<p><em>ONGC is going against the tide by keeping capital expenditure up in a sluggish global market</em><br><br>ONGC, The country’s largest hydrocarbon explorer, has got some flak in the past for living off old discoveries while privately-owned companies were making new discoveries and increasing commercial production. In 2014-15, ONGC notched a marginal increase in output after seven years - 22.262 million tonnes (MT), up from 22.247 MT the previous year. It was due to better performance of the company’s assets in the western offshore region. The upstream company made 22 oil and gas discoveries in 2014-15.<br><br>ONGC is a Maharatna public-sector company, and made India’s largest oil discovery — Bombay High — in the early 1970s. It accounts for 59 per cent of India’s crude oil output.<br><br>In a year when the price of crude in the international market plummeted by more than 50 per cent, ONGC reported an 8.2 per cent decline in income at Rs 1,67,082 crore. Its net profit fell 33.69 per cent to Rs 17,673 crore in FY15. Despite lower crude prices in the international market, ONGC has decided not to lower its capital expenditure. Chairman Dinesh K. Sarraf told shareholders recently, “While many of the global exploration and production companies have responded to this situation by cutting down their investments, ONGC takes this as an opportunity to build its assets.”<br><br>With a capital outlay of more than Rs 14,500 crore, ONGC is moving into the next phase of its redevelopment for fields such as Mumbai High North, Mumbai High South, and Neelam. During FY15, ONGC completed eight projects worth Rs 27,000 crore. It has already completed nine projects with an investment of around Rs 22,000 crore in the current financial year, and plans to complete another 12 projects worth Rs 13,000 crore by May 2016. ONGC also achieved a Reserve Replacement Ratio (RRR) of 1.38, making FY15 the ninth successive year with an RRR greater than 1.<br><br>ONGC Videsh, the company’s subsidiary for overseas operations, produced 8.87 MMToe against 8.36 MMToe in FY14, registering an increase of six per cent. Through ONGC Videsh, the PSU has 36 projects in 17 countries. In FY15, ONGC entered Oceania, with the acquisition of an exploration block in New Zealand. As an upstream hydrocarbon company, ONGC has done well to spread its footprint in the downstream business. ONGC’s oil marketing arm, Mangalore Refinery and Petrochemicals Limited (MRPL), clocked its highest-ever throughput at 14.65 MMT in FY15. With the opening up of fuel retail, the company has huge prospects to grow through the integration of its oil production and oil marketing businesses.<br><br>According to analysts, ONGC will have to fight the fall in the crude oil price by becoming efficient and aggressive, as the outlook for crude prices is bleak. Only the toughest players will survive. For ONGC to give value to its shareholders, it will have to increase synergies in operations and derive value out of existing assets. The company may have increased its oil production after seven years, but it also had to write off investment worth Rs 10,000 crore in the last financial year, including Rs 2,700 crore on account of dry wells.<br><br><em>— Neeraj Thakur</em><br><br>(This story was published in BW | Businessworld Issue Dated 19-10-2015)</p>
