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download ongc annual report 2011-12 pdf

Explore. Evolve. Excel.
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The steady workhorse at ONGC Offshore : Jack-up Rig Sagar Kiran
ONGC was formed in 1956 with the
vision of great leaders to make our country
energy-sufficient. Since then, the company
has taken every step to fulfill this promise.
Over the years, the company has
discovered 6 of the 7 producing basins in
India and added 6.4 billion tonnes of Oil
and Gas reserves. Today, according to
Platts Top 250 Global Energy Ranking,
ONGC is the no. 1 E&P company in the
world. The company is ready to touch new
horizons of growth by resolutely focusing
on its Oil & Gas production capabilities.
ONGC aims to explore newer avenues for
a greener planet, excel in its exploratory
endeavors and evolve into a complete
energy solution provider.
Chairman's Message
Chairman's Message
Dear Shareholders
The fiscal 2010-11 has been the year of achievements for your Company and it is indeed a privilege for
me to share the same with you. First of all, your Company recorded highest-ever production (including
the production share from its domestic joint ventures and the production of OVL) of 62.05 million
tonne of oil and oil equivalent gas (MMTOE). Ultimate reserve accretion of 83.56 MMTOE in domestic
operated fields has been the highest in last two decades. Your Company also made a significant
breakthrough in Shale gas exploration.
Your Company made highest ever Net Profit of `189,240 million despite sharing ` 248,924 million as
under recoveries of the Oil Marketing Companies as per the government directives towards
subsidizing petroleum products i.e., HSD, LPG and SKO. Net Worth of your Company increased to
` 967, 084 million; up by 6.6% over the last year.The aggregate dividend for FY’11 at ` 35 per share has
been 20% more than the last year and the highest-ever dividend in absolute terms.
In recent times, the emerging economies particularly in Asia Pacific region, led by China and India,
emerged as the largest energy consuming centres in the world. India is now the fourth largest energy
consumer after China, USA and Japan.
Energy demand pressure is building up and it will be only intense in the future. However, supply side
remains challenged; particularly for crude oil which accounts for largest slice (38%) in the global energy
basket. Industry expects that it may be able to maintain demand supply balance with increased level of
production from non-conventional oil, probably by 2050.
The uncertainties in the oil industry due to ongoing turmoil in the Middle East and North African
(MENA) region continues to bring unprecedented volatility in the industry; especially throwing the
crude oil prices in the range of US$ 100-125 per bbl. In such high price regime, the growth momentum
of the oil import dependent economies like India have taken a heavy toll. If the same scenario continues,
Indian economy may be severely impacted.
The average crude oil price for Indian basket during FY’11 has been US$ 85.09 per barrel; 22% higher
than FY’10 (US$ 69.76/bbl). To make crucial petroleum products available at affordable prices, the
Government had little option but to subsidize the prices. The upstream companies had to share this
subsidy burden by 38.8%, instead of past practices of 33.3%, out of which ONGC had to share 82%. Our
outgo on account of the subsidy payment of ` 248,920 million resulted in the net crude oil price
realization at US$ 53.77 per bbl in FY’11 against US$ 55.94 per bbl during the last year.
It is also pertinent to mention that the high oil prices always escalate the cost of oil field services.Thus
while the cost of input is increasing due to high oil prices, our net realization is reducing due to higher
subsidy burden. This double impact of rising oil prices seriously affects our investment capacity for
upcoming cost intensive projects.
You will appreciate that despite such challenging business environment, your Company has been
consistently performing well. Its strategic pursuits maintain focus on locating and creating new
hydrocarbon assets, prudent reservoir management, sourcing equity oil and gas, exploration of new
sources of energy and meaningful integration in
hydrocarbon value chain.
For locating and creating new hydrocarbon assets, your
Company intensified exploratory efforts and these
efforts yielded desired results. During the last five years
we accreted 1,124 MMTOE in-place volumes of
hydrocarbons, making average Reserve Replacement
Ratio (3P reserves) 1.53 for this period, which is one of
the most important parameters for sustaining the
growth of your Company.
During FY’11, reserves of 63 major domestic fields,
operated by your Company and having 80.6% of the
total 3P reserves of 1211.39 MMTOE were audited by
independent hydrocarbon reserve consultants. The
overseas reserves of OVL for all its assets were also
audited, and the 3P reserves were found to be more
than what was estimated in-house.
Your Company made some significant discoveries in the
pre-NELP blocks of East Coast like G-1 & GS-15, G-4 &
GS-29, Vashishtha and S-1. Some discoveries in NELP
blocks like KG-DWN-98/2 in KG Basin and MNDWN-98/3 and MN-OSN-2000/2 blocks in Mahanadi
Basin are also significant. Most of these are gas
discoveries and efforts are on to monetize them.As far
as discoveries in pre- NELP blocks in East Coast are
concerned, your Company is planning to develop them
as clusters through common facilities to optimize cost.
DOC (Declaration of Commerciality) for the KGDWN-98/2 along with adjoining discoveries in
nomination blocks and MN-DWN-98/3 has already
been submitted to DGH with request for permission to
drill additional appraisal wells that would help us firming
up the reserves as well as our development plan.
14 major fields, which contribute more than 71% of the
total production of ONGC, are 25-50 years of vintage.
Improving recovery factor of these fields with prudent
reservoir management practices and induction of new
technology has been the focus area of your Company.
Out of 21 Improved Oil Recovery (IOR)/ Enhanced Oil
Recovery (EOR) and redevelopment schemes for
improving recovery factor, 15 schemes have already