Q.

Study a public sector enterprise regarding its relevance

to the Indian economy and its prospects. Analyze the
trend of its growth for the last ten years.

Introduction
Copy from page 410. Add.
In this project, we will be studying Oil and Natural Gas
Corporation Limited, regarding its relevance to the Indian
economy and its prospects.

Oil and Natural Gas Corporation Limited (ONGC)

Company’s Profile
The Oil and Natural Gas Corporation (ONGC) is an
Indian oil and gas explorer and producer. It is under the
ownership of the Ministry of Petroleum and Natural Gas
and the Government of India. Its headquarters is situated
in Vasant Kunj, New Delhi. The operations are overseen
by the Ministry of Petroleum and Natural Gas. It is the
largest government-owned oil and gas exploration and
production corporation in the country and produces
around 70% of India's crude oil (equivalent to around
57% of the country's total demand) and around 84% of its
natural gas. In November 2010, the Government of India
conferred the Maharatna status to ONGC.

In a survey by the government of India for the fiscal year

2019–20, it was ranked as the largest profit-making
Public Sector Undertaking (PSU) in India. It is ranked
25th among the Top 250 Global Energy Companies by
Platts.

ONGC was founded on 14 August 1956 by the

government of India. It is involved in exploring for and
exploiting hydrocarbons in 26 sedimentary basins of India
and owns and operates over 11,000 kilometers of
pipelines in the country. Its international subsidiary
ONGC Videsh currently has projects in 15 countries.
ONGC has discovered 7 out of the 8 producing Indian
Basins, adding over 7.15 billion tonnes of In-place Oil &
Gas volume of hydrocarbons in Indian basins. Against a
global decline of production from matured fields, ONGC
has maintained production from its brownfields like
Mumbai High, with the help of aggressive investments in
various IOR (Improved Oil Recovery) and EOR
(Enhanced Oil Recovery) schemes. ONGC has many
matured fields with a current recovery factor of 25–33%.
[5] Its Reserve Replacement Ratio between 2005 and
2013, has been more than one.[5] During FY 2012–13,
ONGC had to share the highest ever under-recovery of ₹
89765.78 billion (an increase of ₹ 17889.89 million over
the previous financial year) towards the under-recoveries
of Oil Marketing Companies (IOC, BPCL and HPCL).[5]
On 1 November 2017, the Union Cabinet approved
ONGC for acquiring a majority 51.11% stake in
Hindustan Petroleum Corporation Limited (HPCL). On
Jan 30th, 2018, Oil & Natural Gas Corporation acquired
the entire 51.11% stake of HPCL.
ONGC supplies crude oil, natural gas, and value-added
products to major Indian oil and gas refining and
marketing companies. Its primary products crude oil and
natural gas are for the Indian market.[18]
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Product-wise revenue breakup for FY 2016–17 (₹
billion):[24]

Product Revenue
Crude oil 562.38
Gas 168.88
LPG 31.48
Naphtha 76.80
C2-C3 13.44
SKO 3.69
Others 1.59
Adjustments – 32.74
Total 825.52
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Performance Highlights
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The largest crude oil and natural gas company in India,
Oil and Natural Gas Corporation (ONGC) contributes 75
percent to India’s domestic production with a
consolidated turnover of Rs 4,53,461 crore for FY19 (up
25 percent from Rs 3,62,246 crore in FY18).

The last fiscal was yet again one of growth for ONGC and
its business. Strong leadership at the top coupled with
healthy growth in revenue and output has once again
catapulted ONGC among the companies that have found a
place in BW Businessworld’s annual list of Most
Respected Companies.

During the year, ONGC made a total of 13 discoveries of

which eight were on land and five offshore. More
importantly, the company monetized five of those
discoveries during the year itself. Reserve accretion for
the year stood at 63.02 mmtoe (million megatonnes of oil
equivalent) on a 2P basis and a reserve replacement ratio
of 1.41 means that the company replenished more than the
total quantum of hydrocarbon produced during the period.
In terms of financial performance, ONGC recorded gross
revenue of Rs 1,09,654.6 crore in FY19 compared to Rs
85,004.1 crore in FY18. Net profit touched a record high
at Rs 26,715.8 crore (an increase of 34 percent compared
to FY18 which was at Rs 19,945.3 crore). The company
realized $68.19 per barrel for crude sold in the domestic
market in FY19 as compared to $55.19 per barrel in
FY18.

It recently adopted Energy Strategy 2040, which, as CMD

Shashi Shanker stated in the annual report, “envisions
ONGC as a diversified energy company with a strong
contribution from non-E&P businesses; 3x revenues and
5-6x market capitalization.” Shanker further stated that
Strategy 2040 aims to transform ONGC into a future-
ready energy entity, one that positions itself well to
respond to the challenges and opportunities of tomorrow’s
energy scene. Of course, technology, digitalization of
operations, meaningful partnerships, and organizational
restructuring will play critical roles in the successful
implementation of the plan, he added.ONGC stands out in
its persistent pursuit of new oil and gas reserves. When
upstream companies the world over had turned
conservative about investing in new exploration ventures
over the past few years because of plummeting crude
prices, ONGC has persistently been prospecting for oil
and gas reserves.

ONGC began life as the Oil and Natural Gas Directorate

of the Union Ministry of Natural Resources and Scientific
Research in 1955. The directorate was converted into a
commission and christened Oil & Natural Gas
Commission on 14 August 1956. In 2010, the Indian
government conferred the Maharatna status on ONGC.
One of the most valued E&P companies in the world,
ONGC accounts for approximately 75 percent of India’s
crude oil production besides being one of the highest
profit-making and dividend-paying enterprises. Its
international arm, ONGC Videsh, has participated in 41
projects across 20 countries. Acclaimed for its corporate
governance practices, Transparency International has
ranked ONGC 26th among the biggest publicly traded
global giants.

Shanker pointed out that even though the downturn, when

the service sector costs deflated, ONGC had not
implemented any cuts in its budget. “While the focus on
‘doing more with less’ has gained substantial support in
the E&P community in the aftermath of the oil price
crisis, it is also true, at least in the case of our country,
that producing every additional barrel of oil has also
become more difficult, complex and costly.”

The energy giant believes in impacting the lives of people

positively, and with a CSR spend of Rs 614 crore in FY19
it targeted areas such as healthcare, poverty, environment,
women empowerment, and also heritage preservation.
Future Prospects
The government has proposed a detailed action plan to
boost the dwindling oil and gas production of state-run
Oil and Natural Gas Corporation (ONGC) that includes
hiving off non-core businesses into separate companies,
monetizing existing infrastructure, decentralization of
decision-making on operational matters, and partnerships
with private energy majors, two officials familiar with the
matter said on Monday.

In line with the Atmanirbhar Bharat (Self-reliant India)

policy, the government has decided to reduce India’s
over-reliance on imported oil. It has set production targets
of 40 million metric tonnes (MMT) of crude oil, and 50
billion cubic meters (BCM) of gas by 2023-24 where
ONGC is tasked to contribute 70%, the officials said
requesting anonymity. India imported over 89% of crude
oil it processed in 2019-20.

“India’s domestic crude oil production is constantly on a

decline. It is mainly because ONGC, which contributes
about 70% of the domestic output, is unable to ramp up
production from existing fields and could not add new
fields under production. Hence, the action plan,” one
official said. While ONGC’s crude oil output fell to 20.71
MMT in 2019-20 from 21.11 MMT in 2018-19, natural
gas production declined to 23.85 BCM in 2019-20
compared to 24.75 BCM in the previous year.
ONGC is given a target to achieve 28 MMT of oil and 35
BCM of gas production by March 31, 2024, a second
official said. “Therefore, there is an urgent need to
restructure and revamp ONGC to enable it to function as
an engine of exploration of production [E&P] growth in
India,” he said.

According to a note giving details of the restructuring

proposal, ONGC is asked to hive off its non-core
businesses into separate companies. Given its experience
in every sphere of E&P, ONGC may explore creating
separate entities for drilling, well services, logging, work-
over services, and data processing entities through various
modes, such as start-ups, investment trusts, societies, and
companies, it said. HT reviewed the note.

ONGC is also asked to forge partnerships with global

players in blocks with difficult play, but high productivity
such as its Krishna-Godavari basin block called KG-
DWN-98/2.
It proposed that ONGC could bring in technically sound
private partners for about 66 major fields that contribute
over 95% of the domestic production. “ONGC has not
identified fields for inviting partnerships even as the
government asked it to do so in February 2019,” the
second official said.

The restructuring proposal also asked the ONGC board of

directors to empower asset managers. “Assets may be
empowered to act like a small company, and all powers
and functions of the board related to operational decisions
of assets may be delegated to asset managers so that they
can deploy the resources as per their requirements for
expeditious monetization of discoveries and further
exploration,” it said.

The production in ONGC is organized through 15 assets,

10 onshore and five offshore. “Board of Directors should
act as enablers for Asset Managers in achieving their
targets through policy guidelines, coordinating with
Government and providing strategic guidance from Group
point of,” the note said.
RS Sharma, former chairman and managing director of
ONGC said, “A competent global advisor should be
appointed to study finer points of the proposal and work
out details in line with industry best practices.”

Gagan Dixit, vice president at equity research firm Elara

Capital said the restructuring proposals will help to boost
ONGC output. But, to attract private and global energy
players for joint ventures or divestment of fields,
domestic oil and gas production should be incentivized
through lower cess on crude oil and a minimum price
floor for domestic gas, he said. “Given global energy,
majors have the option to invest in many destinations
outside India, domestic oil and gas tax regime should be
made competitive,” he said, adding that natural gas should
be brought under the goods and services tax regime.