other than cash) Cheque management .3.2. according their future needs and at last the club it in to the actual budget. 3. logging department etc. Cash payments and receipts. This section is also responsible for the custody of cash.1 ED �ANKLESHWAR ASSET GENERAL MANAGER [F&A] BUDGET INCHARGE ASSET TEAM SERVICE TEAM Before moving forward it is important to know about the Budget Software known as Budget Manual which is used for the budget data entry prior uploading of final data into SAP • The method use by ONGC is ACTIVITY BASE BUDGET. MM department.

Dispatch of released payments.• • • • • Regular payments on behalf of employees.3 PRE AUDIT SECTION: This section is also known as accounts payable section. MIS activities. Pre-audit is also known as voucher-audit or administrative audit and denotes scrutiny & examination. before releasing the payments. Liquidity forcast and fund management.  In ONGC the vendors payments are done by the Mumbai headquarter  And employees salaries are done by the Dehradun headquarter. The section is divided in to two parts – one is pre-audit supply cell and other is pre-audit service contract cell. Types of Bills:  Supplier’s Bills . Various fees for issuing tender forms to our suppliers are collected by cash and bank section.  Earnest money deposit(EMD)  Security deposit (SD) 3. Remittance of tax deducted at source.2.

off-cycle payments (for example holiday home. recoveries.4.2.  Receipts of FDR kept as security deposits with GEB. controls. and Term based employees.). procedures. roles and responsibilities related to accounting for employee related payments. loans & advances. briefcase payments etc. Activities normally regarded as pre-audit receipt-accounting for incoming cash. (for example employees on deputation) Payments to regular employees include monthly salary payments. irrigation department. Contractor’s Bills  Miscellaneous payments The scope of Pre-audit also includes scrutiny of receipts of the corporation. Graduate Engineering Trainees (GET)/Management Trainees (MT) Retired employees. PERSONAL CLAIM SECTION: This section deals with policies. such as:  Initial public offering (IPO)  Bank drafts/banker’s cheque  Bank guarantees. Logistics invoice verification (LIV) with the integrated network of SAP being used during verification find out any error in the documents before payments are made and deal with it. corresponding statutory payments & compliances. The process explained in this section covers payments to/recoveries from: • • • • Regular employees of ONGC. 3. GET/MT are paid as per .

recoveries of loans & advances etc. production. Accounting of various employee related payments.1. development.their terms of employment. Accounting for full & final settlement on separation of employees. Retired employees are paid medical expense reimbursements as per HR policy. . Main Role of PCS Section • • • • • • • Updating employee payroll data at the time of joining.COSTING SECTION: 4. Tax Deducted at Source deductions and deposits. 4. Payment to retired employees. exploration (including prospecting). Inter unit transfers and deputations to/from the Company. Recoveries from regular employees include House Rent Recovery (HRR). Association of Scientific and Technical Officers (ASTO) union recoveries.1 INTRODUCTION Activities undertaken by the Company The principal activities of the Company includes acquisition of mineral interests in oil and gas properties. Accounting for retirement benefits and related employee benefits.1 COSTING STRUCTURE OF ONGC: 4.

ATF etc. completion of successful exploration wells. the Company incurs expenditure on the following activities: a) Acquisition of mineral rights: covers acquisition of right(s) to explore. b) Exploration activities: cover prospecting activities conducted in the search for oil and gas. lifting the oil and gas to the surface etc. drilling of exploration and appraisal wells etc. and post wellhead activities e.transportation and marketing of crude oil and natural gas. d) Production activities: consist of pre-wellhead activities e. e) Extracting activities: cover extraction of value-added products (VAPs) e. laying of pipelines. c) Development activities: include. installation of facilities required to produce. Superior Kerosene Oil (SKO). gathering. Naphtha. excluding extraction of VAPs are collectively referred to as upstream operations and form part of the Upstream Petroleum Industry. High Speed Diesel (HSD).g. from crude oil and natural gas. It also produces several value added products (VAPs) like Liquefied Petroleum Gas (LPG). The PSC prescribes Participating Interest (PI) of each partner and the share of Govt. These activities include but are not limited to surveys. development and production activities in India. operation and maintenance of wells. Low Sulphur Heavy Stock (LSHS) and Sulphur at their crude & gas processing facilities. but are not limited to. SKO.g. Ethane-Propane (C2-C3). HSD. Aviation Turbine Fuel (ATF). Naphtha. of India along with various corporate bodies for executing exploration. process and transport oil or gas. of oil and gas. Production of crude oil and natural gas is shared among JV partners as per the provisions of PSC. LPG. C2-C3. The Company has also entered into joint ventures in the nature of production sharing contracts (PSC) with Govt. treating. in profit petroleum. field transportation etc. The aforementioned activities. Some of these properties are operated by the Company and some by JV partners. construction of platforms and installations. test drilling. To execute its E&P activities. develop and produce oil and gas. The industry is commonly referred to as the Exploration & Production (E&P) industry.g. . drilling / completion / re-completion / testing of development and service wells.

etc. in Company’s context. 2002. Natural Gas and VAPs.1 Process objective: Cost accounting is the process of tracking. recording and analyzing costs associated with the products or activities of an organization. natural gas and VAPs in conformity with the cost accounting principles wherein all directly attributable costs are aggregated at Product cost centre (CC) and common costs are allocated and/or apportioned on a reasonable basis to Product CC for the purpose of determining the total product cost. • It generates information for meeting the requirements of Cost Audit Report Rules 2001. Therefore. It is also the backbone for preparation of financial statements. • • • It facilitates profit center accounting. • It facilitates location-wise comparison of the cost per unit of crude oil. 4. 4.1. Cost accounting assumes relevance due to following reasons: • Cost accounting helps in determination of cost per unit of crude oil. It enables maintenance of cost records for products and activities in compliance with Cost Accounting Records (Petroleum Industry) Rules. VAPs and various activities.2 CORPORATE REJUVENATION (CRC) STRUCTURE . cost accounting includes tracking. natural gas.f) Selling and distribution activities: consists of transportation and distribution of Crude Oil. recording. • It helps in determination of cost per unit of various activities namely survey. allocating and analyzing costs associated with activities mentioned in Para 1. exploratory drilling and development drilling.

6 Operational Support Services It includes specialized operation support services like drilling services. production. 3. well services. . support activities are undertaken at ONGC. Existing CRC structure at ONGC consist of: 1. VAP like LPG. Production and/or development activities are executed from assets For Example Mumbai High is an offshore asset producing crude oil. Dehradhun. Asset An asset represents a producing field. For example Cauvery Basin. It could be an offshore and onshore asset. Institute of Reservoir Studies. Institute of Oil & Gas Production Technology. Naphtha are also produce from these plants. For example Institute of Drilling Technologies (IDT). Institute An institute primarily executes Research & Development (R&D) activities and conduct in house trainings. exploration. Ahmedabad. logging services and engineering services. They execute crude oil stabilization and gas processing activities for ultimate sale to customers.CRC structure determines how acquisition. Workshop Central workshop has been established at Baroda and Shivsagar to execute repairs. 2. Workshops have also been established at certain locations like Mumbai for executing general repairs and maintenance activities. maintenance and fabrication of material & equipment. Plants Plants represents on shore processing facilities. Hazira. development. Each asset has a surface team and sub-surface team. Uran Plant. 4. 5. Basins A basin represents an exploration field where exploration activities are undertaken. For example. Mumbai etc.

broker’s fees. it is important to get an overview on cost incurred in this activity in the existing CRC structure. lease bonus. analysis. geological. investigations relating to sub surface geology including structural test drilling. Acquisition Costs Acquisition cost covered all cost incurred towards the acquisition of rights to explore. 4. Annual License fees are excluded. Costs incurred can be classified into five broad categories 1. Commercial Group etc. legal cost. Exploration Costs Exploration Costs cover all cosrs relates to exploration activities which include prospecting activities conducted in the search for oil and gas. geochemical. Treasury Management Group (TMG). Onshore/Offshore Logistic Section. Corporate Accounts (CA) section. Forex section. exploratory type stratigraphic test drilling. Corporate Budget cell (CBC) and project appraisal section.3 COST COMPONENT After obtaining understanding on types of activities undertaken and the existing CRC structure to execute this activity. develop and produce oil and gas. studies and their interpretation. topographical and seismic surveys. Material Management (MM) section. . geophysical. 2. cost of obtaining a Mining License (ML) in order to undertake development and production activities. These cost include cost of obtaining the petroleum exploration license (PEL) pr Letter of Authority (LOA) in order to undertake survey and exploration activities.7 Other Support Services Other support service includes F&A section. In the course of an appraisal programmed these activities include but are not limited to aerial. HR section/Employee relations/Medical. cost of temporary occupation of the land including crop compensation paid to farmer’s and all other cost incurred in acquiring this rights.

completion of successful exploration wells. severance taxes. artificial lift and other producing and injection facilities required to produce. including laying of infield pipelines. but are boot limited to the purchase. tanks. Development Costs These costs cover all cost related to development activities for extraction of oil and gas which include. completion. shipment or storage of equipment and material used in developing oil and gas accumulation. in respect of conveying. DDN. MM section etc. the construction of offshore platforms and installations. 4. field processing. process and transport oil and gas into main oil storage or gas processing facilities. Production Costs Production cost consist of direct and indirect cost incurred to operate and maintain an enterprise’s wells and related equipments and facilities. insurance and etc. repairs and maintenance. . re-completion and testing of development wells. gathering. wither inshore or offshore. materials. electricity etc. 5.Drilling of exploration and appraisal wells and other related activities such as surveying. light. Support functions costs/common costs: Support functions costs/common costs consist of expenditure related to marketing and other support function that includes CA section. Conveying treatment transportation costs: Costs of labour. property tax. in respect of lifting oil and gas to the surface. treating. completion and re-completion of service wells. including depreciation and applicable operation costs of support equipment and facilities. the laying of gathering lines. repairs and maintenance. property taxes. the drilling. drilling site preparation and all work necessarily connected therewith for the purpose of oil and gas exploration. HR section. the drilling. This includes employee related expenditure. 3. materials. fuel and power. supplies. fuel and power. including cess up to the outlet valve on the lease or field production storage tank etc. TMG. operation and maintenance including servicing and work-over of wells. Legal & Secretarial section. supplies. the installation of separators. insurance. the installation of the said storage or gas processing facilities. pumps. royalty and etc. Example of production costs are: Lifting cost: Costs of labour. field transportation.

Other modules include Financial Accounting (FI) module. . At the time of booking of any expenditure in SAP.4 COST OBJECTS Cost object is a logical sub-unit for collection of cost. development. costs are initially recorded in assigned General Ledger (GL) account code in FI module and a corresponding amount is booked to associated cost object. exploration. The CO module is not a stand-alone system and it envisages integration with all the other module in SAP. surveys. Understanding of this cost object is important before a period-end cost cycle run is executed in CO module. expenditure on drilling of exploration/development wells etc and finally setting them to relevant asset or expenditure head in general ledger. Name of cost objects. Offshore Logistic Module (OLM). Plant Maintenance (PM) module. Various type of cost incurred in executing E&P activities are collected in the different cost objects defined in different module in SAP. Cost accounting at ONGC in facilitated by Controlling (CO) module in SAP. production and support activities. brief description and process of capturing expenditure to these cost objects is given as mentioned below: 1. Work Breakdown Structure (WBS) in PS module A WBS is a results-oriented family tree that capture all the work of a project in an organized way. MM module. Cost objects have been created in different modules in SAP for capturing expenditure incurred in acquisition. HR module.4. Sales & distribution (S&D) module etc. Production Planning (PP) module. Project System (PS) module. WBS elements are created in PS module in SAP for capturing expenditure related to project activities like construction of facilities.

Cost Centre in CO module . The other costs allocable to a particular PMO like payroll & other employee costs. At the time of initial GL booking of expenditure. Material cost is captured on posting of reservation for issue of materials from main stores and cost of services on posting of service entry sheet in the MM module. etc.Material and services cost incurred on a particular project. 2. these are settled to relevant assets or expenditure head. exploration. exploratory. depreciation etc are allocated to PMO through a cost cycle run in CO module. depreciation. The other cost allocable to a particular project activity like payroll costs and other employee costs. 3. Plant Maintenance Order (PMO) in PM module PMO is created in PM module for executing repairs and maintenance activities on a particular equipment/material. are generally captured directly in the WBS elements created for that project/well etc. cost of material/services used directly in the relation to fabrication of asset/material gets captured in the relevant PO. allocated to PO through a cost cycle run in CO module. Major repairs & Maintenance jobs are executed at central workshops located at Baroda and Shivsagar. cost of materials/services used directly in relation to repairs and maintenance of activities gets captured in PMO. development activities are captured in the respective WBS elements. Once all direct and indirect cost related to construction. Production Orders (PO) In PM module PO is created in PM module in SAP for fabrication of material/equipment for internal use on the basis of requirement received from the projects. This activities are primarily executed at central workshop located at Baroda. At the time of initial General Ledger (GL) booking of expenditure. survey. The other cost allocable to particular PO like payroll and other employee costs. development well etc. depreciation etc are allocated to WBS element through a cost cycle run in CO module. Gujarat and Shivnagar. 4.

all costs other than costs required to be recorded directly in above cost object gets captured in relevant CCs. Drilling services. AT the time initial GL booking of expenditure. Different costs are captured in relevant cost centre at the time of expenditure booking from different modules in SAP. Certain expenditure is booked directly in FI module. depreciation is captured from FA module. 4. monthly cost cycle run is executed in CO module that results in allocation/apportionment of costs booked in different cost centre to various cost objects. expenditure on Diwali gifts for employee etc. 3. For example VRS module. After initial booking of cost. well services etc .CC si a unit identified to capture costs based on suitable criteria such as geographical or geological factors. For example for third party services costing less than INR 5.5 OVERVIEW OF COST ACCOUNTING PROCESS AT ONGC Overall cost accounting methodology at ONGC can be summarized below in the following manner: 1. marketing expenditure. Segregation of allocable and non-allocable expenses booked in various CC in CO module. and cost of material and services used for production activity is captured from MM module. For example. Recording of expenditure in different cost object at the time of initial booking of expenditure in FI module. Cost centre created under the existing organization/CRC structure can be viewed in SAP. Payroll and other employee related cost are captured from HR module. 2.000 individually. CC has been defined in CO module on the basis of existing organization structure. Allocation/apportionment of cost of operational and other support services recorded in various CC to relevant cost objects.

basins from workshops for respective PMO and PO./receiver concept. plants. COST ACCOUNTING PROCESS a) Tools used for allocation/apportionment of costs Cost accounting is facilitated by CO module in SAP. Settlement of expenditure booked in various WBS elements to relevant GL code ( fixed asset or expenses head) 5. Cost allocation/apportionment happens on the basis of sender. Allocation/apportionment of costs recorded in CC of surface team and sub-surface team to producing wells/platforms under a producing asset and allocation of transportation costs to plants where crude/gas processing facilities are located. Sender of cost is always a cost centre and receiver are other cost objects like WBS. Allocation/apportionment of cost booked to producing wells/platforms/processing facilities to process orders executed in PP module against which production of finished goods (FG) has been booked during the particular month. PMO. Tools used in CO module for sending/receiving cost are explained below.4. b) Direct activity allocation . PO or other CC. This helps to determine the total cost of production for each asset and facilitates inventory valuation. from where it is ultimately settled to relevant GL code ( fixed asset or expense head) 6. Raising of debits to assets. 7.

PO or WBS. recording and allocating of business services perform by cost centre to the receivers cost objects like cost centre. if any. which is the activity quantity. For example rig cost is allocated to CC created for exploratory wells. Assessment cost cycle . The receiver of the activity allocation is coast object like CC. when business transaction like Pos are confirmed in PP module or on manual posting of activity quantities to receive cost objects. Two types of cost cycles are designed in CO module. The plan price is the actual price for immediately preceding financial year that is automatically updated in the CO module at the beginning of the next financial year for each location. and production platform on the basis of rig hours. Costing cell at various location in the organization. Activity allocation occurs. Distribution is done at the beginning of the month/fiscal year by the central team. or the designed officer. 2. PMO. The original plan price is revaluated after the Activity Price Calculation (APC) by a separate period-end closing. PO. development wells. Execution of cost cycle results in allocation of costs from sender cost centre to the receiver cost centre. for example. The system multiplies the activity quantity produced by the periodic plan price of the activity type maintained in CC planning for the CC/activity type combination. 1. PMO etc. Distribution Cost cycle In distribution cycles. Cost elements are numeric codes through which CC are linked to GL code in FI module.Direct activity allocation involves measuring. In ONGC’s context. this cycle is used as the primary activity of a period-end procedure to capture all non-allocable cost including impairment provision. c) Cost Cycles: Cost cycles are allocation cycle designed in CO module. costs from sender CC are allocated to the receiver CC without losing the identity of the original cost element.

In assessment the identity of the original cost element from sender to receiver is lost. This tool is widely used in ONGC for allocation all support/operation support cost to receivers. as well as monitoring the operations of their business. reporting. plants. The cycles are run in a particular sequences as per the business process in order to determine the activity price for the respective processes. Some of the components of the CO (Controlling) Module are as follows: • • • • • Cost Element Accounting Cost Centre Accounting Internal Orders Activity-Based Costing ( ABC) Product Cost Controlling .In assessment cycle. workshop etc 4. Management decision-making can be achieved with the level of information provided by this module. basin. Different cost cycle have been designed in CO module for various locations of ONGC depending on the activities undertaken at each location as per the existing CRC structure. For example asset. institutes. Allocation structure is logical grouping of cost elements wherein the costs of sender cost centre are allocated to the receiver cost centre as per the group defined for reporting purposes. Various Statistical Key Figure (SKF) have been defined in Logistics Information System (LIS) in CO module and they determine the basis of allocation of costs from one cost centre to other cost centre each time a particular assessment cycle is executed.6 COSTING IN SAP SAP CO (Controlling) Module provides supporting information to Management for the purpose of planning. costs from sender cost centre are allocated to the receiver cost centre using secondary cost elements or allocation structure.

Examples of accounts that can be assigned are Cost Centres. Cost Centre can be created for such functional areas as Marketing. Internal Orders are used as a method to collect those costs and business transactions related to the task. It is within this module of CO (Controlling) that planned. Human Resources. These postings are automatically updated from FI (Financial Accounting) to CO (Controlling). Facilities. Activity-Based Costing allows a better definition of the source of costs to the process driving the cost. Some of the benefits of Cost Centre Accounting • • • • • Managers can set Budget /Cost Centre targets Cost Centre visibility of functional departments/areas of your business Planning Availability of Cost allocation methods Assessments/Distribution of costs to other cost objects Internal Orders provide a means of tracking costs of a specific job. Purchasing. Legal. It can also be used with Product Costing and Profitability Analysis. WBS(work breakdown structures). you have the ability to assign Cost Centres to departments and /or Managers responsible for certain areas of the business as well as functional areas within your organization. or even Quality. The cost elements are the basis for cost accounting and enable the User the ability to display costs for each of the accounts that have been assigned to the cost element. Internal Orders.• • Profit Centre Accounting Profitability Analysis Cost Element Accounting component provides information which includes the costs and revenue for an organization. Activity-Based Costing enhances Cost Centre Accounting in that it allows for a processoriented and cross-functional view of your cost centre. This level of monitoring can be very detailed but allows management the ability to review Internal Order activity for better-decision making purposes. Finance. Within SAP. or task. Shipping/Receiving. actual and target values are analyzed. Administrative Support. Information Systems. . service. Cost Centre Accounting provides information on the costs incurred by your business. Product Cost Controlling allows management the ability to analyze their product costs and to make decisions on the optimal price(s) to market their products.

geographical regions.Cost Object Controlling includes Product Cost by Period. The difference between a Cost Centre and a Profit Centre is that the Cost Centre represents individual costs incurred during a given period and Profit Centre contain the balances of costs and revenues. well services. Cost flows from cost centers of drilling services section to different cost objects is given below: . Product Cost by Order. institutes. Intangible Goods and Services. Profit Centre can be set-up to identify product lines. The methods which can be utilized for EC-PCA (Profit Centre Accounting) are period accounting or by the cost-of-sales approach. A) Drilling services Drilling services include well drilling. and CRM Service Processes. workshops. logging services. asset for enhanced understanding. Product Costs by Sales Orders. and engineering services). Cost flows have been given in a diagrammatic form. cementing operations and mud operations services. Cost flows have been given for operational support services (like drilling services. Cost flow overview It gives an overview of cost flow from CC to other cost objects after the cost cycle run is executed. Profitability Analysis allows Management the ability to review information with respect to the company’s profit or contribution margin by business segment. offices. Profit Centre are used for Internal Control purposes enabling management the ability to review areas of responsibility within their organization. divisions. Profit Centre Accounting provides visibility of an organization’s profit and losses by profit centre. production sites or by functions. basin & geophysical services.

the formation is tested and evaluated to determine whether the well can be completed for production. Once the designed well depth is reached. Well work over or re-completions are required when the producing oil sands become clogged and production declines or other physical or mechanical problems arises. Well Stimulation Services (WSS) and Well Completion & Testing Services (WCT).d ea rilling s ic s erv e (C ) C D g rig rillin s (C ) C C e tin o eration em n g p s (C ) C M d o e tio s u p ra n (C ) C E p to w lls a x lora ry e nd de elo e w lls v pm nt e (W S ) B E plo tory x ra d v lo m nt w ee p e ells p du in w lls ro c g e & (W S ). B (C ) C B) Well services Well services include work over services. Cost flow from cost centers of well services department to different cost objects is mentioned below: H ead w services ell (CC) W orkover rigs (CC) W S operations S (CC) W operations CT (C ) C W orkover wells (CC) E xploratory and developm ent w WS ells B and workover (C ) C E xploratory and developm wells ent (W S ) B C) Logging services . or whether it should be abandoned.H d . Oil well stimulation is the general term that describes a variety of operations performed on a well to improve its productivity.

Cost flow from cost centres of engineering services department to different cost objects is given below. This is done by sending an electronic device to check conduction properties of the materials within the earth’s bed. Cost flow from cost centres of logging services department to different cost objects is given below. Logging Base – To Logging O perations -100 % 2. E g e rin S rvice n in e g e s Spo u p rt (C ) C W rks o M in n n a te a ce C w rks ivil o (W S ) B P je w rks ro ct o (W S ) B F w lin lo e & in lla n sta tio s (C ) C W rksh p o o (C ) C 1. A high rate of conduction is associated with water where as a lower conduction rate is associated with oil and gives a more detailed picture of where the oil can be found. Logging O perations –To Exp /Dev /Workover Wells based On Logging Hrs . D) Engineering services Engineering services department at ONGC provides specialised services for detailed engineering and management of onshore/offshore construction projects for surface installations. C p je ivil ro cts 3.Logging services involve obtaining information about oil / gas fields. Well logging support (CC ) Well logging operations (CC ) Exploratory well (WBS ) Developm well ent (WBS ) Workover well (CC ) 1. N w w lls e e 2. C m in n n ivil a te a ce M jo p je a r ro cts R ve u jo s e ne b (P&L) C p l jo s a ita b A t /S rvice sse e s Spo u p rt E) Basin & geophysical services .

Cost flow diagram for costs incurred at workshops is given below. W rk h ps rv e o s o e ic s M c a ic l w rk h p eh n a o s o (C ) C E c a w rk h p le tric l o s o (C ) C P o e M rd rs C u in s rv e C tiliz g e ic s G) Institutes Institutes primarily execute R&D activities and conducts in-house trainings. Institute of Oil & Gas Production . Some examples of institute established by ONGC are Institute of Drilling Technology (IDT).Cost flow from cost centres of basin & geophysical services department to different cost objects is given below Basin & Geophysical Support (CC) Bid monitoring (CC) Specialist group (CC) Database group (CC) RGL (CC) Base Support & Logistics (CC) PEL blocks (WBS) Geophysical operation (CC) Processing (WBS) 2D/3D surveys (WBS) Survey cost (WBS) F) F) Workshop Central Workshops have been established at Baroda and Shivsagar for executing repairs. Locations like Mumbai also have workshop for executing general repairs & maintenance activities. Dehradun. maintenance and fabrication of material & equipments. Ahmedabad. Institute of Reservoir Studies.

Institute support (CC) Institute operations (CC) Research Projects (WBS ) Training (CC) H) Assets Assets represent producing field executing production & development activities. Each asset has a surface team and sub-surface team. For example Mumbai High is an offshore asset producing crude oil. Cost flow for expenditure in case of an asset is given below: . Cost flow diagram for cost incurred at institute is given below. It could be an offshore or onshore asset.Technology. Navi Mumbai etc.

Preparation of cost records in compliance with applicable statutory requirements.As tS p o s e u p rt (C ) C S b -s rfa e c s u u c ot (C ) C S rfa e c s u c ot (C ) C P d c g w llsa d ro u in e n d v lo in w lls ee p g e (C ) C C m le o p x /G S /G S -C m G G u CF T (C ) C T n lin sc s ru k e o t (C ) C L g a liftin c s c n r o ic l g o t e te L g a tra s o tio c s o ic l n p rta n o t c n r (C ) e te C L g a p c s in c s o ic l ro e s g o t cn r e te P cs O e o ro e s rd r il P cs O e gs ro e s rd r a M te l a ria -O il M te l a ria . Preparation of financial statements. . Completion of this activity at each location facilitates a) b) c) d) e) Period-end closing.Gs a Period-end cost cycle run Monthly cost run is executed in CO module by Costing Cell at each location for allocation/apportionment of costs booked in different CC to relevant cost objects. and Profit centre accounting by determining cost attributable to each profit centre (Profit centre have been determined by the management). Finished goods inventory valuation. From these cost objects expenditures are ultimately capitalized or charged off to profit & loss (P&L) account in the GL.

Monthly cost cycle run is only executed after all other modules have been closed (except FICO). The various stages of cost allocation cycles are as under:- Stage-1 Creation of Summary data table from line item budget for working out Activity Budget By executing stage one. Distribution and assessment cost cycles have been designed in CO module for different locations depending on the activities undertaken and costs incurred at each location. 4. different cost cycles have been designed for different assets. it is imperative that after any correction/ modification in budget data. The cost allocation cycles in the budget software have been designed in such a manner so that revised activity outlays can be worked out after each round of moderation/ revisions in the budget outlays and also that cyclical iterations of cost allocations are avoided. For e. workshops. Accordingly. institutes and plants. the budget software will summaries the budget data entered in indigenous.g. and after incorporating cost allocations received from other locations.Period-end closing involves certain mandatory activities in different modules in SAP before monthly cost cycle run is executed in CO module. it is imperative that various stages of cost allocation cycles are run in sequential order for working out activity budgets and budgeted cost of activities. . Cost allocations/apportionments are made by direct activity allocations or with execution of cost cycles in CO module.7 Costing Allocations Stages of Cost Allocation Cycles The Cost Allocation Cycles for preparation of Activity wise outlays and activity wise costs have been placed under a separate menu in the budget software as stages of Cost Allocation. Accordingly. Import and DRE Sheets and create a separate summarized table which will be used for working in subsequent stages of cost allocation cycles. basins. Stage 1 execution is repeated before subsequent stages of cost allocation cycles are followed.

Stage-2 Allocation of Directly identified amounts from one activity to another . A Message will pop up that proceed to stage 2.EXECUTE After executing stage 1 the software will keep the costing tables ready.

Allocation of budget from one final activity to the other final activity is to be resorted to only in exceptional cases. However. as allocations in all subsequent stages are proportionate based on parameters / weights. The user has the option of editing/deleting a particular allocation entry if required by selecting the particular record and pressing the edit/delete key. These allocations can be within the same locations and if needed amounts can be allocated to other locations also. the user can select the activities (both final and intermediate) one by one and correspondingly original budget received from Stage 1 for RE and BE and balance available after allocations at Stage 1 are displayed. / Imp.This stage has been designed primarily to facilitate allocation of directly identified amounts from one activity to another. This is illustrated in the following manner: EXECUTE . the same appears in the separate box given at the bottom of the screen. On the top part of the screen of Stage 2. allocations of Costs from Final Activities to Intermediate Activities are not allowed. The system has been designed to show the total amount identified with each of the activity after data entry for each budget unit (in Ind. After saving the allocation entry. The user may select the Transferee location and transferee Activity and Sub Activity and feed the amounts to be allocated for RE and BE in the respective columns. and DRE files after summation at Stage 1) on screen itself.

vehicle days for passenger vehicles or tonnage carried for OSVs. technical weights. The features available on the screen are the same as available in screen of Stage 2 except for that at this stage allocations are not for the identified amounts but are proportionate on the basis of activity parameters / weights. Project Overheads will be charged to P&L A/c as per applicable accounting guidelines. etc. Engineering Services and Project Overheads of the location to other activities This stage provides for allocation of Logistics Services. Activity parameters may be flying hours for air logistics. allocations can be carried out on the basis of the weights considering last years actual allocations in accounts change in activity levels.SAVE EDIT DELETE Stage-3 Allocation of Logistics Services. Trucks / Trailers. A list of activity parameters defined in the software is as follows: . In case direct activity parameters are not available. Engineering Services and Project Overheads to other activities.

Vehicle Days. these parameters are not applicable. users may feed their own parameters in unit/weight column.4. Cementing Jobs Drilling Rig Days/Work over Rig Days Rig Days Jobs. Budget outlays of various activities Budget outlays of various activities Wherever. Weights Wells Completed Logging Hours Weights.1 Activities for cost allocation Activities Drilling Services Cementing Services Mud Services Work over Services WSS Services Well Completion Service Logging Services Engineering Services Logistics Services Project Over heads Regional/Hqr. etc. Final Activities Activities Survey Exploratory Drilling Development Drilling Operating Expenditure Cost Allocation Base Line Kilometers (LK) Meters Meters MMT (Oil+OEG) .7. Man hours Tonnage Carried. OH Cost Allocation Base Rig Days Cementing Hours.

The features available on the screen are the same as available in screen of Stage 3. Activity .UNIT SAVE EDIT DELETE Stage-4 Allocation of other Intermediate Activities to Final activities This stage provides for allocation of all other intermediate activities to the final activities.

In case direct activity parameters are not available. the final amount available after allocations at Stage 2 and Stage 3 for all intermediated activities of the locations will be displayed. Work Over Rigs. In the top side of the screen. etc. allocations can be carried out on the basis of the weights considering last year actual allocations in accounts change in activity levels. etc. To avoid cyclical iterations. technical weights. the balance available under all intermediate services will be NIL. After allocation of Stage 4. intermediate activities can be allocated only to final activities and not to the other intermediate activities. in the amount available for allocation fields. at this stage. Logging Hours for Logging Services.parameters may be Rig Days for Drilling. EXECUTE . Regional & Headquarter Overheads will be charged to P&L A/c as per applicable accounting guidelines.

UNIT SAVE DELETE EDIT Stage-5 Incorporation of allocations received from other locations and change of activity codes if required EXECUTE .

transferor location had earlier sent some allocation to a particular transferee location. while making cost allocations to other locations at Stage 2. . and if required. Accordingly. Allows the budget coordinator of the transferee location to view the allocations received from other locations on the screen and if required to change the allocation from one final activity to another. However. the budget coordinator of the transferee location will interact with the budget coordinator of the transferor location for re allocation of the amounts. and it subsequently decides that no allocations are to be sent to that transferee location. the software does not allow him to change the total amount of the allocations received from the other locations. the software has been designed to allow the inter location allocations only to the final activities. (This has already been explained above under ‘Utilities’) Step I Execute ‘stage 5’ of the costing cycle for Incorporation of allocations received from other locations.3 and 4 the software allows the allocations only to the final activities and not to the intermediate activities. In case.In order to facilitate for the running of allocations cycles for different locations independently. the transferee location budget coordinator will delete the earlier received allocations received from that location by running “delete IUT received” option in the “Utilities” Menu.

Otherwise Restore the Allocations and then again come to Stage 5. Allocation is Complete. .EXECUTE Step II A pop up message will ask for restoring the allocations received from other locations before running Stage 5 of the Costing Allocations. Step III Fill all the fields and Save the data. Execute Ok if the restoration has been done.

Production. Accordingly. Development Drilling. Exploratory Drilling. for RE and BE. Finding Cost. . etc and for Intermediate services like Drilling Services. the physical targets data will be used by the system to work out the budgeted per unit cost of activities.SAVE Stage-6 Physical targets for final activities to work out cost of activities This stage provides a screen to feed the Physical Targets for final activities Survey. etc. Work over services.

PHYSICAL RE PHYSICAL BE 6.9 HYPOTHETICAL COSTING OF WELL cost elements Mining lease hire/lease-rigs onshore hire/lease-LWD Hypothetical cost per well 80476.88 5918690.92076 78613219.236 .

138 600782.888941 30598.878 1071373.7703 2752.54641 207261.O.91129 .exp ES Civil works expenses WCT Opearation Expenses Dv Drl monitor exp reservoir montr-exp open hole logging-exp production logging-expenses Cementing machine Hr-exp Rig operation-exp Rig Move/bldg-exp Coil Tube oper-exp stimulation services-exp DEPN EXP-P&M-drilling strings DEPN EXP-P&M-Well heads DEPN EXP-P&M-Casing pipes DEPN-EXP-P&M-Production Tubing DS Drilling Flud dep WCT Opearation Dep 2462124.138 275613.55129 185931.91183 -600782.0087 8200601.L con-ind-st-mis.3959 1365. St con-ind-st-tube&pipe mat consumed-stores-well heads con-ind-sp-prodn eqp con-ind-sp-BOP Elev Less alloc – expenses CWPS-OB Load-exp DS Drilling Flluid base.614631 7120.978 44706.9932 124202.138 580678.557 1349290.5431 439716.408209 1068424.166 5850.15413 15449.98839 76190.6192 1215427.077 456372.32661 519876.534 21597.5892 17044.86429 0 0 0 2432982.122753 0 0 850023.logging contractual apprch road const-pm Pmt-site prepration Rig positioning & towing civil contract (works) NDT services other contractual payments con-ind-st-drillpipe con-imp-st-casing pi con-ind-st-casing pi con-imp-st-drill bit con-ind-st-drill bit con-ind-st-oth-drill con-ind-st-oilwelcem con-imp-st-chemicals con-ind-st-chemicals con-ind-st-P.4662 344242.3753 192953.2159 822286.753 17450.2017 305848.27037 13822.96 82052.816 1542041.0859 38475.

Dv Drl monitor dep reservoir montr dep Open hole logging dep Production logging dep Cementing machine Hr-dep RIG Drilling oprs-dep Coil tube oprs-dep Stimulation services-dep Cost Elements

1354.95462 59654.89397 912802.4137 52507.52115 120164.3367 521064.0509 3527.769386 172.9549981 110540366.4

4.9 Various cases which can be affect cost of a well
Case 1: Suppose ONGC hire some of the rigs on contract bases. If those rigs are suppose on 2 years contract and that contract is approved at 7.86 crores and because of certain difficulties are arise and because of that the contract is extended for several months suppose 2 months than at the last it will increase the cost of the particular well. Actual cost Particular Hire/lease rigs-onshore Amount 78613219.88

Revise cost of rigs: because of that increase in a time period the cost is increase. Particular Hire/lease rigs-onshore Amount 85164381.46

Case 2: In case 2 if the casing pipe is require according to the requirement and because of the certain calamity there are more requirement of that pipe which is mainly imported from the other countries and their cost is increase. And it is directly depreciated to those costs. Actual cost Particular DEPN EXP-P&M-Casing pipes Amount 8200601.55

Revise cost Particular Amount

DEPN EXP-P&M-Casing pipes

8315423.24

CASE 3: Example of activity base costing.

Particulars Total time (in hours) Total cost ( assumed) Total activity based cost Manpower cost 65% Repairs & Spares 5% Raw material 10% Inventory cost 20%

well 1 300 20.97 902 13.636 36 1.0489 51 2.0979 02 4.1958 04

well2 2 350

well3 3 330

well4 4 400

Colum n5 1430 100

24.47 23.07 27.97 552 692 203 15.909 18.181 09 15 82 1.2237 1.1538 1.3986 76 46 01 2.4475 2.3076 2.7972 52 92 03 4.8951 4.6153 5.5944 05 85 06

5. SALES ACCOUNTIG SECTION:

5.IOCL HPCL For Naphtha . janta glass etc.) For LPG .GAIL Other direct marketing customers (e. Koyali HPCL Other refineries.IOCL.1. prima.g Wellspun. SALES COMPONENT: Customers: For crude oil .RELIANCE HINDALCO For Electricity – GUJARAT ELECTRICITY BOARD . For natural gas.

Premium / discount compared to marker crude is arrived at based on Gross Product Worth (GPW) differential.-) GPW differential. ONGC crude is benchmarked to Bonny Light which is a Nigerian Sweet Crude.1 PRICE OF CRUDE OIL: Component of crude oil • • • • • FOB price Ocean freight Sharing of custom duty Octroi – whenever applicable Facilities charges Component of FOB price FOB price for crude oil:Base price + premium/discount compare to marker crude.32/bbl .2. PRICE MECHANISM OF CRUDE OIL AND NATURAL GAS: 5.68=$69. Now suppose the price of Bonny Light crude is $70/bbl and GPW differential is $0. the FOB price of Mumbai high crude will be: FOB price = 70-0.2.Crude processing Crude transportation • • • Cairn NIKO HOEC 5.For services . FOB Price = price of marker crude (+.68/bbl.

govt.50/MT INDUSTRY XXXXXX DEVELOPMENT Rs.2500/MT -credit period is 18 days.In India the Selling price is pre decided by Central Government of india for E&P companies to sell to marketers. AFFECTING FACTORS ON CRUDE OIL PRICE DECIDING:-F. . Govt. -billing is done on weekly bases.O. decide the price. COMPONENT:BASIC PRICE OF CRUDE OIL TAX VAT OCTROI NATURAL CONTINGENCY DUTY EDUCATION EDUC.CESS ROYALTY TOTAL Rs.B (FRIGHT OF BOARD) PRICE -RBI conversion rate -BS &W (Basic sediments and water) that shows impurity of crude. firstly collect data regarding E&P costing from different E&P companies and after analyzing the data govt. In APM.3300/MT XXXXXXX CESS+HIGHER 2%+1%=3% 4% 3% CALAMITY Rs. of India use Administrative price mechanism(APM) to decide the crude oil price.

5%+2.5%=15% XXXXXX -credit period is 10 days to private customer and 7 days to GAIL. 1. LPG :BASIC PRICE XXXXXX .2 PRICING OF GAS: The Gas price can decide by two way.V.5.2. NON-APM (Market price) AFFACTING FACTORS OF GAS PRICE:o FOB PRICE o C. -the billing is done on the weekly basis. APM. 2.(CALARICE VALUE) o PRESSURE o NON APM PRICE COMPONENT:NATURAL GAS BASIC PRICE ROYALTY VAT TOTAL XXXXXX 10% On basic 12.

the purchasers send the purchase order. in which billing is done for every week.5%+2. Then invoice is creation is done. . Purchase order content the quantity what the customer require and such documentation. SALE CYCLE:Firstly. Then delivery document is prepared and oil dispatching work is start.5%=15% XXXXXX In case of naphtha. ONGC can fix the price and it can be vary from customer to customer. The billing is done on weekly basis and advance payment is done. Release the invoice to accounting. Then ONGC create sales order that content what would be their dispatch quantity. Then invoice printing is done. And billing is done on weekly basis NAPHTHA:BASIC PRICE EXCISES DUTY EDUCATION CESS VAT TOTAL XXXXXX 16% OF BASIC 3% 12. Finally.5%=15% XXXXXX -The credit period is 20 days.EXCISE DUTY EDUCATION CESS VAT TOTAL 8% OF BASIC 3% 12.5%+2. approximately pricing and other terms and condition.

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