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BAKER III INSTITUTE FOR PUBLIC POLICY RICE UNIVERSITY
CHARTING A NEW COURSE?
SUMIT GANGULY INDIANA UNIVERSITY, BLOOMINGTON
PREPARED IN CONJUNCTION WITH AN ENERGY STUDY SPONSORED BY JAPAN PETROLEUM ENERGY CENTER AND THE JAMES A. BAKER III INSTITUTE FOR PUBLIC POLICY RICE UNIVERSITY – MARCH 2007
DISCLAIMER THIS PAPER WAS WRITTEN BY A RESEARCHER (OR RESEARCHERS) WHO PARTICIPATED IN
BAKER INSTITUTE/JAPAN PETROLEUM ENERGY CENTER POLICY REPORT, THE
CHANGING ROLE OF NATIONAL OIL COMPANIES IN INTERNATIONAL ENERGY MARKETS. WHERE FEASIBLE, THIS PAPER HAS BEEN REVIEWED BY OUTSIDE EXPERTS BEFORE
HOWEVER, THE RESEARCH AND THE VIEWS EXPRESSED WITHIN ARE THOSE OF A. BAKER III INSTITUTE FOR PUBLIC POLICY NOR THOSE OF THE JAPAN
THE INDIVIDUAL RESEARCHER(S) AND DO NOT NECESSARILY REPRESENT THE VIEWS OF THE JAMES
PETROLEUM ENERGY CENTER.
© 2007 BY THE JAMES A. BAKER III INSTITUTE FOR PUBLIC POLICY OF RICE UNIVERSITY
THIS MATERIAL MAY BE QUOTED OR REPRODUCED WITHOUT PRIOR PERMISSION,
PROVIDED APPROPRIATE CREDIT IS GIVEN TO THE AUTHOR AND THE JAMES A. BAKER III INSTITUTE FOR PUBLIC POLICY
ABOUT THE POLICY REPORT
THE CHANGING ROLE OF NATIONAL OIL COMPANIES IN INTERNATIONAL ENERGY MARKETS
Of world proven oil reserves of 1,148 billion barrels, approximately 77% of these resources are under the control of national oil companies (NOCs) with no equity participation by foreign, international oil companies. The Western international oil companies now control less than 10% of the world’s oil and gas resource base. In terms of current world oil production, NOCs also dominate. Of the top 20 oil producing companies in the world, 14 are NOCs or newly privatized NOCs. However, many of the Western major oil companies continue to achieve a dramatically higher return on capital than NOCs of similar size and operations.
Many NOCs are in the process of reevaluating and adjusting business strategies, with substantial consequences for international oil and gas markets. Several NOCs have increasingly been jockeying for strategic resources in the Middle East, Eurasia, and Africa, in some cases knocking the Western majors out of important resource development plays. Often these emerging NOCs have close and interlocking relationships with their national governments, with geopolitical and strategic aims factored into foreign investments rather than purely commercial considerations. At home, these emerging NOCs fulfill important social and economic functions that compete for capital budgets that might otherwise be spent on more commercial reserve replacement and production activities.
The Baker Institute Policy Report on NOCs focuses on the changing strategies and behavior of NOCs and the impact NOC activities will have on the future supply, security, and pricing of oil. The goals, strategies, and behaviors of NOCs have changed over time. Understanding this transformation is important to understanding the future organization and operation of the international energy industry.
HERTZMARK AMY MYERS JAFFE STEVEN W. VON DER MEHDEN EDWARD MORSE G. MEDLOCK III FRED R. MARES KENNETH B. LEWIS DAVID R. AHRAM JOE BARNES DANIEL BRUMBERG MATTHEW E.CASE STUDY AUTHORS NELSON ALTAMIRANO ARIEL I. UGO NWOKEJI MARTHA BRILL OLCOTT NINA POUSSENKOVA RONALD SOLIGO THOMAS STENVOLL AL TRONER XIAOJIE XU . CHEN JAREER ELASS STACY L. ELLER RICHARD GORDON ISABEL GORST SUMIT GANGULY PETER HARTLEY DONALD I.
WALLACE S. BAKER HUGHES BP CHEVRON CORPORATION CONOCOPHILLIPS EXXONMOBIL GOLDMAN. TOTAL E&P USA. ENERGY FORUM SPONSORS ANADARKO PETROLEUM THE HONORABLE & MRS. HALLIBURTON JAPAN PETROLEUM ENERGY CENTER MARATHON OIL CORPORATION MORGAN STANLEY NOBLE CORPORATION SCHLUMBERGER SHELL SHELL EXPLORATION & PRODUCTION CO. Baker III Institute for Public Policy would like to thank Japan Petroleum Energy Center and the sponsors of the Baker Institute Energy Forum for their generous support in making this project possible.L.P. SACHS & CO. SIMMONS & COMPANY INTERNATIONAL SUEZ ENERGY NORTH AMERICA. HUSHANG ANSARY APACHE CORPORATION BAKER BOTTS. WILSON . L. INC. INC.ACKNOWLEDGEMENTS The James A.
Ganguly is currently working on a book.ABOUT THE AUTHOR SUMIT GANGULY RABINDRANATH TAGORE PROFESSOR OF INDIAN CULTURES AND CIVILIZATIONS INDIANA UNIVERSITY. 1999). and security policy. inter state war and defense. He also recently published The Crisis in Kashmir: Portents of War. Dr. Dr. is entitled Conflict Unending: India Pakistan Tensions Since 1947. His most recent work. Dr. Ganguly’s research and writing interests are focused on South Asia. Dr. published by Columbia University Press and Oxford University Press (New Delhi). DC. Asian Survey. Current History and the Journal of Strategic Studies. He has published extensively in the areas of ethnic conflict. Ganguly received his PhD in Political Science from the University of Illinois at Urbana/Champaign in 1984. Ganguly serves on the editorial boards of Asian Affairs. under contract with Cambridge University Press. He was previously a visiting fellow at the Center for International Security and Cooperation at Stanford University and a senior fellow at the Woodrow Wilson Center for Scholars in Washington. Hopes of Peace (Cambridge University Press and The Woodrow Wilson Center Press. India Since 1980. BLOOMINGTON Sumit Ganguly is the Rabindranath Tagore Professor of Indian Cultures and Civilizations and a professor of Political Science at Indiana University. He is also the founding editor of Asian Security and editor of The India Review. .
the Institute seeks to improve the debate on selected public policy issues and make a difference in the formulation. forward st looking discussion and research on the energyrelated challenges facing our society in the 21 century. government. Baker III Institute for Public Policy Rice University – MS 40 P.edu .ABOUT THE ENERGY FORUM AT THE JAMES A.org bipp@rice.O. The mission of the Energy Forum is to promote the development of informed and realistic public policy choices in the energy area by educating policy makers and the public about important trends—both regional and global—that shape the nature of global energy markets and influence the quantity and security of vital supplies needed to fuel world economic growth and prosperity.bakerinstitute. and nongovernmental organizations. TX 772511892 http://www. implementation. and evaluation of public policy. Box 1892 Houston. By involving both policy makers and scholars. The James A. business. BAKER III INSTITUTE FOR PUBLIC POLICY The Baker Institute Energy Forum is a multifaceted center that promotes original. Baker III Institute for Public Policy at Rice University. The forum is one of several major foreign policy programs at the James A. the media. The mission of the Baker Institute is to help bridge the gap between the theory and practice of public policy by drawing together experts from academia.
JPEC's activities include the development of technologies; promotion of international research cooperation; management of the information network system to be used during an international oil crisis; provision of financial support for the promotion of high efficiency energy systems and the upgrading of petroleum refining facilities; and organization of research surveys. JPEC's international collaborations cover joint research and exchange of researchers and information with oil producing countries and international institutions and support for infrastructure improvement and solving environmental problems of the petroleum industries in oil producing countries.ABOUT THE JAPAN PETROLEUM ENERGY CENTER The Japan Petroleum Energy Center (JPEC) was established in May 1986 by the petroleum subcommittee in the Petroleum Council.jp/english/index_e.html . 39 Toranomon 4choume Minatoku Tokyo 1050001. Japan Petroleum Energy Center Sumitomo ShinToranomon bldg.or. which is an advisory committee to the Minister of International Trade and Industry. Japan http://www. JPEC's mission is to promote structural renovation that will effectively enhance technological development in the petroleum industry and to cope with the need for the rationalization of the refining system.pecj.
India had net oil imports of almost 1.S.6 billion barrels of undiscovered 1 U.gov/emeu/cabs/India/Oil. and Cauvery basins. Geological Survey World Petroleum Assessment 2000. from 2.eia. of which 632.000 b/d. (2007): http://www.html. India has only 5. up to 3. Indiana University. India’s average oil production level (total liquids) for 2005 was 837. Bloomington INTRODUCTION The importance of petroleum to India’s energy needs cannot be overstated.THE ONGC: CHARTING A NEW COURSE? Sumit Ganguly. Country Analysis Brief – India. the bulk of which are located in the Mumbai (Bombay) High.7 million b/d in 2005. India has roughly 5. Future oil consumption is expected to show strong 1 growth. Currently. Upper Assam.4 billion in oil reserves.doe.1 million b/d by 2010. oil comprises approximately 34 percent of India’s total energy consumption and has been growing gradually as a share of the country’s energy consumption in recent years. Energy Information Administration. According to the U.000 b/d was crude oil. .4 billion barrels of proven oil reserves and a further 10. Cambay. Department of Energy.5 million b/d in 2005.S. KrishnaGodavari.
rigzone. The largely stateowned.asp?1_id=211. July 18. Nearly 60 percent thereof comes from Saudi Arabia. Tang Shiping. Oil and Natural Gas Corporation (ONGC) dominates India’s energy sector.86 billion. 2005.” The Hindu Business Line. In an attempt to address these demands the ONGC has invested as much as $3 billion since 2000 in 7 overseas exploration and energy projects.com/analysis/rigs/insight. As India’s principal energy company it will continue to play a significant role in guaranteeing the country’s longterm energy security.033 employees (2005) and produces 77 percent of India’s domestic petroleum and 81 percent of its natural gas. The market value of the firm is estimated to be around $27. December 12. “PIW’s Top 50: How the Firms Stack up. The importance of the ONGC to international energy markets cannot be overstated. India is expected to become the fourth largest consumer of energy in 2010. Nigeria. these needs are unlikely to diminish. the Petroleum Intelligence Weekly nd 3 (PIW) ranked the ONGC as the 32 largest oil company in the world. Kuwait and Iran. 2006. Joey Long Shi Ruey.16 billion.yaleglobalonline (accessed March 15. 5 Manjeet Singh Pardesi. 2005). 2006). Premarani Somasundram.” Petroleum Intelligence Weekly. India is already the world’s sixth largest energy consumer and imports close to 70 percent of its oil needs. 2005. http://www. India will exhaust its proven oil reserves in 2 just over 20 years.” Offshore Rig Review. 2005. com/2006/07/18/stories/20060718043800300. At current production rates. Hiro Katsumata and Vladimir I. Extrapolating from 6 current trends. remaining flat in the nd ranking from the year before. http://www. Nanyang Technological University. Ivanov. August 12. 6 Pramit Mitra. Based on six different operational criteria. 2 3 “India Indepth.htm.” India Abroad. Amitav Acharya. “Indian Diplomacy Energized by Search for Oil.81 billion and its profits for 2004 were $2. Energy and Security: The Geopolitics of Energy in the AsiaPacific (Singapore: Institute of Defense and Strategic Studies. Young Ho Chang. up from a 544 ranking the year before.thehindubusinessline. March 14.” YaleGlobal Online. Its total assets in 2005 amounted to $19. 5 Given India’s current rate of economic growth. 2 . which is hovering around seven percent annually.and probable reserves. May 4. 7 Aziz Haniffa. The 2006 Fortune Global 500 rankings placed the ONGC as 402 th 4 in terms of sales revenues. http://www. 4 “ONGC Moves up 52 Points in Fortune Listing. It has 38. “”India Will Consume More Energy to Fuel Economic Growth. 2006.
3 . has made only limited progress on the path of economic liberalization. Both of these allies have periodically placed important roadblocks on the road to economic liberalization. The dominant party in the coalition. since 2001. it has had important successes as well as failures. A virtual stateowned monopoly. the Congress. through its international arm ONGC (Videsh) has increased attempts to purchase offshore oilfields to meet India’s burgeoning energy needs. a detailed casestudy of the ONGC can generate important insights into the workings of predominantly stateowned firms in an era of economic liberalization. India is faced with mounting pressures from foreign investors and governments to continue with its fitful efforts toward economic liberalization. Despite many of the pathologies that afflict stateowned firms the ONGC has managed to function in a reasonably efficient fashion. In recent years. the United Progressive Alliance (UPA). 1972). as India’s energy needs have burgeoned as a consequence of rapid industrialization and the growth of a vibrant middle class the ONGC has become more nimble in its quest for greater access to energy resources. Communism in Indian Politics (New York: Columbia University Press. In this endeavor. profitmaking stateowned enterprises. Indeed. is acutely dependent on India’s two Communist parties. their ideological positions and their political strategies constitute the principal impediment to the sale of large. Most pertinent to our study. the ONGC.ONGC There are a number of compelling reasons to study the organization and functions of the ONGC. the Communist Party of India and the Communist Party of India 8 (Marxist) for parliamentary support. Bharat Heavy Electricals. Specifically. the Indian firm has only met with partial success and has been repeatedly sidelined by 8 The best treatment of the split in the Communist movement in India remains Bhabani Sen Gupta. The ruling coalition regime. in 2005 they successfully stopped the government from selling a mere 10 percent of the shares of a large stateowned enterprise. Most importantly.
see Jagdish Bhagwati and Padma Desai. For an important set of discussions about planning and its consequences for the Indian economy. The two key elements of the Soviet experience that he incorporated into India’s economic policymaking were the creation of a substantial public sector and the adoption of the 10 process of economic planning. The other reason for keeping the oil and natural gas sector in state hands stemmed from India’s bitter colonial experience. “Head to Head in the Quest for National Energy Security. see Terence J. offshore oil blocks.) The State and Development Planning in India (New Delhi: Oxford University Press. Despite these setbacks it is unlikely that the ONGC will drop its 9 ongoing efforts to purchase foreign. He abhorred the violence of the process but was nevertheless fascinated with the ability of the Soviet Union to emerge as a major industrial state within a short time span. 1994). 2004. Accordingly. Consequently. 9 Edward Luce.one of its principal and more formidable competitors. India’s principal policymakers. From the standpoint of Indian nationalists. India: Planning for Industrialization (London: Oxford University Press. though a committed democrat. 11 For an early. HISTORY The history of the ONGC cannot be understood without some grasp of the political climate that prevailed in India following its independence from the British Indian Empire in 1947. Prime Minister Jawaharlal Nehru. These two components of economic policy making dovetailed 11 into India’s larger strategy of importsubstituting industrialization. the expansion of the colonial enterprise was inextricably linked to the development of capitalism.” Financial Times. 10 4 . thoughtful but unsparing critique. November 17. most notably. he was keen on utilizing some features of the Soviet experience with rapid industrialization. All the colonial states had also been capitalist states. was impressed with the Soviet Union’s strategy of forceddraught industrialization. Chinese state oil firm China Petroleum and Chemical Company (Sinopec). 1970). These deep misgivings also contributed to the creation of a substantial and powerful state sector. there was a profound distrust of free market policies. Byres (ed.
1993). http://global. On this crisis see Sumit Ganguly. These three factors. it was renamed the Oil and Natural Gas 14 Corporation. However. they turned to the Soviet Union.factiva. 14 Three factors had precipitated this unprecedented financial crisis.ONGC In the aftermath of India’s independence in 1947 a number of the oil majors had expressed limited interest in the Indian market. they provided considerable advice on both technological and organizational matters.com/en/arch/print_results. First. Prime Minister Nehru and key members of his cabinet. in concert. Tomlinson. were convinced that the Western oil majors would not deal fairly with the nascent state.R. just as oil prices skyrocketed. To this end. Thus. 12 For a general discussion of India’s strategy of importsubstituting industrialization. with an eventual eye toward privatization. Second. The exploration of oil and natural gas were 12 deemed to be part and parcel of the “commanding heights” of the Indian economy. Some had also set up prospecting and refining operations within India. Subsequently.” The International Executive. Indian economic planners deemed it necessary and appropriate to create a public sector firm that would take control of the production of these vital natural resources. 2005); also see B. JanuaryFebruary 1991. 1956 as a department of the Geological Survey of India. see Francine Frankel. 5 . “The Developing World and the New Oil Crisis: Between Iraq and A Hard Place. just prior to the first Gulf War India had purchased a substantial amount of oil on the spot market thereby draining much of its carefullyhoarded foreign exchange reserves. 1993). most notably. In 1994.asp accessed December 2. thanks to India’s fitful embrace of the market in the wake of a major financial crisis in 1991. a number of India’s external debt payments came due. K.000 expatriate workers in the Gulf states. 13 Oil and Natural Gas Corporation LimitedHistory.D. It was first set up as the Oil and Natural Gas Commission on August 14. in 1959. was converted into a statutory body by an act of the Indian parliament. India Political Economy. Malaviya. Third and finally. The Soviets completed a geophysical survey in December 1955. India in Transition: Freeing the Economy (Oxford: Clarendon Press. 2005. The Economy of Modern India: 18601970 (Cambridge: Cambridge University Press. 19472004 (New Delhi: Oxford University Press. 3738; for the efforts to unshackle the Indian economy from its hidebound legacy of economic planning see Jagdish Bhagwati. 13 Subsequently. which proved willing to assist India. it lost the remittances of some 130. contributed to a major foreign exchange crisis. They were also keen on developing India’s indigenous capacity in oil prospecting and refining. the ONGC was formed during the heyday of India’s initial and nascent experiment with the creation of a behemoth public sector.
After 1981. they are also hobbled from shedding excess labor capacity because of India’s sclerotic and antiquated labor laws. the ONGC. On many an occasion.eiu. the management of the firm has to adhere to rigid rules of promotion and hiring. are overly ambitious and are not reached in an expeditious fashion. Since it was started as a public sector firm. These targets. http://www. as one of India’s stellar state enterprise performers. Other serious ramifications come from being a large. unwieldy public sector firm set up during the heyday of state intervention in the economy. like the Indian state itself. The firm sets various goals and targets with multiyear plans. across the political spectrum. it has been subjected to political interference and has had to adhere to government dictates on oil pricing policy. one of the socalled “navaratnas”. Simultaneously. The disadvantage of being a public sector firm is also equally apparent. there is little or no immediate prospect of diluting the ONGC or selling off its component parts.The historical backdrop has a profound impact on the company’s behavior. Furthermore. the ONGC has had significant advantages and disadvantages. Such rules often prevent the management from rewarding extraordinary performance through merit increases. For example. engages in a variant of indicative planning.com/index. Despite efforts by the energetic (but controversial) former ONGC Chairman and Managing Director Subir Raha to expand the 15 “Industry Briefing: ONGC. all too often. STRUCTURE AND SCOPE OF OPERATIONS The ONGC has evolved into India’s largest energy upstream company.asp?layout=IWArticleVW3&article_id= 1261253711_id=280000028. It is widely seen. holding 57 15 percent of the country’s hydrocarbon acreage. Even in an era when India is steadily dispensing with its pseudosocialist legacy. it has virtually emerged as a monopoly as India moved to nationalize the few foreign oil companies that were operating in the country. 6 .” Economist Intelligence Unit.
“The decline in anticipated output from existing fields is going to assume increasingly significant proportions … I will be failing in my duty if I didn’t draw the attention of the country to some of the alarming facts about the ONGC and energy security in the immediate future. November 6.co.stm. November 28.000 b/d by the year ending March 2007. together with two state energy firms. pointing a finger at falling ONGC output. 18 “ONGC Short on Output Goal.” The International Oil Daily.” Aiyar noted that 20 percent of India’s estimated oil reserves remain undiscovered and he felt that the ONGC’s record in finding new reserves was poor.asp.” BBC News. maintains an 84. http://www.bbc.ongc.net/history. “Concerns Over Indian Oil Output. The minister was quoted as saying. 2005. 16 17 ONGC.000 b/d. In November 2005. The ONGC responded by stressing that the company had discovered five out of India’s six producing basins 17 and that prospects for future discoveries were “very encouraging. The ONGC’s output for the first half of the fiscal year was 257. The Indian government is a majority stakeholder in the company: the 16 government.000 b/d for fiscal 200607.000 b/d. 2006. while projected output for the second half was 264. but the ministry expressed its concern in November 2006 that the ONGC was likely to experience a shortfall of nearly 30. former Indian Oil Minister Mani Shankar Aiyar raised concerns about the country’s future energy supplies.11 percent in the ONGC.uk/1/hi/business/4477676.” In mid2006. aiming to boost the overall recovery rate for its production assets from 28 percent to 40 18 percent.ONGC company’s operations into the downstream sector. 7 . the Indian government has effectively stymied those efforts. preferring that the company focus primarily on its exploration and production (E&P) strengths. the Indian Ministry of Petroleum and Natural Gas set a crude production target for the ONGC of around 550. The company has delayed a project to increase recovery rates in the Mumbai High offshore field and several others as well. http://news.
with the 20 company anticipating output from the field to rise to 300. 8 . Mumbai High was discovered by a Russian and Indian oil exploration team during the mapping of the Gulf of Cambay between 1964 and 1967. the company has made 10 discoveries to date in the Mahanadi and KrishnaGodavari areas. at least 3 dead.000 b/d but an offshore gathering platform at the field was damaged in a fire in July 2005. 39 are deepwater blocks. Saurashtra.000 b/d. In the west. exploration is continuing in the Gujarat.” The Hindu Business Line.” Reuters.com/2006/10/05/stories/2006100503140300. with exploration ongoing in the Cauvery region and seismic surveys under way in Andaman Islands.000 b/d in 2007. and also off Mumbai. The first well was sunk in 1974 and production began in 1976. Of these. In deepwater licenses in India. Richa Mishra. The ONGC operates 31 deepwater blocks. The field attained a peak production of 400. “FPSO Vessel to be Operational by MonthEnd: ONGC.000 b/d between 1985 and 1989. July 28. “Fire destroys Bombay High platform. Kerala and Konkan areas. the ONGC's partners include BG in three blocks. http://www.htm. 18 off India’s east coast and 13 off the west. 19 20 Himangshu Watts and Hiral Vora. temporarily dropping output to just 140. accounts for 14 percent of India's oil requirements and 38 percent of all domestic production. In the east.the indubusinessline. Normal output at Mumbai High has averaged around 270.The Mumbai High field. 2006. Cairn Energy in one block and ENI in two blocks plus another onshore. but subsequently went into decline. the ONGC has pumped in 19 more than 85 billion rupees to redevelop the field beginning in 2001. which is the country’s largest offshore oil field. 2005. October 4. The first five New Exploration Licensing Policy (NELP) rounds offered up 144 exploration blocks. split between the ONGC (22) and Reliance (17) – the ONGC's other nine deepwater blocks were “nomination blocks”. of which 109 were awarded. To arrest the decline from its most prolific field.000 b/d by the end of 2006. Subsequent repairs and the introduction of a floating production storage and offloading vessel brought the field’s output back to 270.
000 b/d and most are located far from the major oilproducing fields on the western seaboard of India and remote locations in Assam in northeastern India.” September 19.txt last updated December 13. including from foreign firms. 2006 http://www. Pannu. Of the 109 blocks awarded in the first five rounds. the ONGC 23 garnered 24 blocks.asp. 9 .” OilOnline.ONGC 21 awarded before NELP. 2006. com/2006/10/14/stories/2006101403950300. the loss of drilling expertise through the defection of key exploration personnel to private oil firms has impacted the ONGC’s ability to effectively conduct future 24 drilling operations. which effectively leveled the playing field in the Indian hydrocarbon sector by opening the door to largescale private investment.ongcindia.telegraphindia. In addition. A number of marginal fields were awarded to ONGC before the launching of NELP in 1999.com/news/ features/aog/20060824. the company is now opting to maximize production from its marginal fields. Indeed. 2006 http://www. http://www. October 13. according to technical consultants Gaffney Cline. http://www. the 25 company will likely contract out for work on the onshore fields.asp December 2.com/1061213/ asp/business/story_7128189. either as the sole bidder or through a consortium. 2006. August 24. under which bids were received in September 2006.” International Oil Daily. Blocks Downstream Expansion. July 20. 22 ONGC.htm. 21 Terry Knott. having monetized 38 fields with another 94 fields under monetization. 24 “India Tightens Control Over ONGC. The ONGC’s marginal fields have the capacity to produce less than 10.” The Telegraph. “Bigger Oil India Role in Exploration. While ONGC may develop some of the offshore marginal fields where it already has infrastructure. “ONGC Seeks to Maximise Marginal Oilfields.S. 2006.ONGC_loo. 2006.com/featart1. 25 Rahul Wadke.22015. The ONGC intends to develop 153 onshore and offshore marginal fields in the near future. “Chairman’s Speech at the 13th Annual General Meeting of Oil and Natural Gas Corporation Ltd. The oil firm is facing the problems of falling output from maturing fields as well as a series of drilling failures.P.thehindubusinessline.asp?fold=feature_article&file=feature_article172.” The Hindu Business Line. of which 12 are deepwater. 23 S. “ONGC Looks Deep to Increase Resources. The ONGC’s expensive deepwater drilling program has encountered more dry holes than discoveries in the last three years.oilonline. In NELP’s Round 6. the ONGC won 59 22 of them.
November 1. The ONGC had opened up just one retail outlet in Mangalore. India’s gas production was 32. 2006 http://www.S. Energy Information Administration. With the departure of the ONGC’s last chairman. India's domestic natural gas supply is not likely to keep pace with demand.com/2006/09/20/ stories/2006092006341700.96 Tcf in 2003 and is projected to reach 1. the government demanded that the ONGC stop developing retail outlets for transport fuels after previously permitting the oil firm to set up 1.63 trillion cubic feet (Tcf) per year in 1995.thehindubusinessline. the ONGC announced that it had made ten new oil and gas discoveries during fiscal 200506.” The Hindu Business Line. In July. Current projects include enhancing natural gas production at the Tapti fields in Gujarat and recovering previously 26 flared natural gas at the Mumbai High oilfield. all in the Krishna Godavari (KG) basin.000 b/d refinery.2 billion cubic 27 meters (BCM) in fiscal year 200506. In September 2006. Department of Energy. in May 2006. but had plans to open up some 40 26 U.8 Tcf in 2015. http://www. natural gas use was nearly 0. com/2006/11/02/stories/2006110203930100. Saurashtra and KrishnaGodavari regions while two discoveries were made in onshore blocks of 28 the KG basin and the Assam shelf. with the ONGC’s gas output accounting for 23 BCM. 28 “ONGC's Huge Outlay for Mangalore SEZ. 2006 http://www. and the country will have to import much of its natural gas. the Indian government has moved to thwart Raha’s goal of seeing the ONGC become a fully integrated company. Another three finds were in shallow offshore areas of the Mumbai. January 2007. These included five discoveries in deepsea areas.” The Hindu.4 Tcf in 2010 and 1.India’s consumption of natural gas has grown faster than any other fuel in recent years.htm. The government reportedly changed its mind after recognizing that other state oil firms were losing billions of dollars in revenues because of price controls.100 retail outlets.gov/emeu/cabs/India/Oil. Most of India's current natural gas production occurs in the Mumbai High basin and the state of Gujarat.eia.html 27 “Reliance to Double KG Basin Gas Output. Country Analysis Briefs: India. 10 .htm. September 20. either by pipeline or as liquefied natural gas (LNG).hindu. near its 250. From only 0. doe. Subir Raha.
11 . May 26. while Shell reportedly wants to invest in an onshore oil field in Gujurat in exchange for a share in the profit oil that will result from the use of Shell technology. For example. 29 30 “India Tightens Control Over ONGC. December 14. The expansion of its activities. 2006 that covered cooperation in Indian and overseas upstream and downstream activities including exploration and production. stemmed from a single. in all likelihood. Although ONGC signed a memorandum of understanding with Royal Dutch/Shell on January 19.business standard. there had been criticism of how the ONGC management had handled the aftermath of the fire that destroyed an offshore installation at the 30 Mumbai High North oil field in July 2005. 2006 http://www.ONGC stations in 2006. oil products and refining and petrochemicals – the two companies have been at loggerheads and no definitive agreements have been signed. the ONGC does not want to part with any equity oil and would prefer a service 31 agreement. C. DOWNSTREAM Under Raha.hinduonnet. who had helped steer the ONGC to becoming a global upstream player through a series of overseas acquisitions.” Business Standard.php?autono=267890&leftnm=1&subLeft=0&chkFlg=. Since Raha’s fiveyear contract was not extended. Shell Fracas Continues. with a drive to increase its refining capacity to become the second largest refiner behind the Indian Oil Co (IOC). July 20. 31 Rakteem Katakey.” The Hindu. “ONGC. the ONGC had very ambitious plans to beef up its refining business. the company lacks autonomy 29 and is being more closely controlled by oil ministry officials. “No Extension for ONGC Chairman Subir Raha. Blocks Downstream Expansion.com/common/storypage. ran afoul of former Oil Minister Aiyar and former Petroleum Secretary R. 2006. Raha. Tripathi over a number of issues.com/2006/05/26/ stories/2006052615790100. In addition. 2006 http://www. coal gasification.htm. natural gas.” International Oil Daily. including the fact that the company failed to add to the country’s oil and gas reserves and Raha’s opposition to the increase of government directors to the ONGC board.
it appears that the Indian government put a stop to the proposed development of the Kakinada refinery. to make the ONGC a more significant player in India’s overall energy infrastructure.” September 16. making it the company’s only refining subsidiary. Mangalore Refinery and Petrochemicals Ltd. (MRPL) in 2003.000 b/d refinery at Kakinada in Andhra Pradesh. The Mangalore refinery has processed a record throughput of around 242.000 b/d refinery in 32 Mangalore. with Hindustan Petroleum Corp. 2006.000 34 b/d. and IOC both planning on building 300. 33 ONGC. the firm bought a 23 percent stake in the 364kmlong MangaloreHasanBangalore product pipeline. The ONGC had purchased a 71. Sharma. The company had goals of expanding capacity of its only refinery at Mangalore from 250. connecting the refinery to the Karnataka hinterland.’s Cairn Energy to construct a 150. The government cited a surplus of refining capacity likely to occur on the Indian east coast in the coming years. R.000 b/d refinery at Barmer in Rajasthan.htm. with the refinery producing nearly 227. 32 “ONGC Charts Roadmap for Higher Oil Output. 34 “ONGC Charts Roadmap. Refining Capacity.000 b/d of crude in fiscal year 200506. 2006. “Statement of Mr. the ONGC’s refining capacity would jump to 850.000 b/d to 300.txt.000 b/d refineries in the area 35 and Chennai Petroleum looking to expand capacity at its 150.S. If these projects were to come to fruition.000 b/d of products. At the same time.K. “India’s ONGC Reconsiders East Coast Refinery.hindu. the company was also eyeing the possibility of building a 100. September 22.” The Hindu.” International Oil Daily. August 7. asking the ONGC to reconsider its plans. 12 . Chairman.000b/d refinery in Manali. 2006 http://www. second only to IOC.com/ 2005/09/22/stories/2005092206921900. However.asp?fold=feature_article&file=feature _article171. 33 The ONGC had also considered entering into a joint venture with the U. 2005 http://www.ongc.straightforward concern: namely.net/featart1. last updated December 13.000 b/d before building another 300.6 percent stake in the Mangalore Refinery and Petrochemicals Ltd. at the 18th Annual General Meeting of Shareholders at Mangalore.” 35 Dinakar Sethuraman. In addition.
000 km of pipelines in India. firm holding a 70 percent stake in the oil developed there and the ONGC holding the remaining 30 percent 36 stake.net/profile. “India’s ONGC Rethinks Downstream Plans. Cairn Energy has found 3.000b/d refinery at Bhatinda to be completed by 2010. The energy firm has pointed out that with IOC’s Mathura and Panipat refineries in the region. The cost of the refinery is a key issue because the two firms must build a pipeline to a port in Gujarat for the evacuation of 150. but weren’t successful. The ONGC and Cairn Energy had sought to get fiscal incentives such as local tax exemption to build the refinery from the Rajasthan government. with the U. The ONGC also owns and operates more than 11. they would move the delivery point of the crude from the Barmer district to the Mundra. the companies would prefer selling the crude to others.'s 180. December 5. and Hindustan Petroleum Corp. 2006. the ONGC and Cairn Energy hope to sell the Rajasthan crude to refiners such as Reliance Industries and Essar Oil. Should the two energy firms decide not to build the refinery. Indeed.200 km of subsea pipelines. No other company in India operates even 50 percent of this 37 route length.ongc. which is expected to go on stream in late 2008 or 2009. Salaya or Kandla port in Gujarat and include the pipeline cost in the field development cost. citing poor economics. including nearly 3. 2006. there will be no market for the Barmer refinery. Because the proposed refinery would not be completed until 2011 with peak production from the field coming to its end. requiring the ONGC’s MRPL subsidiary to be delisted as the official offtaker of the crude produced from the field.000 b/d of crude oil output expected from their jointlyoperated Rajasthan field.6 billion barrels of oil in Rajasthan. 13 . which would then be recovered from the revenues culled from the crude produced at the field. http://www. December 13.K.” International Oil Daily. ONGC.asp last updated. 36 37 Ammar Zaidi.ONGC The ONGC also appeared to be pulling out of its plans to construct a refinery at Barmer in Rajasthan.
More to the point. 14 . It is highly unlikely that the company will be privatized anytime in the foreseeable future. Petronet has a 25year contract to buy LNG from Ras Laffan Liquefied Natural Gas Co Ltd II (RasGas II).htm. thehindubusinessline. Petronet currently imports five million tonnes a year at its Dahej terminal in Gujarat and would start importing 2. the Congressled government of Prime Minister Manmohan Singh. November 16. Through this contract. (GAIL) and the Bharat Petroleum Corporation Ltd (BPCL). along with IOC. the Communist Party of India and the Communist Party of India (Marxist) for parliamentary survival. Petronet LNG Ltd. India has begun 39 been pressing Qatar to raise the LNG supply to 17. The leaders of these two parties have placed a significant brake on the privatization process in general and on profitmaking stateowned companies in particular.5 percent equity stake in the joint venture company. First.” The Hindu. “Petronet May Source 1. 2006 http://www.com/2006/11/16/stories/2006111600660200. the political arena in India is still caught in a wrenching debate about privatization and economic liberalization.5 million tonnes a year more from 2009. Gaz de France is another partner with a 10 percent share in the company.5 million tonnes a year. remains acutely dependent on India’s two Communist parties.com/2006/02/07/stories/2006020719060300 .hindu. 2006 http://www.htm. Februray 7. a joint venture between the staterun Qatar Petroleum and Exxon Mobil. Petronet LNG Ltd.25 mt LNG from Qatar. which will handle LNG import and marketing within India.5 million tonnes a year that could be 38 raised to 5 million tonnes a year is to be commissioned by the last quarter of 2009. has set up its first LNG Terminal at Dahej in Gujarat with the capacity of 5 million tonnes a year. oil and natural gas are still deemed to be vital sectors 38 “LNG Terminal by 2009end.The ONGC. 39 Richa Mishra. A second terminal at Kochi in Kerala with an initial capacity of 2. the Gas Authority of India Ltd. The reasons for the small likelihood of privatization are compelling. In 2005. has a 12.” The Hindu Business Line.
In September of 2005. was moved out of the ministry. 2005. 15 . lost the battle. Raha. September 23. the organization. in all likelihood. ONGC’s organizational culture. Aiyar. there was no compelling interest in privatization. was thriving and even though uppermanagement chafed under some government regulations. 40 Jo Johnson. Within the ONGC. an equally driven and able chairman. feared that the appointment of bureaucrats beholden to the minister would 40 compromise the autonomy of the organization.ONGC of the economy and thereby unlikely to be sold off to the private sector unless a new consensus on privatization can be forged in the future. a highly energetic petroleum minister. stemming from his commitment to atavistic Nehruvian ideals in domestic and foreign policy arenas. the prospect of privatization was daunting. Mani Shankar Aiyar and the ONGC chairman. In the end. tensions emerged between the Minister for Petroleum. there is no broadbased hostility toward public enterprise. “Indian Business Chief Hits at Minister. The move toward privatization in India is relatively new and has yet to acquire widespread acceptance in the country’s political culture. Subir Raha about the composition of the governing board of the firm. As a monopoly. was in favor of appointing one or more bureaucrats to oversee the functioning of the firm. on the other hand. Aiyar. Ministerial and bureaucratic interests ensured that an independentminded chairman of a major public monopoly would not be countenanced.” Financial Times. Raha. because of his neuralgic opposition to the United States. One must bear in mind that within the context of India’s political culture and concomitantly.
The relationship between the leadership of the company and the national political leadership has varied over time. “India Widens Search for New ONGC Boss. ONGC: The Energy of India (New Delhi: ONGC. At one level. February 8. play a role in their appointments. explain the varying quality of the relationship. 2005.RELATIONSHIP TO GOVERNMENT AND OTHER POLITICAL ACTORS The leadership of the company is in the hands of chairperson who is either hired laterally or rises through the ranks. 43 Ammar Zaidi. However. The public enterprise selection board. Among other matters. 2007. This necessarily makes the process somewhat political and any national government wants to appoint an individual who reflects its policy preferences. Most of the individuals who are appointed to the board have had considerable. 2005). proffers potential names for the chair of the ONGC. as was evident in the case of Raha. their political connections. 41 Some of the Difficulties Between the ONGC and the Ministry of Petroleum are Captured in the ONGC’s Own FiftyYear History. June 27. an electronics engineer by training. the personality and beliefs of the chair can also 41 influence the relationship. At another level. The appointment process consists of an amalgam of politics and merit. Petroleum Intelligence Weekly. 42 The members of the ONGC board of directors are drawn mostly from the upper echelons of the civil service and from staterun corporations. 42 “India”. the prevailing political climate in the country and the overall directions of economic policymaking has had a profound impact on this relationship. governmentrun body. 16 . in particular. an apex.” International Oil Daily. Two factors. Even with a powerful chair at the helm the ONGC is subject to political demands and interference. it is expected to subsidize the price of domestic petroleum products and not rely on marketdriven price mechanisms. The last chair of the company is Subir Raha. The appointments 43 committee of the Cabinet makes the final selection. no doubt. highlevel experience in other staterun firms.
the Ministry of Finance was able to exercise greater oversight because of the company’s dependence on the ministry to obtain scarce foreign exchange for the purchase of new technology. 44 a major steel producer. For example.” Financial Times. Much of this takes place at the K. Raha.” The Financial Express. In the earlier years of the formation of the ONGC. the state firm sought to develop links with major foreign firms. the ONGC as a majority stateowned enterprise is also subject to the needs and concerns of other key ministries. Malaviya Institute of Petroleum Exploration in Dehra Dun in Uttaranchal state. This dependence has decreased in the last several years as the ONGC has been able to generate internal resources. under the last chairman. it signed a contract with Royal Dutch Shell. More recently.based. producing and 45 supplying oil and natural gas inside as well as outside India. most notably the Ministry of Finance. 2006. 2005. including finding. August 11. It seeks to fend off the efforts of both the Ministries of Petroleum and Natural Gas and Finance to interfere in its affairs whether in the short or longer 44 45 Anupama Airy. The principal political role that it plays in the country is related to its organizational imperatives and corporate interests. The ONGC engages in substantial noncommercial activities. For example it has long been involved in research and development (R&D) in hydrocarbons. the international arm of the ONGC. ONGC Videsh. to create ONGC Mittal Energy Limited in August 2005. LN Mittal group. securing.D. Anita Jain. However. January 20.K.ONGC The Ministry of Petroleum and Natural Gas exercises oversight over the ONGC. 17 . “ONGC Mittal to Explore Jointly in 22 Countries. This new contract envisages cooperation between the ONGC and Shell in such areas as joint operations. Additionally. signed a Memorandum of Understanding (MOU) with the U. “Shell Signs WideRanging Deal with India’s ONGC. One of the principal purposes of the institute is to develop and transfer technology which can contribute to the country’s longterm quest for energy security.
Its budget and expenditures are subject to central government approval and 46 scrutiny. Enid Tsui. in the last two years. the ONGC’s foreign arm. As mentioned earlier. 49 OVL. August 23. it is subject to enormous pressure from regimes of every political stripe to provide petroleum products to the consumer at less than market prices. 2006. However.ongcvidesh. Despite these setbacks. its record of success has not been exemplary.com/corp_profile. ONGC Videsh Limited which is a whollyowned subsidiary of the ONGC.ongcvidesh. All receipts are given to the central government. the ONGC faces a significant financial hurdle as a stateowned firm.terms.000 b/d by 2010. It cannot retain its own revenues or.com/display1. 48 OVL. February 7. was formed in 1996 when its parent company decided to focus solely on managing its oil and gas assets in India. Francesco Guerrera.2 million b/d of equity oil and gas overseas by 2025. http://www. OVL now has 25 oil and gas 49 properties in fifteen countries. for that matter. 46 47 Personal correspondence with Al Troner. Khozem Merchant and Bernard Simon. OVL is 48 currently working towards a goal of 400. Chinese stateowned entities have 47 undercut the ONGC in its bids in Kazakhstan and Angola. 18 . “Chinese Oil Group in $4 billion Deal for Rival. On a number of occasions. With a longterm target of acquiring 1. http://www. These demands have led to periodic clashes between the management of the ONGC and various ministries.asp?fol_name=News&file_name=news126&get_pic=ovl_news&p_title=News% 20::%20OVL%20News&curr_f=126&tot_file=128. and founded the subsidiary to oversee the international E&P business. In recent years.” Financial Times. profits. it has sought to increasingly expand its foreign investments. 2005. ONGC Videsh Limited (OVL) appears intent on seeking other foreign oilfields to invest in. Additionally. STRATEGIES AND BEHAVIORS The ONGC has no evident constraints on investment capital.asp.
the Indian state oil subsidiary in 2006 signed Memorandums of Understanding with the state oil firms of Brazil. However. February 2007. OVL considers one of its biggest achievements being its $1. It is important to note that typical financial investments are not based upon ordinary estimates of the rate of return on capital.com. 52 50 OVL. making it the largest investment of its kind by an Indian corporation.corp_profile. the ONGC has invested as much as $3 billion since 2000 in overseas exploration and energy projects. In 2006 alone.ongcvidesh. In addition. http://www. unlike China’s stateowned firms which have access to substantial foreign exchange and can thereby arrange side payments (as in the case of the acquisition of an Angolan oilfield in 2004). both in those respective countries and elsewhere. OVL has assets in Asia/Pacific. Jawaharlal Nehru University. Africa and Latin America in the following countries: Myanmar; Vietnam; Australia; Russia; Iraq; Iran; Egypt; Syria; Qatar; Libya; the Ivory Coast; Sudan; Colombia; Brazil and Cuba. yet another record for any 51 Indian corporation. Rahul Mukherji. Venezuela and Ecuador for cooperation in E&P 50 activities in the hydrocarbon sector. School of International Studies.asp?fol_name=News&file_name=news&get_pic=ovl_news&p_title=News%20::% 20OVL%20News 51 OVL.7 billion investment in Russia’s Sakhalin1 project.asp 52 Personal correspondence with Dr. 19 .ongcvidesh.ONGC Through OVL. Another impressive feat was securing a 25 percent share in the renowned Greater Nile Oil Project fields of Sudan via a onetime investment of $690 million. Instead they are seen as longterm investments based upon predictions of future prices. and it entered into a joint acquisition Sinopec for the Columbian oil and gas assets of Texasbased Omimex Resources Inc. OVL secured a productionsharing agreement with Cuba for operatorship of two offshore blocks.com/display. the Middle East. ONGC is forced to rely on any goodwill that India’s Ministry of External Affairs can muster. New Delhi. http://www.
December 23. On the other hand.” Financial Times.Raman. In January 2006. 20 . This agreement came in the wake of the successful joint bid on the part of ONGC Videsh and China National Petroleum Corporation (CNPC) to acquire a 38 percent stake in Al Furat Production Company. as an Indian strategic analyst has underscored. the ONGC has to subsidize the Indian consumer to the tune 53 Richard McGregor. the government still maintains substantial control over the price mechanism. Petroleum Pricing in India (New Delhi: The Energy and Resources Institute. Oil prices have a significant impact on the ONGC’s decisionmaking about upstream investment and oil sales levels. China may be able 55 to preempt India in its efforts to obtain natural gas from Burma/Myanmar. Jo Johnson and Carola Hoyos. The ONGC does have access to international capital markets and the organizational structure of the firm does not inhibit raising funds in global markets. 54 Francesco Guerrera.htm accessed January 13. India and China entered into an accord to co operate in their efforts to secure overseas crude oil supplies. December 14.OVL’s principal competition stems from China’s stateowned oil firms which have consistently managed to outbid and undercut its efforts to obtain access to foreign oil and gas fields. Ruchika Chawla. In late 2005. Currently.K. However. “China and India Forge Alliance on Oil Supplies. http://www. New Delhi. January 13. In an attempt to dampen this seemingly relentless competition the two national governments created a bilateral agreement. 2006. Leena Srivastav and R. “Chinese Link with Indians to Bid for Oil Field Stake.” Financial Times. Despite this agreement. 56 Interview with Subir Raha. For a discussion of this issue see Neha Misra. 55 B. 2005). Chairman and Managing Director of the ONGC.saag. Pachauri.” South Asia Analysis Group. it remains to 53 be seen if the process of outbidding actually stops. This remains a source of contention as it invariably has an adverse impact on the ONGC’s revenue stream. The Administered Price Mechanism (APM) was formally abolished in April 2002. in an effort to contain the bidding wars between their respective state energy firms. the ONGC is forced to adhere to the expectations of the Petroleum Ministry. India still has a system of administered prices in a number of key 57 areas.org/papers17/paper1676. “China Beats India to the Myanmar Gas. 2006. 57 The issue is complex. Consequently. Syria’s largest oil 54 producer. 2005. 2005. the ONGC was engaged in an effort to obtain a rating from Moody’s to enhance its ability to raise funds 56 from commercial sources.
To obviate the tender process the company has to seek out negotiated contracts. New Delhi December 23. 59 Certain problems of technology acquisition and human resources also dog the firm principally because of its status as a stateowned firm. (The government has long mandated uniform salary scales across public sector firms). indicated that the stateowned oil marketing companies were losing as much as $51 million dollars a day. the petroleum secretary. As a governmentrun firm. Finally. the firm is expected to recruit only at the induction level. Thanks to the tender process senior management at ONGC believe that the company is now facing at least a 5 to 10 year technology gap in particular sectors. 2006. gasoline and home cooking gas. Additionally. the existing. diesel. May 18. ONGC. The bulk of the subsidies are directed towards kerosene.ONGC of $1 billion annually. To compound matters. One of the chief problems that the ONGC faces as opposed to private counterparts is in the acquisition of new technology. 2005. few firms wish to disburse cuttingedge technologies through tenders. The other significant issue that the ONGC confronts stems from the existing labor laws. 58 In 2006. India’s highest ranking civil servant in the Ministry of Petroleum. It has no voice whatsoever in the appointment of its directors. it is extremely difficult to remove individuals on the basis of incompetent performance and promotion rules virtually dictate that every few years individuals receive promotions regardless of their performance. it has to purchase all cuttingedge technology through a cumbersome and inefficient tendering process. Chairman and Managing Director. there is no scope for paying additional financial incentives. 21 . 58 59 Interview with Subir Raha. “Burnout: Oilcos lose $51m/day. Unfortunately. Though there are no legal barriers to attracting midlevel talent. governmentdetermined salary structure makes it exceedingly difficult to attract able and promising individuals.” The Economic Times.
as India’s appetite for oil and natural gas have grown dramatically.FUTURE ROLE IN GLOBAL ENERGY SYSTEM AND OIL GEOPOLITICS The ONGC does not shape or influence national oil policy except at the margins. key members of the cabinet. 2006. The External Affairs Ministry has increasingly been drawn into the making of national oil policy as India seeks to pursue pipelines from Iran and from Myanmar. In recent years. apart from criticism from human rights groups. the gas pipeline project is likely to be pursued with some vigor. Questions of foreign and security policy. December 8. In addition to these strategic concerns. the Minister of Finance and the Minister for External Affairs. academics at premier institutions and researchers at a small handful of think tanks. for the most part. India’s strategists and policymakers are acutely concerned with what they perceive to be China’s steady penetration of Myanmar. remains an elite concern and within the domain of India’s attentive public that section of the population composed of highlevel journalists. India’s acute energy needs will trump any residual anxieties about the unsavory features of the Myanmar regime. Despite American misgivings about India’s dealings with the military junta in Myanmar. 60 Jo Johnson and Amy Kazmin. it is most unlikely that the efforts to court the regime will come to a close. The reasons for the lack of a public outcry require some explanation. The Ministry of Petroleum makes fundamental decisions about national oil policy. Consequently. Interestingly enough. former policymakers.” Financial Times. primarily in New Delhi. “India Under Fire for its Military Aid to Burma. such the Minister of Commerce. play a role in shaping national oil policy. 22 . there is little or no great opposition to the ONGC 60 going into Myanmar. as long as ONGC and other Indian companies can find technical means to circumvent Bangladeshi territory.
India’s prodigious and growing appetite for petroleum and petroleum based products is increasingly making it an important player. the government’s willingness open up new areas for exploration to the oil majors and its leeway to the ONGC to forge partnerships will also affect the future of the global oil industry.ONGC The pipeline project with Iran is far more fraught with problems. Sreenivasan. First. is likely to object with much greater vigor to the IndoPakistaniIranian pipeline.. reflect 61 the deepseated propensity toward independence in India’s foreign policy. Whether they will result in bringing the pipeline project to fruition remains and open question. IndoPakistani tensions still remain tense despite the efforts of Prime Minister Manmohan Singh to improve relations. Two factors in particular are likely to drive this trend.” February 12. These discussions. the U. Second. The ONGC’s increasing willingness and ability to broker deals with oil majors. civilian nuclear accord. 23 . Having reached a major civilian nuclear accord in December 2006 with theU.P.S.S. despite provoking American annoyance. neither the present Congress Partyled regime nor a future government is likely to pursue a course that brings it into direct confrontation with Washington and possibly jeopardize the carefully drafted IndoU. no doubt. Rediff. discussions are still under way with Iran about the pipeline. Second.htm. 2007 http://www. In a related vein. That said. will have important consequences for the global oil market..S.com/news/2007/feb/ 12tps.S. Pakistan cannot effectively guarantee the safety and security of the proposed pipeline which is currently designed to pass through one of its most troubled and restive provinces. 61 T. Baluchistan. “Pranab’s Iran Visit a Signal to the U. First.
REFERENCES CITED Journals and News Agencies BBC News Business Standard Economist Intelligence Unit Financial Times India Abroad International Oil Daily Offshore Rig Review Oil Online Petroleum Intelligence Weekly Reuters News Service South Asia Analysis Group The Economic Times The Financial Express The Hindu The Hindu Business Line The International Oil Daily The Telegraph U. Department of Energy Yale Global Online 24 .S.
ExxonMobil is operator. Also gas pipeline. 4 (25%) Talisman Block 5A (24%) OMV 25 KarthoumPort Sudan Products Pipeline; Khartoum Refinery Upgrade Mangalore Refinery (not an overseas asset. First phase peak at 250 MBD; 708 MBD gas output. Operator Petronas. 2006. Jointly held with CNPC; Bought in early2006. Holds 45% of upstream; 51% of South Con Son gas gathering system 200 MM BOE reserves; Consists of Dair alZoar. Active Assets Country/Asset Acquired Estimated Estimated Oil Output Gas Output 2006 2006 (MBD) (MM CFD) SUDAN 400 Notes Blocks 1. but fits with above) CNPC Greater Nile Petroleum Operating Company is joint operator; Buyin 2003. Deir EZ Annex (37. 2. Deir EZ. 56 MBD capacity.4%) & AlShaun tracts.235 km pipeline. option to buy into project at later date. Has proposed 150 MBD JV refinery with Cairn at Barmer. Mangalore Refining 184 RUSSIA Sakhalin1 Buyin ExxonMobil PSA 40 177 VIETNAM Blocks 61 and 63 Partner Condensate: 4 SYRIA 280 AlFurat Gas & Petroleum Company Petrocanada NGLs: 20 140 25 . Considering buyin for SakhalinIII exploration tract. no formal equity. NGL plant. Reserves of at least 2. Partial buyin in 2003; Sole owner by 2004. Farmin 2001; First production 3Q.5 BN BBLs of liquids and 9 TCF of gas. Service contract. Known as ‘White Nile’ project; Buyin completed 2004. Startup mid2005 Thar Jath discovery. 1.7 BN.ONGC APPENDIX APPENDIX 1: ONGC EQUITY INVESTMENT OVERSEAS I. Initial cost $1.
50% Nare & Cornica blocks. Includes 190 km crude pipeline. Development options. Shell operator; four commercial finds in block; Will produce from FPSO – good experience for ONGC for technically challenging project. Active Assets (Cont. Farmin with Indian company GAIL; Daewoo has remained operator.I. Crude heavy (1724 API).) Country/Asset Acquired Estimated Estimated Oil Output Gas Output 2006 2006 (MBD) (MM CFD) COLUMBIA Notes Omimex de Columbia Ominex Resources 20 Untested gross reserves of more than 300 MM BBLs. Shwee Phu & MYA totaling at least 5. pipeline. Gas finds include Shwee. BRAZIL BC10 Block (30%) ExxonMobil II.7 TCF gas. By 2008. with three well commitment; Blocks 16.000 sq km each MYANMAR Exploration/ Development Block A1 (20%) Daewoo VIETNAM Block 127. Later signed strategic cooperation accord with Brazil’s Petrobras. First joint purchase with Sinopec. where Ecopetrol is operator. sweet & waxy and similar to Indian grades. Acreage Country/Asset Block 5B (24%) Acquired OMV Type SUDAN Exploration Notes Petronas operator; Seismic done exploration drilling underway. Purchase mid2006. Tracts include 100% Velasquez production area. 128 (100% and operator) Bid Award Exploration 26 . output of 60100 MBD. LNG or CNG undecided. Three—year exploration phase.
Nigeria will give further access to upstream tracts with production of up to 650 MBD; guaranteed 120 MBD term crude sales and share of new LNG output. Development rights Yadavaran Upstream contracts were quidproquo for India buying 7. 4well program and seismic back contract required; Signed end2004.5%) Vanco IRAN Exploration ONGC operator with IOC (40%) and OIL under buy (20%) partners.646 km sq; TPOC. Awarded in 2005; ONGC has 70% equity.; Signed mid 2005.116 km sq offshore Farmin block.5 MM MTA of LNG.ONGC II. contract for Jefeyr oil field. 36 Bid Award Farmin CUBA Exploration Exploration QATAR Najwat Najen PSC (70%) Bid Award Appraisal of block EGYPT Block 6 (70%) Bid Award Exploration Farsi Block (40%) Bid Award Pending Govt. Nc188 & 189 TPOC Farmin 27 . LIBYA Onshore blocks totaling 8. if commercial oil found; 300 MM BBLs reported in place. Half dozen prospects identified. OIL and Sinopec also partners.300 km sq total ONGC 30% share; Norsk Hydro remains operator. One well drilled in 2005. N35 Blocks 2529. Signed by ONGC Mittal Energy Limited (EMEL). remains operator. Joint operator wit IPR Red Sea for 290 sq km tract. the Turkish national oil company. one of two ONGC/Mittal JV companies. N34. 100% PSC and operator; 4. In conjunction with $6 BN infrastructure investment promised with JV. IVORY COAST Vanco is operator in 4. LNG field; sale appears shelved and upstream projects in Buyback limbo. Oil in place of 600 MM BBLs estimated in the North Ramadan block. CI112 (23. Acreage (Cont. to Govt.) Country/Asset Acquired Type NIGERIA Notes OPL 209 & 212; OPL 279 & 285 Bid Award Exploration First acquisitions by ONGC/Mittal JV.
First attempt to bid with Mittal JV. Kumkol produced 150 MBD in 2005 of light sweet crude.) Country/Asset Acquired Type Notes AUSTRALIA ONGC bought 55%.II.42 BN. OPL 321. but Canada independent Farmin Antrium still operator. Crude output of 90 MBD. ONGC still negotiating for two separate exploration blocks.6 BN bid. Block WA 306P (55%) Antrim Energy III. Block is in prospective Browse Basin. 323 Exploration ECUADOR Half dozen tracts Encana Assets Production & Exploration Tracts KAZAKHSTAN Lost out to China consortium at bid of $1. Untested reserves in range of 645 MM BBLs in onshore block bordering Kuwait. Acreage (Cont. Acquisition 50% of Block 18 Exploration & Part of Project under Development 28 . Failed Attempts 20052006 Country/Asset Type NIGERIA Notes OPL 246 Exploration Indian cabinet rejected $2 BN bid as “too risky”; OPL 246 was hived off of Akpo find now under development offshore Lost out to KNOC. ANGOLA Sale by Shell nullified by Angola government and awarded to Chinese interests by 2004. Acreage & Kumkol Production Exploration & Production Lost PetroKazakhstan to China’s CNPC $3. which will pump 200 MBD by 2009. IRAQ Block 8 Bid Award Exploration Status of contract awarded under Hussain regime uncertain. Part of BP’s Greater Plutonio development.
asp) 29 .ONGC APPENDIX 2: ONGC ORGANIZATIONAL STRUCTURE (Derived from: http://ongcindia.com/iorganogram.
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