OIL AND NATURAL GAS CORPORATION LIMITED
ANNUAL REPORT 2007-2008
DIRECTORS' REPORT
Dear Members,
On behalf of the Board of Directors of your Company, it is my privilege to present the 15th Annual Report and Audited Statement of Accounts for the year ended 31st March, 2008, together with the Auditors' Report and Comments on the Accounts by the Comptroller and Auditor General (C&AG) of India.
At the outset, I must congratulate you as your Company has been the first and only Indian company to be enlisted in Fortune's 'Most Admired Companies 2007'. The 'Fortune Global 500', 2008 list has ranked your Company at 335,34 notches higher than the previous year.
The fiscal 2007-08 was yet another year of growth and success for your Company, which along with other group companies, excelled in all its endeavours; particularly in the core activity of Exploration and Production (E&P) of Crude Oil and Natural Gas. Your Company maintained a Reserve Replacement Ratio (RRR) of more than one, for the fourth consecutive year. During the year, your Company registered RRR at 1.32, with Ultimate reserve accretion (3P reserves) of 63.82 Million Metric Tonnes (MMT) against production of 48.28 MMT of Oil & Oil Equivalent Gas (O+OEG).
Your Company accreted 182.23 MMT of Initial In-place reserves, the highest in last decade and 7% more than the last years accretion of 169.52 MMT, with 33 discoveries (Oil: 13, Gas: 20) spread across Indian sedimentary basins against 22 discoveries during 2006-07. Exploratory performance during ensuing fiscal 2008-09 also started on a high note with 11 discoveries in the first quarter of current fiscal.
During the year, O+OEG production of your Company, including the production from domestic joint ventures and overseas assets, was the highest-ever at 61.85 MMT, 1.84% more than the previous year. ONGC maintained the O+OEG production level at 48.28 MMT, marginally (0.4%) lower than last year, against the natural decline of mature fields. However, the oil and gas production from overseas assets increased by 10.7% and O+OEG production from domestic joint ventures also increased by 11.2%.
The augmenting and enhancing efforts taken up by your Company, through Improved Oil Recovery and Enhanced Oil Recovery (IOR/EOR) schemes, implemented since 2001, have helped to arrest production decline in the mature fields. Twelve IOR/ FOR schemes have been completed and six projects are under
implementation with an investment of Rs. 85,630 million. Out of the 165 marginal fields, 143 are either monetized or under delineation or under monetization on service contract. Remaining 22 fields will be put on production by offer under new marginal field policy. The new field Vasai East discovered in Western Offshore has commenced production from 7th July, 2008.
Your Company launched the second phase of Mumbai High South redevelopment on 1st April, 2008, with an investment of Rs. 63,392 million (USD 1,584 million).
Last year, your Company had opened up ultradeepwater province in the country by making first discovery at a water-depth of 2,841 metres in NELP block KG-DWN-98/2. So far, your Company has made 10 discoveries in the NELP Block KG-DWN-98/2 and 3 (Fig.3) discoveries in the adjoining PEL acreage KGOS-DW4. Appraisal plan for development of these blocks, which was submitted in October, 2007, has now been approved by Director General of Hydrocarbons (DGH). Your Company will develop these fields with an approximate investment of over Rs. 200,000 million (USD 5 billion); production is expected to commence from 2013.
Your Company is also participating with M/s Cairn Energy India Pty. Ltd. (CEIL) for development of Mangala, Aishwariya, Raageshwari and Saraswati fields in Barmer Basin of Rajasthan, in which your Company has 30% share, with estimated investment of USD 450 million (Rs.18,000 million). Your Company has also launched Assam Renewal Project (ARP) for revamping of aged surface facilities of brown fields in the north-eastern state of Assam.
Your Company is setting up a 3,000 bopd 'Mini Refinery' at Gandhar in Gujarat with an estimated investment of Rs. 640 million (USD 16 million) which is expected to be commissioned by August 2009.
The foundation stone for 'Rajiv Gandhi Urja Bhavan' which will house 'ONGC Energy Centre', a state-of-the-art REM centre for holistic research in alternate energy sources beyond hydrocarbons, was laid by Hon'ble Prime Minister Dr. Manmohan Singh on 20th August, 2007 at New Delhi.
Your Company appointed DeGolyer and MacNaughton (DEW) Canada Ltd. during May 2007 for Post Drill Analysis of 579 exploratory wells drilled during) ('Five Year Plan period (2002-07). DEW has submitted its interim report for first 350 wells drilled during 2002-05. Out of these 350 wells, 348 wells have been validated as having satisfactory exploration process.
Government Launched the VII round of the NELP on 1st December, 2007, offering 57 blocks (19 Deep-water, 9 Shallow-water and 29 On-land blocks). As per early indications your Company may get 20 blocks out of 27 blocks for which it submitted bids.
New sources:
Your Company is setting up a 50 MW Wind Farm in Gujarat consisting of 34 wheeling units with an investment of Rs. 3,070 million. Power will be utilized in nearby ONGC installations. All 34 units have been erected, 10 have started wheeling power.
The first CBM development well for CBM was spudded in Parbatpur pilot area on 1st December, 2007 near Bokaro Steel City of Jharkhand; production is likely to commence from April 2009.
Under UCG exploration, data from fifteen different sites were sent to Skochinsky Institute of Mining, Russia for comprehensive study. Based on that study, Vastan Mine in Gujarat has been selected as pilot project. 18 bore holes were drilled to know the extension of lignite which helped in preparing detailed geological maps and Hydro geological studies. Finalization of agency for engineering and construction of UCG pilot is in process.
National Gas Hydrate Core Repository has been established at ONGC's Institute of Engineering and Ocean Technology (IEOT) near Mumbai for long-term preservation of both hydrate and non-hydrate bearing cores under cryogenic and refrigerated conditions.
Your Company, in association with Saha Institute of Nuclear Physics and Department of Science and Technology, has installed India's first pilot plant for Helium recovery from natural gas at Kuthalam, Tamil Nadu.
1. Financial Results:
Your Company scaled a new milestone to record a Net Profit of Rs. 167,016 million (up 6.77% from 85.156,429 million in 2006-07).
During the year under review, your Company registered a gross revenue of Rs. 615,426 million, (up 4.21% from Rs. 590,575 million in year 2006-07) despite sharing under recoveries of Rs. 220,009 million (Rs. 170,239 million in 2006-07) of the Public Sector Oil Marketing Companies by way of discounts in the price of Crude Oil, Domestic LPG and PDS Kerosene (SKO), on administrative instructions of the Government of India.
Summary (Rs. in million) 2007-08 2006-07
Grass Revenue 615,426 590,575Gross Profit 351,912 335,431LessInterest 590 215Exchange variation (1,070) 177Depreciation, Depletion& Amortisation 98,416 93265Impairment (437) 1,730Provision /write offs 2,067 3,342Provision for Taxation(including deferred tax(liability of Rs.8,481 million) 85,330 184,896 80,273 179,002Profit after tax 167,016 156,429AppropriationsInterim Dividend 38,500 38,500Proposed Final Dividend 29,944 27,805Tax on Dividend 11,632 10,125Transfer to General Reserve 86,940 79,999Total 167,016 156,429
2. Dividend
Your Company declared an interim dividend of Rs. 18 per share (180%) in December, 2007. The Board of Directors have now recommended the final dividend of Rs. 14 per share (140%), making the aggregate dividend at Rs.32 per share (320%), against previous year's Rs. 31 per share (310%). The total dividend will absorb Rs. 68,444 million besides Rs. 11,632 million as tax on dividend.
3. Production & Sales
Highlights of production and sales of Crude Oil, Natural Gas and Value-added Products:
Unit Production Sales Value (Rs. in million) 2007-08 2006-07 2007-08 2006-07 2007-08 2006-07
DirectCrude Oil MMT 27.93* 27.94* 24.08 24.42 386,803 372,212Natural Gas BCM 25.12** 24.88** 20.43 20.30 71,780 72,078C2-C3 '000 MT 520 549 520 548 9,291 9,095LPG '000 MT 1035 1023 1037 1033 20,169 14,866Naphtha/ARN '000 MT 1469 1450 1442 1442 43,848 37,907SKO '000 MT 167 155 168 156 3,374 2,827Others 937 654Sub-total 536,202 509,639TradingMotorSpirit '000 KL 232 121 9,159 4,530SKO '000 KL 308 563 7,401 12,926HSD '000 KL 1539 1394 48,608 42,017Sub-total 65,168 59,473Total 601,370 569,112
* includes 1.99 MMT (Previous year 1.89 MMT) from Joint ventures.
** includes of 2.79 BCM (Previous year 2.44 BCM) from Joint ventures
4. Oil & Gas Reserves
ONGC has made voluntary disclosures in respect of Oil & Gas Reserves, conforming to SPE classification 1994 and US Financial Accounting Standards Board (FASB-69). ONGC has added 110.21 Million Metric Tonnes (MMT) of ultimate reserves of oil and oil-equivalent gas (O+OEG) during the year under review from its domestic and overseas assets (OIL).
Ultimate Reserve Accretion O+OEG (in MWT)
Year Domestic Domestic Total Foreign Total Assets JVs Domestic Assets (ONGC's Share) Reserve (OVL's Share) (1) (2) (3)=(1)+(2) (4) (5)=(3)+(4)
2005-06 51,53 0.12 51.65 16.72 68.372006-07 65.56 4.77 70.33 9.96 80.292007-08 63.82 -0.34 63.48 46.73 110.21
5. Statement of Reserve Recognition Accounting:
1. The Concept of Reserve Recognition Accounting attempts to recognize income at the point of discovery of reserves, and seeks to demonstrate the intrinsic strength of an organization with reference to its future earning capacity in terms of current prices for income as well as expenditure. This information is based on the estimated net proved reserves (developed and undeveloped) as determined by the Reserves Estimates Committee.
2. As per FASB-69 on disclosure about Oil and Gas producing activities, publicly traded enterprises that have significant Oil and Gas producing activities are to disclose with complete set of annual financial statements, the following information, considered to be supplemental information:
a) Proved Oil and Gas reserve quantities
b) Capitalized costs relating to Oil and Gas producing activities
c) Cost incurred for property acquisition, exploration and development activities
d) Results of operations for Oil and Gas producing activities
e) A standardized measure of discounted future net cash flows relating to proved Oil and Gas reserve quantities.
3. Your Company has disclosed information in respect of (a) and (d) above in the Annual Financial Statements.
In respect of item (e) above, your Company has made voluntary disclosure on standardized measure of discounted future net cash flows relating to proved Oil and Gas reserves at annexure-b
6. Financial Accounting
The Financial Statements have been prepared in accordance with the Generally Accepted Accounting Principles (GAAP) and in compliance with all applicable Accounting Standards (AS-1 to AS-29) and Successful Efforts Method as per the Guidance Note on Accounting for Oil It Gas Producing Activities issued by The Institute of Chartered Accountants of India (ICAI) and provisions of the Companies Act, 1956.
7. Internal Control System
The Company has well established and efficient internal control system and procedures. Your Company has already implemented SAP R/3 system for integration of various business processes across the organization. The Company also has well defined financial powers of various executives in its Book of Delegated Powers. The Company has in-house Internal Audit Department commensurate with its size. Audit observations are periodically reviewed by the Audit & Ethics Committee of the Board and necessary directions are issued wherever required.
8. Subsidiaries
(i) ONGC Videsh Limited (OVL)
ONGC Videsh Limited (OVL), the wholly-owned subsidiary of your Company engaged in overseas E&P activities, continued to maintain robust growth during 2007-08. It acquired 11 E&P projects in 6 countries during the year.
ONGC Videsh Ltd. (OVL) signed a joint venture agreement with Petroleous de Venezuela SA (PdVSA) on 8th April, 2008 at Caracus to take 40% stake in the San Cristobal oilfield located in Orinoco Heavy Oil belt of Venezuela; PdVSA will hold the remaining 60% stake. The agreement was signed by Mr. R.S.Butola, MD, OVL and Mr. Eleogao Del Pino, MD, PdVSA during the visit of Mr. Murli Deora, Hon'ble Minister of P&NG, G01. Under the agreement OVL and PdVSA will develop the field from its current production level of 20,000 bbl/d to 40,000 bbl/d.
The company now has participation in 38 projects in 18 countries. Of the projects acquired, NEMED Block in Egypt offshore is under appraisal phase; Blocks AD-2, AD-3 and AD-9 in Myanmar offshore; Blocks RC-8, RC-9 and RC-10 in Colombia offshore; Block ES-M-470 and Block SM-1413 in Brazil offshore; MTPN Block in Congo offshore and Block 11-12 in Turkmenistan offshore are under exploration phase. The Turkmenistan Block is held through ONGC Mittal Energy Limited (OMEL), a joint venture of OVL and Mittal Investment Sari.
Out of 38 projects, OVL is operator in 18 projects and joint operator in 2 projects in 11 countries. OVL is currently producing oil and gas from Greater Nile Oil Project and Block 5A in Sudan, Block 6.1 in Vietnam, Al Furat Project in Syria, Sakhalin-I Project in Russia and Mansarovar Energy Project in Colombia. Block BC-10 in Brazil is currently under development with production expected to begin in 2009-10. Block A-1 and A-3 in Myanmar, North Ramadan Block and NEMED in Egypt and Farsi Offshore Block in Iran have discoveries and appraisal work is being carried out. The remaining projects are in exploration phase.
OVL's share in production of oil and oil-equivalent gas (O+OEG), together with its wholly-owned subsidiaries ONGC Nile Ganga B.V. and ONGC Amazon Alaknanda Limited, increased from 7.95 MMTOE to 8.80 MMTOE, up 10.7%. Consolidated gross revenue of OVL increased from Rs. 118,610 million to Rs.169,540 million, up 42.93% and consolidated net profit from Rs. 16,633 million to Rs. 23,971 million, up 44.12%.
Direct Subsidiaries of OVL:
a) ONGC Nile Ganga B.V. (ONGBV):
ONGC Nile Ganga B.V (ONGBV) is engaged in E&P activities in Sudan, Syria and Brazil. ONGBV holds 25% Participating Interest (PI) in Greater Nile Oil Project (GNOP), Sudan; the other partners in this project are National Oil Company (NOC) of China (with 40% PI), a Malaysian NOC (with 30% PI) and a NOC of Sudan (with 5% PI). ONGBV's share in oil production from GNOP was 2.969 MMT during 2007-08. Besides, ONGBV also holds PI in AFPC Syrian producing asset and deepwater discovered Block BC-10 and exploratory Blocks ES-M-470 and Block SM-1413 in Brazil.
b) ONGC Narmada Limited (ONL):
ONGC Narmada Limited (ONL), a wholly-owned subsidiary of OVL is engaged in E&P activities in Nigeria. ONL holds 13.5% PI in deep I'i1x water exploration Block-2 in Nigeria-Sao Tome Et Principe, Joint Development Zone (JDZ). The Chinese NOC, Sinopec is operator with 28.67% PI.
c) ONGC Amazon Alaknanda Limited (OAAL):
ONGC Amazon Alaknanda Limited (ORAL), a wholly-owned subsidiary of OVL incorporated in Bermuda, is engaged in E&P activities and holds stake in E&P projects in Colombia, through Mansarovar Energy Colombia Limited (MECL), a 50:50 JV company with Sinopec of China. MECL is currently producing oil at 24,000 bbls/d. During 2007-08, OVL's share of production was about 0.349 MMT of oil.
Joint Venture of OVL
d) ONGC Mittal Energy Limited (OMEL)
OVL along with Mittal Investments Sari (MIS) promoted ISMEL ONGC Mittal Energy Limited (OMEL), a joint venture company incorporated in Cyprus. OVL and MIS holds 98% shares of OMEL in the ratio of 51(OVL): 49(MIS) with 2% shares held by SBI Capital. OMEL holds PI in the AFPC Syrian Assets through ONGBV, exploration Blocks OPL279 and OPL285 in Nigeria and Block 11-12 in Turkmenistan.
(ii) Mangalore (Refinery & Petrochemicals Limited (MRPL)
Your Company continues to hold 71.62% equity stake in MRPL, which has achieved new heights in excellence in both financial and operational performance during the year.
In view of the improved performance MRPL Board has recommended the dividend of 12%.
MRPL's launched its brand 'HiQ through its first retail outlet at Maddur, Karanataka.
MRPL Refinery was awarded prestigious Jawaharlal Nehru Centenary Award, for Energy conservation in refinery for the year 2006-07, instituted by the Ministry of Petroleum and Natural Gas, for the fourth consecutive year.
MRPL continues to be a major exporter of petroleum products with exports valuing Rs. 111,410 million during 2007-08 which is 41% of total dispatches. MRPL has been granted status of a PremierTrading House by DGFT, Govt. of India.
MRPL and Shell Gas B.V, Netherland entered into an agreement on 5th February, 2008 to forma joint venture company 'Shell MRPL Aviation Fuel and Services Private Limited' for marketing of Aviation Turbine Fuel to both Domestic and International airlines at Indian Airports.
Product supply agreement with STC, Mauritius for export of Petrol, Diesel, Aviation Turbine Fuel and Fuel Oil valuing US$ 2,000 million (approx.) has been renewed for a further period of three years starting from August 2007.
MRPL's Phase III Refinery Project is progressing as per schedule.
MRPL has acquired the Nitrogen manufacturing facilities from Essel Mining Industries Limited (formerly, Hindustan Gas Industries Ltd.), located in the close proximity of refinery at Mangalore, so as to ensure self sufficiency for this critical input.
Joint Ventures of MRPL
Kakinada SEZ Pvt. Ltd. (KSEZ) and Kakinada Refinery and Petrochemicals Pvt. Ltd (KRPL) Considering all circumstances and factors affecting the steering of these two projects, ONGC and MRPL have decided not to continue as equity partners in these two Joint Ventures and have accordingly withdrawn with effect from 23rd June, 2008. ONGC's proposed equity participation, through MRPL, was 46% in KRPL and 26% in KSEZ.
9. Exemption in respect of Annual Report of Subsidiaries and Consolidated Financial Statement:
In terms of approval granted by the Central Government under Section 212(8) of the Companies Act, 1956 copy of the Balance Sheets, Profit and Loss Accounts, Reports of the Board of the Directors and Reports of the Auditors of the Subsidiary Companies have not been attached to the Accounts of the Company. The Company will make these documents/details available upon request by any member of the Company interested in obtaining the same. Annual Reports of MRPL and OVL are available on website www.mrpl.co. in and www.ongcvidesh.com respectively.
In accordance with the Accounting Standard AS-21 on Consolidated Financial Statements read with Accounting Standard AS-23 on Accounting for Investments in Associates and with Accounting Standard AS-27 on Financial Reporting of Interests in Joint Ventures, Audited Consolidated Financial Statements for the year ended 31st March, 2008 of the Company and its subsidiaries form part of the Annual Report and Accounts.
10. Joint Ventures/ Associates
(I) Petronet LNG Ltd. (PLL)
ONGC has 12.5% equity stake in PLL. PLL has started expansion of Dahej LNG terminal to 10.0 MMTPA capacity and also setting up LNG Receiving and Re- gasification Terminal of 5.0 MMTPA at Kochi. The turnover of PLL during 2007-08 is Rs. 65,553 million (previous year Rs. 55,089 million) and net profit is Rs. 4,747 million (previous year Rs. 3,133 million) PLL has declared a dividend of 15% (previous year 12.5%).
(iii) ONGC Tripura Power Company Pvt. Ltd. (GTPC)
Your Company has promoted 'ONGC Tripura Power OTPC Company Pvt. Ltd. '(OTPC) which is setting up a 726.6 MW (363.3x2) Combined Cycle Gas Turbine based Power Generation project . This would facilitate monetization of the idle gas reserves of ONGC in Tripura. ONGC has 50% share in OTPC along with Government of Tripura (0.5%), IL&FS (26%) and balance 23.5% by Financial Institutions (FI) and other investors. Your Company placed Notice of Award on 23rd June, 2008 to M/s BHEL for generation project.
(iii) Pawan Maps HetIcapters Ltd. (PHHL)
Your Company, ONGC, has 21.5% equity stake in PHHL, which provides helicopter support for its offshore operations. PHHL has an operational fleet of 36 helicopters. The PHHL was successful in providing all the 12 Dauphin N Et N3 helicopters fully compliant with AS-4 as per the new contract with ONGC by December 2007. PHHL earned a net profit of Rs.95.2 million in the year 2006-07 (previous year Rs. 473.9 million).
(iv) Petronet MHB Ltd. (PMHBL)
ONGC has equity stake of 28.76% in PMHBL, which owns and operates a pipeline between Mangalore Hassan - Bangalore and provides direct evacuation facility of MRPL products. The company has achieved a throughput of 2.141 MMT which is 50% higher than that in 2006-07. The total revenue of Rs 57,640 million is 48.91% higher as compared to 2006-07. As per audited results for the year 2007-08, the company has made a net profit of Rs. 3.841 million, for the first time since inception.
(v) Dahez SEZ Ltd. (DSL)
Your Company with 23% equity stake along with GIDC (26%) is promoting a Special Economic Zone (SEZ) at Dahej in the coastal Gujarat. SEZ has been formally approved by Ministry of Commerce and Industry and Gazette notification issued. Master Plan for the SEZ has also been finalized. ONGC, as the anchor tenant, is implementing its C2+ extraction plant, the product of which will be utilized as feedstock to OPaL.
(A) ONGC Petro-additions Ltd. (OPaL)
OPaL, an SPV promoted by ONGC, with 26% stake and management control, and GSPC with 5% holding, is implementing a mega petrochemical complex as an anchor industry in Dahej SEZ. The project has been reconfigured according to current market demand-supply dynamics with estimated investment of Rs.124,400 million. Contract for site infrastructure development has already been awarded. Tenders for Dual Feed Cracker unit and Project Management Consultancy are under finalization. Project office has been established at Vadodara on 28th June, 2008.
(vii) Mangalore SEL Ltd. (MSEZ)
MSEZ was incorporated to develop the Special Economic Zone at Mangalore through a SPV As per the proposed equity structure ONGC will hold 26%, KIADB 23% and IL&FS + KCCI 51%. Formal approval for Sector Specific SEZ (Petro-Chemical) has been received from Ministry of Commerce and Industry on 6th November, 2007. Nearly 2,262 acres of land is under acquisition
(viii) ONGC Managalore Petrochemicals Ltd. (OMPL)
An aromatic petrochemical complex is being set up for 0.92 MMTPA Para-xylene and 0.14 MMTPA Benzene manufacturing facilities based on MRPUs aromatic rich Naphtha. The project is being implemented through a SPV - ONGC Mangalore Petrochemicals Ltd. (OMPL) with following equity participation: ONGC 46%, MRPL 3% and balance from Banks, Financial institutions #c strategic partners. 454 acres of land has been allotted by Mangalore Special Economic Zone. Site grading job is in progress.
(ix) ONGC TERI Biotech Ltd. (OTBL)
ONGC formed a Joint Venture in association with The Energy Research Institute (TERI) for addressing the requirement of Bioremediation, Microbial Enhanced Oil Recovery and prevention of wax deposition in tubular for its E&P operations. The JV has been incorporated on 26th March, 2007.
11. Other Business initiatives:
a. Memorandum of Understanding:
ONGC signed various MOUs during the year for cooperation and collaboration in various areas of activities as follows:
i. MoU with Institute for Energy Technology, (IFE) Norway on 11th March, 2008 To emphasizes Indo-Norwegian collaboration in areas of Trace Study Multiphase Flow and Corrosion Studies.
ii. MoU with HPCL on 18th July, 2007
Forsale of products and for sharing of HPCL's marketing infrastructure predominantly for MRPL products.
iii. MoU with GAIL on 24th July, 2007
For co-operation in purchase of gas from new sources to be developed by ONGC in KG & Mahanadi Basins and its transportation, distribution It marketing.
iv. MoU with Ashok Leyland Project Services Ltd (ALPS) on 4th November, 2008 For sourcing of LNG on long term basis at a competitive price and pursuing integrated E&P & downstream opportunities.
v. MoU with Shell on 23rd January, 2008
For co-operation in various areas of exploration &t production hydrocarbon, coal gasification, oil products, HSE, technology and business consulting services.
b. C2-C3-C4 Extracti an Plant
ONGC is setting up a C2-C3-C4 (Ethane, Propane and Butane) Extraction Plant at Dahej using LNG from PLL as feed stock. Overall progress of the project is 89.07% as on 31st March, 2008. The project is expected to be commissioned in 2009.
12. Information Technology:
Entire 3D seismic data and original logs of more than 9,000 wells were computerized under Project EPINET. Supervisory Control and Data Acquisition (SCADA) is being implemented covering entire production and drilling facilities.
The e-procurement process along with reverse auctioning has gone live and centralised electronic processing of vendors payment has been started for payment through National Electronic Fund Transfer (NEFT). All Welfare Trusts of your Company went on-line.
For Providing Urban amenities in Rural Areas (PURA), ONGC has plans to set up a PURA in each of the states where it operates. The picture shows a village in north-eastern state of Tripura, where the first PURA is being set up by ONGC
13. Health, Safety and Environment (HSE)
HSE occupies an elevated position in the business agenda of your Company hile all work centres are certified with ISO 9001, OHSAS 18001 and ISO 14001, extensive training is provided to the work force for ensuring the maintenance of HSE practices
Your Company has undertaken Mangrove plantation at Gulf of Khambat and implemented Bioremediation of oily sludge at various onshore installations.
Your Company has renewed 'Participant Agreement' with OSRL (Oil Spill Response and East Asia Response Limited) to combat major oil spills.
14. Clean Development Mechanism (CDM)
Your Company has formalized its corporate policy on Climate Change and Sustainability, thereby becoming, once again the first PSU to have this policy. It has got registered four CDM projects with United Nations Framework Convention on Climate Change (UNFCCC), with expected annual Certified Emission Reductions (CERs) of 119,865.19 more CDM projects are identified for development.
Your Company has signed an MoU with the United States Environment Protection Agency (US EPA) for identifying and capturing fugitive methane emission from various operations. It has also entered into an MoU with Statoil Hydro, Norway to develop Carbon Dioxide Capture and Sequestration (CCS), CDM and Carbon Management projects. Your Company has joined the global initiative on Carbon Disclosure Project (CDP) giving it access to the technologies adapted by different signatory companies in achieving sustainable development.
15. Human Resource
Your Company believes that its human resource is its greatest wealth. Therefore, it is the endeavour of your Company to nurture and develop this wealth.
Your Company continues to extend several welfare benefits to its employees and their dependants by way of comprehensive medical care, education, housing, and social security. During the year 2007-08 your Company implemented 84 new and revised welfare polices for its employees.
During the year, 60 employees were released under the Voluntary Retirement Scheme.
16. Human Resource Accounting
The organisational knowledge in your Company is the sum total of information and experience in the minds of our people, well as the cumulative knowledge in the organisational systems. This is a priceless asset, and therefore, beyond the mechanics of accounting.
There are, however, methods to measure the potential ability of all employees across the ranks, to produce value out of their knowledge and skills. The standard 'lev and Schwarte' model equates the anticipated future earnings as the surrogate of the 'Walue' of an employee. This model has been used as per the details given in annexure-d.
Based on these assumptions, your Company's Human Resource has been valued at Rs. 290,528.9 million as on 31st March, 2008.
These are unaudited figures.
17. Welfare Trusts
Employees Contributory Provident Fund (ECPF) Trust, managing Provident Fund accounts of employees of your Company, has settled 1,639 cases of final withdrawal and 2,029 cases for non-refundable withdrawals during the year.
The Post Retirement Benefit Scheme (PRBS) Trust of your Company, set up to provide financial security to superannuating employees separating on or after 01.04.2007, is to enhance the pension amount by almost 45%.
The Composite Social Security Scheme (CSSS) formulated by your Company provides an assured ex-gratia payment in the event of unfortunate death or permanent disability of an employee in service. Families of deceased employees get a financial assistance under the scheme ranging between Rs.1.5 million to Rs. 2.0 million. During the year, 61 bereaved families were supported through this Scheme.
ONGC Sahayog Trust has been created for welfare of secondary workforce or their heirs, who are in financial distress. Approximately Rs. one million was disbursed during 2007-08 amongst 23 such beneficiaries.
Your Company implemented the Employees Pension Scheme (EPS-1995) retrospectively w.e.f. 16th November, 1995 and remitted Rs. 215.09 million as employer's contribution.
Your Company complies with the Government guidelines on reservation for SC and ST The percentage of SC and ST employees, as on 1st April, 2008 was 15.9% and 8.4% respectively. During the year 2007-08, Rs. 12.50 million was spent for welfare of the SC and ST communities.
18. Industrial Relations
During the year, harmonious industrial relations were maintained in your Company and no man days were lost due to internal factors.
19. Grievance Management System
Your Company provides an easily accessible machinery to the employees for redressal of their grievances, either through informal channel (open hearing day) or through formal channel. All Key Executives of your Company have designated a publicized time slot thrice a week to meet public representatives for speedy redressal of their grievances.
20. Medical Services
Your Company has a comprehensive health care scheme for all serving employees and their dependants. Retired employees and their spouse are availing Company's medical facilities. In addition serving employees of CISF and KV (along with their dependents), posted at he Company's work centres are eligible for the Company's medical facilities.
21. Human Resource Development (HRD)
Many HRD initiatives were taken like; comprehensive rew of the performance incentive scheme, skill mapping for various disciplines. Assessment and Development Centre workshops for Surface Managers, Block Managers and Sub-surface Managers.
During the year, ONGC Academy organised 242 training programmes for 7,427 executives (86,840 training days). The Regional Training Institutes conducted 243 training programmes for 4,496 non-executives. Two unique qualification upgradation programs, one for Diploma holders (Unnati Prayas) and the other for Degree holders (Super Unnati Prayas) have been continuing.
An intense Leadership Development Programme for senior level (E7) Executives was launched from 17th January, 2008 at ISB Hyderabad.
The details of awards and recognitions to your Company are placed at Annexure-e.
22. Sports
Around 150 sportspersons including 95 international level performers are on the rolls of ONGC representing your Company in 15 different games.
Your Company's basketball team won the National Federation Cup.
Your Company hosted the ONGC Near Nehru Cup International Invitational Tournament during the year.
Chess Queen Koneru Humpy was conferred with Padmashri and Badminton ace Chetan Anand received the Arjuna Award. Reigning World Billiards Champion Pankaj Advani retained his title after an 'all ONGC Final' in which Dhruv Sietwala was the Runner-up.
Arjuna Awardee Virender Sehwag became the first Indian and third cricketer to score two triple Test centuries.
Your Company won the Petroleum Minister's PSPB Trophy for Overall Best Performance in 2007-08 for the fifth year in succession.
23. Corporate Social Responsibility (CSR)
ONGC is spearheading the United Nations Global Compact - World's biggest corporate citizenship initiative to bring Industry, UN bodies, NGOs, Civil societies and corporates on the same platform.
During the year, your Company has undertaken various CSR projects at its work centres and Corporate level.
24. Official Language
During the year, a series of initiatives were undertaken for promotion and propagation of Rajbhasha. Literary works in official language continued to be financially supported by your Company. In addition, all inductees at the executive level were exposed to the Official Language Policy of the Govt. of India.
25. Right to Information Act, 2405 (RTI Act)
An appropriate mechanism has been set up across the company in line with the RTI Act. During the year, 318 applications were received under RTI Act, out of which information has been supplied to 283 applicants, 3 cases have been transferred to other public authorities and 32 requests have been rejected. In addition, 90 first appeals were filed and 17 appeals were filed before Central Information Commission.
26. Women Empowerment
Women employees constituted about 5% of ONGC's workforce. Various programmes for empowerment and development, including programme on gender sensitization were organized.
27. Directors' Responsibility Statement:
Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, with respect to Directors' Responsibility Statement, it is hereby confirmed that:
(i) In the preparation of the Annual Accounts, the applicable accounting standards have been followed and there are no material departures from the same;
(ii) The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fairview of the state of affairs of the Company as at 31st March, 2008 and of the profit of the Company for the year ended on that date; (iii) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and
(iv) The Directors have prepared the annual accounts of the Company on a 'going concern' basis.
28. Corporate Governance
A report on Corporate Governance as stipulated as per Clause 49 of the Listing Agreement, together with Management Discussion and Analysis Report supported by a certificate from the Company's Auditors confirming compliance of conditions, form part of this Report.
Your Company, acknowledging its corporate responsibility, has voluntarily obtained a 'Secretarial Compliance Report' for the financial year ended 31st March, 2008 from M/s A.N. Kukreja & Co., Company Secretaries in whole-time practice, which is annexed to this Report.
In line with global practices, your Company has made all information, required by investors, available on the Company's corporate website www.ongcindia.com.
29. Statutory Disclosures
Section 274(1)(g) of the Companies Act, 1956 is not applicable to the Government Companies. Your Directors have made necessary disclosures, as required under various provisions of the Act and Clause 49 of the Listing Agreement. The information required under section 217(1)(e) of the Act read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, as amended is annexed as annexure-a.
None of the employees of your Company is drawing remuneration exceeding the limits laid down under provisions of section 217(2A) of the Act read with Companies (Particulars of Employees) Rules, 1975 as amended.
30. Auditors
The Statutory Auditors of your Company are appointed by the Comptroller & Auditor General of India (CRAG). M/s K K Soni & Co., M/s S C Ajmera & Co., M/s PSD & Associates, M/s. Padmanabhan Ramani & Ramanujam and M/s Singhi & Co. Chartered Accountants were appointed as joint Statutory Auditors for the financial year 2007-08. There is no qualification in the Statutory Auditors' Report.
The review by CRAG forms part of this report as annexure-c.
Notes on Accounts referred to in the Auditors' Report are self-explanatory and therefore do not call for any further comments.
Cost Audit:
Pursuant to the direction of the Central Government for Audit of Cost Accounts, your Company appointed Cost Accountants, for auditing the cost accounts of your Company for the year ended 31st March, 2008.
31. Directors
Pursuant to the provisions of Section 260 of the Companies Act, 1956 and Clause 104(1) of Articles of Association of the Company, Dr. R.K.Pachauri, Shri V R Singh, Shri R K. Choudhury and Dr. Bakul H. Dholakia, retire by rotation at this AGM and being eligible offer themselves for reappointment.
Shri D. K. Sarraf was appointed as an Additional Director and designated as Director (Finance) effective from 27th December, 2007 and holds office up to the 15th Annual General Meeting and in respect of whom, the Company has received a notice in writing from a member pursuant to the provisions of Section 257 of the Companies Act, 1956, proposing his name for appointment as a Director of the Company, subject to retirement by rotation under the Articles of Association of the Company.
Brief resume of the Directors seeking re-appointment, together with the nature of their expertise in specific functional areas and names of the companies in which they hold the directorship, number of shares held and the membership/ chairmanship of committees of the Board, as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges are given in notice convening the 15th Annual General Meeting of the Company, and form part of the Annual Report.
32. Acknowledgement
Your Directors acknowledge the involvement of the Government of India in the Ministry of Petroleum and Natural Gas and the support from the Ministry of Finance, the Reserve Bank of India and other agencies in Central and State Governments.
Your Directors recognise all shareholders, business partners, and members of the ONGC Family for their sustained support.
Your Directors wish to place on record their sincere appreciation for the dedicated contribution by the ONGCians in the remarkable performance and impressive results of your Company.
On behalf of the Board of Directors
New Delhi (R.S. Sharma)22nd July, 2008 Chairman & Managing Director
A. Energy Conservation
Annexure-a
1. Energy Conservation Measures taken
Your Company always gives emphasis to energy conservation measures and efficient use of energy in its entire venture of operation. Executive Committee in its 307th meeting had approved the training of ONGC Executives on Energy conservation techniques by PCRA.
Your Company has replaced old type filament lamps with CFL in most of its work centres and institutes. Old fixtures have also been replaced with modern energy efficient fittings. It has installed fuel efficient K-50 emergency generator engines, soft starter at E-1400-19 rig for motors above 30 HP, auto transformer starter for 100 HP motor at CW#1, bi-fuel (CBM gas & diesel) kit in 200 KVA Gen set in Bokaro, energy efficient top drive system on all offshore rigs.
Your Company has also installed solar water heaters at many work centres, solar panels at well heads at Bokar- Jharkhand and has started installing the 50 MW Wind power project at Gujarat
2. Energy Conservation measures taken earlier which are contributing to Energy savings
Your Company's proactive steps in energy conservation measures are paying off. Waste heat recovery systems, turbo-expanders, natural gas geysers are successfully running at various installations. Reduced loss of thermal energy through sustained maintenance of steam traps and inter-fuel substitutions are paying off.
3. Impact of Measures on reduction of energy consumption and consequent impact on the cost of production of the goods.
Above measures taken by your Company have resulted in reduction of significant quantity of fuel consumption (HSD, Natural gas and electricity) valuing about Rs.1, 570 million during the financial year 2007-08.
B. Research and Development
Specific areas in which R & D was carried out
Your Company has always focussed on technology-driven growth. Its eleven institutes spread over the country incessantly explore the latest technologies and alternative means to the ever surfacing challenges of E&P industry.
In Geology and Geophysics front, hybrid inversion of the pre-stack seismic reflection data with optimized source wavelet, reservoir modeling for enhanced oil recovery using fractals and 4D-4C Seismic, study of microbial, palynological and geochemical proxies for biogenic gas exploration, shale gas desorption studies on Cambay Basin and South Karanpura sub-Basin and study for prediction of oil production rate using the low frequency behaviour of the reflection coefficient from seismic data are among the prominent areas of R&D activities.
In microbial front, ONGC has undertaken studying paraffin control using indigenously developed PDS-10 bacterial consortium, improving flow efficiency in flow lines using FIB-19 bacterial system, enhancing oil recovery through microbial system for high temperature reservoirs (900C), implementing MEOR technique using S2 bacterial consortium for improving production from stripper wells. ONGC Energy Centre has outsourced projects to Indian biotechnical institutions (TERI Delhi, BHU Varanasi, ARI Pune, MCRC Chennai) for research and developing selective microbes.
You Company, ONGC, has also undertaken development of Visco-elastic surfactant based self-diverting acid (VSDA), a polymer free surfactant based acid system, for stimulation of heterogeneous / multilayered carbonate reservoirs, fracturing fluid for high temperature (1490C) reservoirs, venturi type surface chokes for stabilized flow in gas wells, water shut-off technique for gravel packed wells using cross linking polymer and using sodium thio-sulphate instead of thin-urea for water shut-off formulation (for PDO, Oman).
ONGC has also undertaken research on formulating polyamines enhanced High Performance Water based Mud (HPWBM) systems, evaluating the suitability of ordinary Portland Non API Cements for use in oil well cementation and formulating a new Low Toxic Mineral Oil (LTMO) package as a substitute for Synthetic Oil base mud.
In the new energy source front, ONGC Energy Centre has established a research project with leading research institutions like IIT, Delhi, UICT, Mumbai and CECRI, Karaikudi for conducting research on thermochemical processes for water decomposition. It has also undertaken a project to examine the archived well logs to identify potential uranium rich zones and generate geological models to predict uranium occurrence. Designing of leaching agents for in-situ leaching of uranium from sedimentary rocks is also planned.
7. Benefits derived as a result of the R & D projects:
Critical evaluation of all the geoscientific data coupled with over pressure modeling in Kavitam and surrounding area of Krishna-Godavari basin clearly indicate ample scope for exploration and exploitation of two major unconventional gas systems. Bacterial activity zonation - Aerobic, Sulfate reductive and Anaerobic zones have been established in KG on land and offshore area. The results of shale gas desoprtion study has led to evolving a methodology for deliberate search for hydrocarbons within basement rocks. Stochastic Inversion approach has demonstrated the efficacy of the technique in delineating thin pay sands. Various works on microbial front is helping in better flow management and environment friendly sludge disposal.
R&D in the area of drilling by your Company has come out with ceramic microspheres based high performance light weight cement slurry, cross linked stiff rubbery gel and synthetic fiber cement slurry for loss control solutions.
Application of selective dispersant and solvent that has been implemented in four wells of Heera field and one well of MH resulting in an additional oil gain of about 201 BOPD. Residue free Visco-elastic surfactant based self-diverting acid (VSDA) implemented in six wells of Heera field gaining about 714 BOPD. Formulation Et technique developed for Multistage Acid Frac job has been implemented in seven wells of Heera Field gaining about 701 BOPD. Thio-sulfate based water shut-off formulation was applied in three wells of PDO, Oman.
Application of cross linked biopolymer gel system for limiting water production in gravel packed well of Mehsana field to avoid deployment of work over rig resulted in good savings.
3. Future Plan of Action
You Company has plan to induct Low Frequency Acoustic Passive Seismic DHI (IPDS) technology for direct detection of hydrocarbons using low frequency acoustic waves, passive seismic tomography in Frontier Basin for providing a detailed 3-D seismic velocity and Poisson ratio model of upper few km of the crust. Plans are there for developing software for Seismic Imaging of Oil Production rates.
ONGC has developed polymer gel formulations for Nandasan, North Kadi fields of Mehsana and L-II and L -III reservoirs of Mumbai High Asset. The process for field implementation of findings is planned to be undertaken soon. Plan is also afoot for identifying suitable chemical additive for the flow assurance of problematic crude oil belonging to Gopavaram field, Rahjamundary and Sobhasan field, Mehsana.
Two REED projects on microbial front are being taken up; microbial conversion of heavy oil to methane gas and investigations on biogenic gas source and entrapment styles in Krishna-Godavari Basin.
In drilling front, ONGC has plan to undertake study of managed pressure drilling and its application, development and evaluation of suitable enzymatic breaker and a non acidic precursor formulation for effective clean up of filter cake, optimization of chemical composition of PHPA mud system with respect to Potassium chloride and amine based high performance water base mud system to stabilize troublesome BCS and Kopili shale.
Field trials HGS based drilling fluid at Mumbai High, high temperature polymeric drilling fluid for HTHP wells of KG Asset, mud loss pill in Mumbai Western offshore and amine based high performance water based mud system are also planned.
In production front, application of high temperature frac-fluid formulation in hydro- frac jobs in high temperature reservoir of GS-3A sand of Gandhar field to enhance the productivity is planned. It is also planned to develop suitable fracturing fluid for high temperature (165 degree Cendigrade) reservoirs, implement multistage acid fracturing in low permeable wells for improvement in productivity and undertake study on gas exploitation from isolated gas pools.
Your Company has also plan for undertaking study on application of composite materials for various useful purposes at offshore installations, gas hydrate induced corrosion, analysis and design of Deep-water foundation and riser systems, developing Electro-less Nickel Phosphorous (ENP) coating and many other projects related to deep-water, gas hydrates and offshore structural engineering.
4. Technology Absorption and Adaptation
ONGC has absorbed and adapted quite a number of new technologies. Structural Geology Software by M/S Midland Valley Exploration (MVE), 3D Basin Modelling technology - the PetroMod Software System and Petrobank Master Data Store (MDS) have helped in better data interpretation and storage. A new state-ofthe-art data acquisition system with 24 bit delta sigma technology and Multi-component seismic survey, 3D-3C technology, inducted in A&AA Basin area are adding value in data acquisition. SAR technology for imaging surface oil seeps that originate by slow leakage from oil and gas-filled traps has also been adapted for faster information gathering on prospective areas.
A Rapid Solvent Extraction Unit (Soxtherm System) for quick and efficient extraction of bitumen and removal of polyglycol contamination from sedimentary rock samples for detailed geochemical evaluation has been inducted.
In the area of Drilling, in addition to already existing hi-technologies, two new technologies, Twister technology and Extended Reach Technology (ERT), have been added.
5. Cailaborative projects with Foreign Institutes / Domain Expertsl MoU
Following collaborations and collaborative projects are noteworthy during the preceding year:
* Heads of Agreement signed with Petrobras for swapping of interests in deepwater blocks in India and Brazil on 4th May, 2007.
* Board accorded approval for assignment of 30% PI in block KG-DWN-98/4 and 25% in MN-DWN-2002/2 to BG subject to G01 approval.
* Engaged Dr. Ben & Law Consultant, USA, for Basin Center Gas and Shale gas.
* Dr. C. D. Johnston seismic interpreter hired for integrated study of Mahanadi Offshore basin.
* Engagement of Dr. G. Keller for study of subsurface samples for KT boundary sediments of KG basin.
* Participation of ONGC as sponsor in developing Action Learning Plans (ALPS) on Exploration topics with IHRDC, Boston, USA.
* Membership of Fold Fault Research Project (FRP) consortium, University of Calgary, with the objective of availing expertise in seismic imaging in structurally complex areas.
* A Geophysics SIG being formed under Energistics to promote collaborative development and improvement of industry geophysical standards.
* A research agreement has been signed between Royal Holloway and Bedford New College, University of London and ONGC for their collaborative program between the Fault Dynamics Research Group at Royal Holloway University of London and ten other sponsoring E&P companies like BP, Shell, Statoil, PDVSA etc. The outcome of the project will enhance the interpretation skills, strengthen the research capability and wider access to the international talent pools.
* Collaborative research projects undertaken with UPG Romania for outer Himalayan belt.
* Collaborative research project with University of California, Utah on Ganga basin.
* Collaboration with University of New South Wales, Australia - for establishment of micro CT scan centre.
* Long term collaboration with University of Calgary, Canada for participation, maintenance and service of High Pressure Air Injection set-up for studying FOR processes in heavy, medium and light oil reservoirs.
Collaboration with TERI, New Delhi for isolation, identification and development of methanogens for in-situ generation of methane from coal seams and for Microbial system for improving flow efficiency of oil in surface flow lines.
A collaborative job was taken up with MIS IKON Sciences, UK to determine a method to delineate thin pay sands in Tapti-Daman area which otherwise could not be mapped through conventional seismic techniques.
An MOU was signed for the collaborative project with C-DAC, Pune on 'Hybrid Inversion of the Prestack Seismic Reflection Data with Optimized Source Wavelet.
Strategic alliance was entered into M/s Canoro Resources Ltd for carrying out exploration and development activities in the northeast.
A long term technical consultancy for Structural Geology Modelling is being taken up with Midland Valley Exploration for 3 years at the cost of 42.7 million.
Pilot project for 4C-4D study in Vasai East for using fractal theory under MOU signed between NGRI, NTNU (Norwegian University of Science & Technology), Norway and ONGC.
MOU with MIS Fugro Geoscience India Private Limited (FGIPL) was signed for alliances in the areas of airborne geophysical surveys, seismic API, reservoir characterization, data solution and setting of Joint study centre (HUB).
MOU with M/s Petroleum Geo-Services ASA (PGS), Oslo, Norway for gaining access to a whole range of seismic solutions and services which are unique and represent the cutting edge of the technology, management processes and unique services like HD3D., Multi-Transient EM, PGS Megasurveys, Ramform offshore Seismic survey Vessel Design and Building, Fiber Optic Technology and setting up of Joint study centre.
MOU was signed with global oil major British Petroleum (Alpha) Limited to collaborate in Exploration 8t Production (E&P) business in India and abroad, which includes sharing of knowledge in Coal Bed Methane (CBM) and Deepwater exploration.
ONGC signed MOU with Norsk Hydro in the area of offshore exploration, development of Vasai field and KG-98/2 block.
ONGC has entered into an MOU with M/s Rocksource ASA, of Norway on for cooperation in E&P sector on Indian and international projects which include the use of Rocksource EM technology for exploration prospect evaluation.
MOU was signed with M/s MOL Hungarian Oil and Gas for alliance in hydrocarbon sector has been signed. Also approved assignment of 35% PI in HF-ONN-2001 / 1 block.
The ONGC Energy Centre has entered into a MOU with BARC to research thermochemical processes for water decomposition.
ONGC has signed an Agreement of Collaboration (AOC) with Skochinsky Institute of Mining (SIMNMRC), on 25th November, 2004 for Underground Coal Gasification.
a. Information Regarding Imported Technology:
Information Regarding Imported Technology (Imported during the last five years from the beginning of the Financial Year)
Technology Imported Year of Import
(i) 3D Integrated Quantitative Inversion & Modelling 2003-04(My Bench software from M/S Jason Geosystems)
* Network Enhancement Gigabit
* Two suits of Additional Licenses for G & G application of M/s Landmark.
* 18 TB RAID 5 Storage system, N/W & RAM Upgradation of Origin 2000server, Hard disk for octane workstations for processing and & 5 TB
* RAID 1 Disk for INTEG.
* RCCFA (Reservoir Condition Core Flow Apparatus).
* Fully automated capillary pressure and resistivity system.
* Mercury free PVT package.
* SEM with EDX system, model 6460 LV
* SGI Origin 300 - 4 CPU Machine + Octane 2.
* Network Access System (NAS).
* Automated LTO Backup System.
* New Layer 3 Switch for Network Upgradation.
* Forgas Software.
* PAL/ RAVE/ FZAP/ RFB/ Openvision and EMERGE - Softwarefor Enhancing 2D/ 3D Interpretation and Reservoir Characterisation.
* 3 Additional Licenses for Open Works of M/s Landmark Graphics.
* 1 Additional License for ZMAP (Mapping) of Landmark Graphics.
(ii) 8 CPU based P690 server and 3590E tape drive with Robotic 2004-05tape library - up-gradation of Petrobank server.
* SUN Fire 15K Unified interpretation Data server,
* 30 SUN Blade150 X Terminals, one SUN Blade 2000 & one SUN Blade 2500,
* GEOPROBE software from M/s LANDMARK Graphics.
* 4 Suites of Licenses from M/s Landmark Graphics.
* SGI-350 server and SGI TEZERO workstation OS-IRIX 6.5with LANDMARK application software (Openworks,
* Seisworks 2D & 3D and Earth Cube)
* Stand Alone System (96 CPU) Regetta with time and depth domain processing software 'GEOPDEPTH'.
* Stand Alone System (32 CPU) Regetta with time and depth domainprocessing software 'GEODEPTH'.
* 64CPU cluster system having 4TB disk space and time anddepth processing software for MV Sagar Sandhani.
* 10 Nos of 408-UL seismic data acquisition systems.
* 17 Field processing units for 3D field crew to monitor online data quality.
* DGPS-RTK Differential Global Positioning System for accurate positioning in topographic surveys.
(iii) * 'StrataBug' software for Bio-stratigraphy. 2005-06 * Log data processing software - GEOFRAME containing ELAN PLUS,dip-meter, image processing and interpretation package along with hardware.
* State of Art digital micro gravitymeter, Proton Precessionmagnetometer together with DGPS, Total station and Auto levelfor topographical survey to meet the requirements of precision GM survey.
* ISO Prime GC-IRMS
* Sun servers and work-stations for EPINET(Exploration Et Production Information Network)
* Suit of 2D/3D Move Software of Mid land valley
* Three Numbers PC based software from Geographix.
* Geosec2D Paradigm software installed in F15K server
* Configured five sun blade 150 systems with PCI cards andinstalled windows XP so as to work both as workstation and PC.
* IBM P690 (8CPU) Petrobank server upgraded to 32 CPUfor supplementing seismic data processing
* 3 No's of Mobile Processing Units (MPU) for reducing API cycle time.
PC based Seismic Interpretation system with matching hardware and software.
* High temperature anaerobic bio-reactor.
* Microscope with image analyser.
* Refrigerated centrifuge.
* Incubated shaker.
* High temperature incubator.
* High precision metering pump.
* End Face grinder.
(iv) Data Station (DASTA - 720) 2006-07
* GV Isoprime Continuous Flow Isotope Ratio Mass Spectrometry (CF-IRMS)
* Varian CP3800 Natural Gas Analyzer
* GC-MS-MS(Varian)
* Latest releases of Landmark / Hampson Russell / Jason /
* GeoQuest Interpretation Software installed as part of regular M&S.
* Geo-Vision Centre (Virtual Reality Centre) with SGI Onyx 3900 Server
* (16 CPU, 64 GB RAM) installed for 3 Pipe, Curved screen, immersive volume visualization using the software from M/s Paradigm.
* Petrel Suite of Software along with Interactive Petrophysics from M/s GeoQuest Systems Installed.
* Latest release of Solaris Operating System version 10 installed and configured for future migration of Landmark Application Software.
* Netvault Backup Software for Lanfree / SAN backup installed.
* ZFS (Zeta Byte file system) was created on one SUN machine with Solaris 10 for performance evaluation with respect to existing UFS file system.
* Biglron Foundry Gigabit Ethernet switch upgraded to 120 gigabit fiber ports along with redundant power module to provide seamless gigabit network connectivity to all servers and clients throughout GEOPIC.
* EPOS3SE upgraded to RFC (Rock & Fluid Canvas)
* Q - Marine. Sea bed logging.
* GX Technology.
* Digital Multilevel Vertical seismic profiling (VSP).
* Air borne Electromagnetic Survey.
* Multi Transient Electro Magnetic (MTEM) technique.
* Virtual Drilling Technology.
(v) Rapid Solvent Extraction Unit (Soxtherm System). 2007-08
* Petrobank Master Data Store (MDS), from M/S HaRiburton
* Offshore Services Inc. - a multi-client solution for the management of E&P technical data.
* 64 CPUs SGI ALTIX machine.
* 48 node IBM PC Cluster system with dual CPU per node equipped with Geocluster 4.1 application software of M/S CGG.
* 272 node IBM PC Cluster system with dual CPU per node equipped with OMEGA application software of M/S Western Geco
* Corporate Licensing of Interpretation software from
* M/s Hampson Russet, M/s Landmark, M/s Geoquest and M/s Paradigm.
* CGG Geocluster application software for processing.
* WGC Omega: application software for processing.
* StatMod MC and EarthMod FT modules added to Fugro-Jason's
* MyBench software suite.
* WD / Geosteering with Laterolog tool.
* Compact combo LWD tool.
* FPWD- Formation Pressure While Drilling tool.
* 'Air Injection Laboratory' for identifying candidate reservoirs for air injection as a part of FOR efforts.
* Cluster Computing capabilities have been established,which will reduce significant run-time of various G&G applications and reservoir simulation processes.
* Four licenses for G&G modules (Open Works-2,SeisWorks-1 and StratWorks-1 of M/s Landmark Graphic Corporation).
* Three licenses for Reservoir Simulation (Model Builder-3 ofM/s Computer Modeling Group Limited). * PC Cluster technology, both Hardware and Software,for seismic data processing.
* 3D - 3C Multi-Component Seismic Survey.
* Four numbers of State-of-the-art multi component digital VSP equipment.
* 14 new state-of-art data acquisition system with 24 bit delta sigma technology.
B. Has the technology been fully absorbed? Yes
C. If not fully absorbed, areas where this has not taken place, reasons thereof, and future plans of action Not applicable
7. Expenditure on Research & Development
(Rs. in million)Sr. Heads 2007-08 2006-07 No.
1 Capital 93.42 482.712 Recurring 1,753.32 863.563 Total REM Expenditure 1,846.74 1,346.274 Total R&D Expenditure as a percentage of Total Turnover, 0.30% 0.23%
8. Information on Foreign Exchange Earnings and Outgo:
(Rs. in million)Sr. Heads 2007-08 2006-07No.
1 Foreign Exchange Earnings 37,947.22 29,906.562 Foreign Exchange Outgo 74,009.98 87,761.69
Annexure-b
Statement of reserve recognition accounting:
Standardised measure of Discounted Future Net Cash Flows relating to Proved Oil and Gas Reserve quantities as on 31st March, 2008.
(Rs. in million)
Particulars Gross Value as at Present value (Discounted at 10%) as at
31st March 31st March 31st March 31st March 2008 2007 2008 2007Revenuesoil 6,596,884.02 6,104,400.92 3,060,469.75 3,039,324.43Gas 1,122,791.68 1,089,576.71 490,299.24 521,645.01Total Revenues 7,719,675.70 7,193,977.63 3,550,768.99 3,560,969.44CostsOperating, Selling & General 3,096,451.55 3,035,075.19 1,422,352.50 1,501,831.31Corporate Tax 1,030,614.89 1,025,459.00 474,884.82 488,610.98Sub-total 4,127 066.44 4,060,534.19 1,897,237.32 1,990,442.29Evaluated Cost of Acquisition of Assets, Developmentand Abandonmenta) Assets 755,244.21 369,623.75 406,247.75 276,278.43b) Development 261,147.88 179,031.55 167,629.32 131,176.02c) Abandonment 149,457.70 169,632.50 1,936.71 2,113.12Sub-total 1,165,849.79 718,287.80 575,813.78 409,567.57Total Cost 5,292,916.23 4,778,821.99 2,473,051.10 2,400,009.86Net future earnings fromProved Reserves 2,426,759.47 2,415,155.64 1,077,717.89 1,160,959.58
Notes:
1) The Revenues on account of crude oil and gas have been worked out on the basis of average price for the year 2007-08. The average price for crude oil is net of Subsidy Discount.
2) Expenditure on Development, Acquisition of capital assets, Abandonment costs and Operating Expenditure have been considered at current costs i.e as on on 31st March, 2008. Taxes and Levies have been considered at prevailing rates as on 31st March, 2008.
3) The reserves have been estimated by ONGC's Reserve Estimates Committee following the standard international reservoir engineering practices.
4) Only Proved reserves have been considered. Probable or Possible reserves have not been considered. These reserves exclude ONGC's share of foreign JV Assets.
5) Both revenues and costs have been discounted to present value using 10% discounting factor. The Net future earnings, therefore, represent the net expected future cash inflows from production of recoverable reserves of crude oil and gas.
6) However, neither the estimated net reserves nor the related present value should betaken as a forecast of future cash flows or value of these reserves because (a) future estimated production schedules used in the valuation process are subject to change, (b) up-gradation of Probable and Possible reserves would significantly affects the gross and net present value of the expected future cash inflows, (c) future crude oil and natural gas prices are subject to change and (d) future expenditure on production (operating), development, acquisition cost of capital assets, abandonment costs and rates of taxes and levies, which may be at variance from those assumed herein.
Annexure-c
Comments of the Comptroller and Auditor General of India under section 619(4) of the Companies Act, 1956 on the accounts of Oil and Natural Gas Corporation Limited for tile year ended 31st March, 2008
The preparation of financial statements of Oil and Natural Gas Corporation Limited for the year ended 31st March 2008 in accordance with the financial reporting framework prescribed under the Companies Act, 1956 is the responsibility of the Management of the Company. The Statutory Auditors appointed by the Comptroller and Auditor General of India under section 619(2) of the Companies Act, 1956 are responsible for expressing opinion on these financial statements under section 227 of the Companies Act, 1956 based on independent audit in accordance with the auditing and assurance standards prescribed by their professional body the Institute of Chartered Accountants of India. This is stated to have been done vide their Audit Report dated 25th June, 2008.
I, on the behalf of the Comptroller and Auditor General of India have conducted a supplementary audit under section 619(3)(b) of the Companies Act, 1956 of the financial statements of Oil and Natural Gas Corporation Limited for the year ended 31st March, 2008. On the basis of my audit nothing significant has come to my knowledge which would give rise to any comment upon or supplement to Statutory Auditors' report under section 619(4) of the Companies Act, 1956.
For and behalf of the Comptroller and Auditor General of India
Sd/- K.P. Sasidharan Principal Director of Commercial Audit & ex-officio Member, Audit Board II Mumbai
Place: MumbaiDate : 11th July 2008.
Annexure-d
Human resource value
Employees as on 31st March, 2008:
Employee Group Age Distribution Total
Upto 31 31-40 41-50 51-60 2007-08 2006-07(A) TechnicalExecutive 564 1494 9703 6618 18379 18305Non-Executive 42 762 2571 622 3997 5072Total (A) 606 2256 12274 7240 22376 23377(B) Non-TechnicalExecutive 154 435 1912 2137 4638 4365Non-Executive 86 876 2945 2075 5982 6068Total (B) 240 1311 4857 4212 10620 10433Grand Total (A+B) 846 3567 17131 11452 32996 33810
Note: Whole time Directors excluded.
Valuation as on 31st March, 2008: (Rs. in million)Employee Group Age Distribution Total Upto 31 31-40 41-50 51-60(A) Technical
Executive 10,091.9 23,745.9 107,673.4 36,973.8 178,485.1Non-Executive 455.7 7,669.7 22,484.0 2,781.0 33,390.4Total (A) 10,547.5 31,415.6 130,157.4 39,754.8 211,875.4
(B) Non-Technical
Executive 2,670.1 6,689.8 19,720.1 11,344.5 40,424.5Non-Executive 894.5 8,104.8 21,742.4 7,487.2 38,228.9Total (B) 3,564.6 14,794.6 41,462.5 18,831.7 78,653.5Grand Total (A+B) 14,112.2 46,210.3 171,619.9 58,586.6 290,528.9
(Rs. in million)Employee Group Value per employee 2007-08 2006-07(A) Technical
Executive 9.7 9.4Non-Executive 8.4 7.7Total (A) 9.5 9.0
(B) Non-Technical Executive 8.7 8.3Non-Executive 6.4 6.2Total (B) 7.4 7.1Grand Total (A+B) 8.8 8.4
* Valuation based on most widely used ' Lev & Schwartz' model.
* Aggregate future earnings during remaining employment period of employees, discounted @8% p.a., provides present valuation
* Future earnings based on current emoluments with normal incremental profile.
Annexure-e
Recognitions, awards and accreditians
1. Global Rankings/ Recognitions:
* The Numero Uno E&P Company in Asia, as per the ranking of the top 'Platts 250 Global Energy Companies list for the year 2007' based on Assets, revenues, profits and Return on Invested Capital (ROIC) (September 2007)
* Ranked 20th among the Global publicly-listed Energy companies as per 'PFC Energy 50' (Jan 2008).
* Occupies 198th rank in 'Forbes Global 2000' 2008 list (up 42 notches than last year) of the elite companies across the World; based on sales, profits, assets and market valuation during the last fiscal. In terms of Profits, ONGC maintains its top rank from India.
* Ranked 335th position as per Fortune Global 500 2008 list; up from 369th rank last year, based on Revenues, Profits, Assets and Shareholder's equity. ONGC maintains top rank in terms of profits among seven companies from India in the list.
* The first and only Indian Company to be enlisted in Fortune's 'Most admired Companies 2007'.
2. Indian Rankings/ Recognitions
* Ranked as the most respected Public Enterprises in India in 2007 'Business World Survey,' with 19th position in the league of the most-respected Indian Corporates.
* Rated 'Excellent' in MOU Performance Rating for 2006-07 by the Department of Public Enterprises, Ministry of Heavy Industries in Public Enterprises, GOI.
* Oil Industry Safety Directorate (OISD) has selected Ahmedabad Asset and MRPL for the year 2006-07 (as number one in Group-4 category (Oil & Gas Assets) and second in Group-1 Refinery category respectively).
Topped the visibility metrics in Indian Oil and Gas Sector; the only PSU in the top 10 of the list of Indian Corporate Newsmakers.
3. Awards & Accreditations
* 'Golden Peacock Global Award 2007 for Excellence in Corporate Governance 2007', for the 3rd consecutive time, conferred by World Council for Corporate Governance.
* Bagged the coveted winner's trophy of the maiden 'Earth Care Award for excellence in climate change mitigation and adaptation' under the category of GHG mitigation in the small/medium and large enterprises.
* Secured the 'Jury's Special Appreciation Award' under 'Employer Branding Awards 2007', for being considered by the jury as the only organization in PSU that is considered an Employer Brand.
* ONGC was awarded 'Petroleum Minister's Trophy for 2006-07' in recognition of its best overall performance in 15 sports disciplines under the Petroleum Sports Promotion Board (PSPB), for the fourth consecutive year in a row. ONGC also received the overall 'Excellence Trophy' for corporate contribution towards promoting sports in the country
* Conferred with 'Partners in Progress' Award', instituted by the 'Legends of India', an independent endeavour to promote Indian Art and Cultural within the country and abroad, for its support and contribution in the field of Art and Cultural.
* Conferred with 'Infraline Energy Excellence Award' for its services to the Nation in Oil Ft Gas Exploration and Production category.
* Bestowed with 'AmityAward for Excellence' in Cost Management.
4. Awards to ONGC's Business Units
Ahmedabad Asset:
* Golden Peacock Environment Management Award - 2007 - instituted by World Environment Foundation.
* Safety Innovation Award - 2007 from Safety and quality Forum - instituted by the Institution of Engineers India.
* Oil Industry Safety Award - 2006 - instituted by Ministry of Petroleum Et Natural Gas, Govt. of India.
Ankleshwar Asset:
* Safety Innovation Award for the year 2006-07.
* Green Tech 'Silver Award -2008'.
Tripura Asset:
* Longest Accident Free Period to Tripura Asset from Director General of Mines, Dhanbad.
Rajamundry Assets:
* Green Tech Environment Excellence Silver Award-2006 for Mandapeta GCS.
* Certificate of Appreciation for Ponnamanda Gas Compression Station for outstanding achievement for 'Environment Management' during the year 2006 from the Greentech Foundation.
* Greentech Safety Silver Excellence Award-2007 to the Drilling Rig E-1400-16
* Greentech Safety Gold Excellence Award-2007 to the Lingala Group Gathering Station
* Certificate of Appreciation for Excellent performance in Safety for the year 2007 from Greentech Foundation to Mori Gas Compression Station.
Cauvery Asset:
* Greentech Award for Environment Excellence for the year 2006 in Petroleum Sector to Narimanam Group Gather Station.
* Best Technical Audit Performance Award for the year 2007 to Kuthalam Group Gathering Station.
* Greentech Safety Award 2008 in petroleum sector to Cauvery Asset, Tripura Asset, Rajahmundry Asset, Ahmedabad Asset, Offshore Engineering Services and to Hazira Plant for the sixth time.
* Golden Peacock Awards instituted by Institute of Director (IOD) under the categories of 'Training and Innovation'. Institute of Drilling Technology (IDT) received the award for Excellence in Training and Cauvery Asset for Excellence in Innovation.
5. Awards to CMO & Directors:
* Mr. R S Sharma, CMD, ONGC has been conferred the 'CNBC-TV18 Award 2007' for excellence in the Oil and Allied Services category.
* Mr. R S Sharma, CMD, ONGC has been conferred with the 'CNBC-2007 CFO Award' for Excellence in Financial Management in the category of Best performing CFO in the Oil, Gas and Chemicals sector, for the third time in a row.
* Mr. R S Sharma, CMD, ONGC has been coffered 'Distinguished Fellowship' of the Institute of Directors (IOD) in recognition for dedicated public service i.e. commendable performance in management.
* Dr. A K Balyan, Director (HR) has been conferred the award of 'Best HR-Head' by Amity International Business school.
* Dr. A K Balyan, Director (HR) was conferred with 'Lifetime Achievement Award in Human Resource' during the 9t' Convention on Leadership in Mumbai on 28th September, 2007. The award was presented to Dr. Balyan for his remarkable achievements in the area of managing Human Resource of the best PSU in the country.
* Dr. A K Balyan, Director (HR) was conferred the 'Exemplary Leader Award' under 'Employer Branding Awards 2007'.
* Dr. A K Balyan, Director (HR), conferred with fellowship of World Academy of Productivity Science.
The Nobel Peace Prize 2007 has been conferred jointly to Intergovernmental Panel on Climate Changeheaded by Padma Bhushan Dr. R K Pachauri who is on the Board of ONGC and to Mr. Al Gore, former Vice-President, USA for efforts to build up and disseminate greater knowledge about man-made climate change, and to lay the foundations for the measures that are needed to counteract such change.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
The Economy:
India's progressive emergence as one of the world's more stable and dynamic economies has fuelled widespread confidence in the BRIC thesis, which forecasts that along with Brazil, Russia and China, India is on its way to the top four slots in global economic hierarchy.
One milestone to the coveted journey was crossed on 25th April 2007, when India moved into the Trillion Dollar Economy Club of the ten economies (The Times of India, New Delhi edition, 26th April 2007). However, the caveats on the path of onward journey became loud and clear on 1st July 2008, when the same daily reported 'With the dollar breaching the Rs. 43 mark, the economy is down to $995 billion. High oil prices have triggered a domino effect that has ultimately robbed India of the trillion-dollar tag'.
The concern is neither specific to India, nor Asian economies. The issue of high crude oil prices snowballing into wider economic slowdown is a global one. Though non-fundamental factors like speculation and weak dollar may also have played a role in crude price increase, it is largely the traditional fundamentals of demand and supply which are the major reasons. Demand for petroleum has been growing globally, whereas supply of this finite resource remained under pressure.
Industry Structure and Developments:
Crude Oil Price:
The average spot price of the WTI crude was just $66.051barrel in 2006. The crude oil price touched a ceiling of $77/barrel (Source: EIA) in last fiscal while pitching tent in the 60s for a major part of the year and even going down to 50s for sometime.
Arrival of fiscal 2008 showed no indication of the coming storm till August 2007; the prices remained within 70s, but thereafter the climbing started and finallyzoomed past the psychological barrierof $100/barrel soon. Since then it has not looked back, and crossing new milestones almost every day, even crossing $147/barrel for a day before cooling down to about $ 125 / barrel in July 2008.
Skewed demand supply axis:
According to the World Economic Outlook, April 2008, the global GDP rate, at constant prices, has grown by an average 4.59% annually in the last five years. The growth is led by developing economies with an average annual growth of 7.28% in the last five years. China and India lead with a five-year average annual growth rate of 10.6% and 8.57%, respectively.
This growth has translated into growing demand for oil. On the contrary, the supply had lagged behind this rising demand. For long, the FSU (Former Soviet Union) countries and OPEC bailed out such crisis despite dwindling supplies from other major oil producers. But now, according to the BP Statistical Review of World Energy 2008, even OPEC has registered a fall in oil production by 1.2% in 2007 as compared to last year. The global oil
production too has declined marginally by 0.2% and every other producer, namely the European Union (EU), OECD, OPEC and non-OPEC, except Former Soviet Union (FSU) countries, have registered adecline.
Opportunities & Threats:
The Scientific American, in an article published in April2008, has described the last decade as The Lost Decade'. It points out that when the oil price collapsed from $25 to $12 per barrel at the end of 1990s, E&P companies slashed their technical and scientific staff. Secondly, in spite of the booming markets of the early to mid 2000, E&P industry failed to invest in infrastructure and equipment to sustain profitability. The situation orchestrated the biggest failure in sharpening the E&P edge to locate new oil and gas sources.
However, high oil price regime has now encouraged the industry to invest in developing oil and gas capacity and monetizing them. There is unprecedented level of E&P activities the world over. The EV companies are now stretching themselves beyond conventional resource centres, exploring frontier areas including deepwater and ultra-deepwater provinces. Finally, there is a genuine effort to recover The Lost Decade'.
According to Cambridge Energy Research Associates (CERA) and United States Geological Survey (USGS), a large pool of hydrocarbon still lies undiscovered. The three big oil field finds in Brazil, namely Carioca, Tupi and Jupiter, fuelled these theories. Your Company's discoveries in Indian East coast in well UD-1, opening up the ultra-deep regime in India and finds by few other companies have given us cause for optimism.
However, the increased E$P activities have a flip side, the steep rise in the cost of hiring services and equipment. According to IHS Energy, costs have more than doubled in last four years worldwide. An ultra-deepwater drill ship which your Company hired at a day rate of US$ 192,000 in 2003 is available in 2008 for US$ 525,000 per day for mobilization end-2010. Nonetheless, the industry believes that these costs are viable going by the hopes from yet-to-be-discovered assets.
The Priorities:
Locating new oil & gas assets and bringing them to stream remains the immediate and top priority. Simultaneously, the industry will have to be more accurate and cost effective to ensure adequate supplies of oil and natural gas at an affordable price. Developing technologies for tomorrow becomes imperative.
Gas is gaining prominence as the bridge fuel and efforts are on to exploit India s natural endowment in gas in all its dimensions; like Coal Bed Methane (CBM), Underground Coal Gasification (UCG) and Gas Hydrates. These require technology and capital infusion.
Demand management through conservation and by enhancing efficiency of automobiles, electrical and household appliances, through Green buildings and introducing Mass Rapid Transport Systems are also priorities for which industry will have to extend a helping hand to synchronize these efforts. At the same time, the industry needs to collaborate in efforts looking for supplements beyond hydrocarbons.
Strategic Pursuits:
Your Company's long-term strategy focuses on strengthening the core Exploration and Production (E&P) activities in oil & gas. Improving Reserve Replacement Ratio by intensifying exploration is your Company's first priority. Increasing production, arresting decline in matured fields and expeditious development of discovered fields are the other priorities. The desired level of investment to create new infrastructure, to maintain the old ones to support enhanced levels of E&P activities are also on our strategic agenda. Your Company has taken structured initiatives in these priorities as detailed in the Directors' Report.
Deepwater oil & gas provinces hold lot of promise. Your Company made significant discoveries in deepwater and ultra-deepwater provinces in Krishna-Godavari (KG) and Mahanadi basins. These prospects have been assigned priority for expeditious development. Technologically, ONGC has achieved a number of milestones in deepwater exploration, which have been adopted as standard by many global operators.
Besides its focus on Oil & Gas E&P, your Company, mandated to secure Energy Independence of India by diversifying sourcing of energy, is also investing to leverage the natural endowment of the country of having one of the largest Coal Reserves in the world. Pilots on Clean Coal Technologies Like Coal Bed Methane (CBM), Underground Coal Gasification (UCG) are being run. It has also brought up ONGC Energy Centre Trust for holistic research on alternate energy sources.
ONGC is committed to sourcing equity Oil & Gas through its wholly-owned subsidiary ONGC Videsh Ltd. (OVL), which is being seen as the growth vehicle of the ONGC Group. Currently OVL has 38 Oil it Gas projects in 18 countries and is one of the biggest Indian multinationals with an overseas investment of around 5 billion dollars.
Capacity expansion of Mangalore Refinery Petrochemicals Ltd.(MRPL), a subsidiary of ONGC from 9.69 to 15 MMTPA (Million Tonne Per Annum) is under implementation and this expansion will further strengthen your Company's efforts towards value-chain integration.
Value-multiplier projects in sectors like, Refining, Petrochemicals, LNG, SEZs, Power, have huge potential towards inclusive and integrated growth for your Company. All these projects are in time and will be on stream soon, bringing additional revenue. Your Company, after detailed feasibility studies, has decided to come out of the earlier proposed refinery and SEZ projects at Kakinada, Andhra Pradesh.
Physical Performance:
Reserve Accretion:
Your Company had struck 35 new discoveries (13 new prospects and 22 pools) in the concluding fiscal of 2007-08. Initial In-place (1113) hydrocarbon accretion in 2007-08 was 182.23 Million Tonne Oil Equivalent (MMTOE), which is highest in last ten years, against IIP accretion of 169.52 MMTOE last year. The Ultimate reserve (UR) was 63.82 MMTOE as against 65.56 MMTOE in last year.
Seismic Survey:
This year your Company acquired 8,158 Km of 2D seismic survey and 19,360 Sq. Km of 3D data.
Drilling:
Out of the 322 wells, that your Company drilled in 2007-08, 98 were Exploratory Wells (against 87 in 2006-07) and 224 Development Wells (against 178 in 2006-07). This year 90 wells were drilled in offshore, which is highest since Last fourteen years.
Your Company is always focused on quality and new technology. This year, all the development wells in Offshore (57 nos.) were hi-tech wells with a record cycle speed of 1,407 Mtrsl RM (highest since last fourteen years). At the same time, 30 hi-tech wells were drilled in onshore during the year as against 17 in the last fiscal.
Production (Excluding JVs)
Crude oil production during the year (2007-08) was 25.945 Million Tonne (MMT) as against 26.051 MMT in the previous fiscal.
Natural Gas production was 22.334 Billion Cubic Meter (BCM) as against 22.442 BCM in the previous fiscal.
Marginal shortfall in oil (0.4%) and gas (0.48%) production is primarily due to the gas Leakage incident at Balol area of Mehsana and deferment in G1 ft GS-15 project completion.
Gas sales in 2007-08 was 17.822 BCM as compared to 17.989 BCM during 2006-07.
VAP production during the year was 3.257 MMT as against 3.238 MMT in the previous year.
Outlook:
Your Company has set an ambitious outlook for the XI five year plan (2007-12). It has envisaged 3% higher production from its existing mature fields producing for over thirty years. To achieve this target, your company has enhanced its E&P outlay by about 52% for XI plan period compared to X plan period actual expenditure. In the first fiscal of XI five year plan period the result is encouraging as far as drilling, reserve accretion and production are concerned.
Your Company's structured initiatives and planned investment in the area of IOR (Improved Oil Recovery) and FOR (Enhanced Oil Recovery) schemes have already yielded more than 40 MMT of oil and envisages to produce cumulatively 110 MMT by 2030. 12 projects are already complete and 7 are under implementation. The Mumbai High-North Phase-II Redevelopment plan has also been launched.
Your Company is determined to bring new and Marginal fields to production on fast track. Out of 109 marginal fields, 87 fields are already monetized and balance 22 fields are prioritized for development as per the new marginal field policy of the Government.
Human Resources/in industrial Relations:
Within the given mandate, your Company crafted ample welfare measures for its employees. These measures, aimed at retaining talent, helped in restricting attrition that had assumed alarming proportion. In 2007-08, 261 resignation cases were accepted against 361 during 2006-07.
Your Company focuses on maintaining competitive competence of its employees and invests extensively to augment human resource capacity and quality through tailored training and development programmes.
The pay-roll strength as on 31st March, 2008 was 32,996.
Health, Safety & Environment (HSE)
Your Company has adopted integrated QHSE (Quality, Health, Safety & Environment) management systems at its installations and facilities. As on 31st March, 2008 total 471 installations (including operational facilities, offices & colonies) have been certified conforming to international standard requirements. All these installations & facilities have successfully sustained the re-certifications during annual surveillance audits.
Corporate Social Responsibility:
Corporate Social Responsibility (CSR) initiatives of your Company aim to strengthen the societal fabric by promoting education, healthcare, infrastructure development, entrepreneurship in the community, water management etc. 'Project Saraswati' and ONGC-Pura are the landmark initiatives by your Company. It extends its helping hand during Disaster Relief measures, as and when required. Your Company earmarks 0.75% of its Profit After Tax of previous year for its CSR projects.
Cautionary Statement:
These discussions are 'forward looking' within the meaning of the applicable laws and regulations. Actual performance may deviate from the explicit or implicit expectations.
ANNUAL REPORT 2007-2008
DIRECTORS' REPORT
Dear Members,
On behalf of the Board of Directors of your Company, it is my privilege to present the 15th Annual Report and Audited Statement of Accounts for the year ended 31st March, 2008, together with the Auditors' Report and Comments on the Accounts by the Comptroller and Auditor General (C&AG) of India.
At the outset, I must congratulate you as your Company has been the first and only Indian company to be enlisted in Fortune's 'Most Admired Companies 2007'. The 'Fortune Global 500', 2008 list has ranked your Company at 335,34 notches higher than the previous year.
The fiscal 2007-08 was yet another year of growth and success for your Company, which along with other group companies, excelled in all its endeavours; particularly in the core activity of Exploration and Production (E&P) of Crude Oil and Natural Gas. Your Company maintained a Reserve Replacement Ratio (RRR) of more than one, for the fourth consecutive year. During the year, your Company registered RRR at 1.32, with Ultimate reserve accretion (3P reserves) of 63.82 Million Metric Tonnes (MMT) against production of 48.28 MMT of Oil & Oil Equivalent Gas (O+OEG).
Your Company accreted 182.23 MMT of Initial In-place reserves, the highest in last decade and 7% more than the last years accretion of 169.52 MMT, with 33 discoveries (Oil: 13, Gas: 20) spread across Indian sedimentary basins against 22 discoveries during 2006-07. Exploratory performance during ensuing fiscal 2008-09 also started on a high note with 11 discoveries in the first quarter of current fiscal.
During the year, O+OEG production of your Company, including the production from domestic joint ventures and overseas assets, was the highest-ever at 61.85 MMT, 1.84% more than the previous year. ONGC maintained the O+OEG production level at 48.28 MMT, marginally (0.4%) lower than last year, against the natural decline of mature fields. However, the oil and gas production from overseas assets increased by 10.7% and O+OEG production from domestic joint ventures also increased by 11.2%.
The augmenting and enhancing efforts taken up by your Company, through Improved Oil Recovery and Enhanced Oil Recovery (IOR/EOR) schemes, implemented since 2001, have helped to arrest production decline in the mature fields. Twelve IOR/ FOR schemes have been completed and six projects are under
implementation with an investment of Rs. 85,630 million. Out of the 165 marginal fields, 143 are either monetized or under delineation or under monetization on service contract. Remaining 22 fields will be put on production by offer under new marginal field policy. The new field Vasai East discovered in Western Offshore has commenced production from 7th July, 2008.
Your Company launched the second phase of Mumbai High South redevelopment on 1st April, 2008, with an investment of Rs. 63,392 million (USD 1,584 million).
Last year, your Company had opened up ultradeepwater province in the country by making first discovery at a water-depth of 2,841 metres in NELP block KG-DWN-98/2. So far, your Company has made 10 discoveries in the NELP Block KG-DWN-98/2 and 3 (Fig.3) discoveries in the adjoining PEL acreage KGOS-DW4. Appraisal plan for development of these blocks, which was submitted in October, 2007, has now been approved by Director General of Hydrocarbons (DGH). Your Company will develop these fields with an approximate investment of over Rs. 200,000 million (USD 5 billion); production is expected to commence from 2013.
Your Company is also participating with M/s Cairn Energy India Pty. Ltd. (CEIL) for development of Mangala, Aishwariya, Raageshwari and Saraswati fields in Barmer Basin of Rajasthan, in which your Company has 30% share, with estimated investment of USD 450 million (Rs.18,000 million). Your Company has also launched Assam Renewal Project (ARP) for revamping of aged surface facilities of brown fields in the north-eastern state of Assam.
Your Company is setting up a 3,000 bopd 'Mini Refinery' at Gandhar in Gujarat with an estimated investment of Rs. 640 million (USD 16 million) which is expected to be commissioned by August 2009.
The foundation stone for 'Rajiv Gandhi Urja Bhavan' which will house 'ONGC Energy Centre', a state-of-the-art REM centre for holistic research in alternate energy sources beyond hydrocarbons, was laid by Hon'ble Prime Minister Dr. Manmohan Singh on 20th August, 2007 at New Delhi.
Your Company appointed DeGolyer and MacNaughton (DEW) Canada Ltd. during May 2007 for Post Drill Analysis of 579 exploratory wells drilled during) ('Five Year Plan period (2002-07). DEW has submitted its interim report for first 350 wells drilled during 2002-05. Out of these 350 wells, 348 wells have been validated as having satisfactory exploration process.
Government Launched the VII round of the NELP on 1st December, 2007, offering 57 blocks (19 Deep-water, 9 Shallow-water and 29 On-land blocks). As per early indications your Company may get 20 blocks out of 27 blocks for which it submitted bids.
New sources:
Your Company is setting up a 50 MW Wind Farm in Gujarat consisting of 34 wheeling units with an investment of Rs. 3,070 million. Power will be utilized in nearby ONGC installations. All 34 units have been erected, 10 have started wheeling power.
The first CBM development well for CBM was spudded in Parbatpur pilot area on 1st December, 2007 near Bokaro Steel City of Jharkhand; production is likely to commence from April 2009.
Under UCG exploration, data from fifteen different sites were sent to Skochinsky Institute of Mining, Russia for comprehensive study. Based on that study, Vastan Mine in Gujarat has been selected as pilot project. 18 bore holes were drilled to know the extension of lignite which helped in preparing detailed geological maps and Hydro geological studies. Finalization of agency for engineering and construction of UCG pilot is in process.
National Gas Hydrate Core Repository has been established at ONGC's Institute of Engineering and Ocean Technology (IEOT) near Mumbai for long-term preservation of both hydrate and non-hydrate bearing cores under cryogenic and refrigerated conditions.
Your Company, in association with Saha Institute of Nuclear Physics and Department of Science and Technology, has installed India's first pilot plant for Helium recovery from natural gas at Kuthalam, Tamil Nadu.
1. Financial Results:
Your Company scaled a new milestone to record a Net Profit of Rs. 167,016 million (up 6.77% from 85.156,429 million in 2006-07).
During the year under review, your Company registered a gross revenue of Rs. 615,426 million, (up 4.21% from Rs. 590,575 million in year 2006-07) despite sharing under recoveries of Rs. 220,009 million (Rs. 170,239 million in 2006-07) of the Public Sector Oil Marketing Companies by way of discounts in the price of Crude Oil, Domestic LPG and PDS Kerosene (SKO), on administrative instructions of the Government of India.
Summary (Rs. in million) 2007-08 2006-07
Grass Revenue 615,426 590,575Gross Profit 351,912 335,431LessInterest 590 215Exchange variation (1,070) 177Depreciation, Depletion& Amortisation 98,416 93265Impairment (437) 1,730Provision /write offs 2,067 3,342Provision for Taxation(including deferred tax(liability of Rs.8,481 million) 85,330 184,896 80,273 179,002Profit after tax 167,016 156,429AppropriationsInterim Dividend 38,500 38,500Proposed Final Dividend 29,944 27,805Tax on Dividend 11,632 10,125Transfer to General Reserve 86,940 79,999Total 167,016 156,429
2. Dividend
Your Company declared an interim dividend of Rs. 18 per share (180%) in December, 2007. The Board of Directors have now recommended the final dividend of Rs. 14 per share (140%), making the aggregate dividend at Rs.32 per share (320%), against previous year's Rs. 31 per share (310%). The total dividend will absorb Rs. 68,444 million besides Rs. 11,632 million as tax on dividend.
3. Production & Sales
Highlights of production and sales of Crude Oil, Natural Gas and Value-added Products:
Unit Production Sales Value (Rs. in million) 2007-08 2006-07 2007-08 2006-07 2007-08 2006-07
DirectCrude Oil MMT 27.93* 27.94* 24.08 24.42 386,803 372,212Natural Gas BCM 25.12** 24.88** 20.43 20.30 71,780 72,078C2-C3 '000 MT 520 549 520 548 9,291 9,095LPG '000 MT 1035 1023 1037 1033 20,169 14,866Naphtha/ARN '000 MT 1469 1450 1442 1442 43,848 37,907SKO '000 MT 167 155 168 156 3,374 2,827Others 937 654Sub-total 536,202 509,639TradingMotorSpirit '000 KL 232 121 9,159 4,530SKO '000 KL 308 563 7,401 12,926HSD '000 KL 1539 1394 48,608 42,017Sub-total 65,168 59,473Total 601,370 569,112
* includes 1.99 MMT (Previous year 1.89 MMT) from Joint ventures.
** includes of 2.79 BCM (Previous year 2.44 BCM) from Joint ventures
4. Oil & Gas Reserves
ONGC has made voluntary disclosures in respect of Oil & Gas Reserves, conforming to SPE classification 1994 and US Financial Accounting Standards Board (FASB-69). ONGC has added 110.21 Million Metric Tonnes (MMT) of ultimate reserves of oil and oil-equivalent gas (O+OEG) during the year under review from its domestic and overseas assets (OIL).
Ultimate Reserve Accretion O+OEG (in MWT)
Year Domestic Domestic Total Foreign Total Assets JVs Domestic Assets (ONGC's Share) Reserve (OVL's Share) (1) (2) (3)=(1)+(2) (4) (5)=(3)+(4)
2005-06 51,53 0.12 51.65 16.72 68.372006-07 65.56 4.77 70.33 9.96 80.292007-08 63.82 -0.34 63.48 46.73 110.21
5. Statement of Reserve Recognition Accounting:
1. The Concept of Reserve Recognition Accounting attempts to recognize income at the point of discovery of reserves, and seeks to demonstrate the intrinsic strength of an organization with reference to its future earning capacity in terms of current prices for income as well as expenditure. This information is based on the estimated net proved reserves (developed and undeveloped) as determined by the Reserves Estimates Committee.
2. As per FASB-69 on disclosure about Oil and Gas producing activities, publicly traded enterprises that have significant Oil and Gas producing activities are to disclose with complete set of annual financial statements, the following information, considered to be supplemental information:
a) Proved Oil and Gas reserve quantities
b) Capitalized costs relating to Oil and Gas producing activities
c) Cost incurred for property acquisition, exploration and development activities
d) Results of operations for Oil and Gas producing activities
e) A standardized measure of discounted future net cash flows relating to proved Oil and Gas reserve quantities.
3. Your Company has disclosed information in respect of (a) and (d) above in the Annual Financial Statements.
In respect of item (e) above, your Company has made voluntary disclosure on standardized measure of discounted future net cash flows relating to proved Oil and Gas reserves at annexure-b
6. Financial Accounting
The Financial Statements have been prepared in accordance with the Generally Accepted Accounting Principles (GAAP) and in compliance with all applicable Accounting Standards (AS-1 to AS-29) and Successful Efforts Method as per the Guidance Note on Accounting for Oil It Gas Producing Activities issued by The Institute of Chartered Accountants of India (ICAI) and provisions of the Companies Act, 1956.
7. Internal Control System
The Company has well established and efficient internal control system and procedures. Your Company has already implemented SAP R/3 system for integration of various business processes across the organization. The Company also has well defined financial powers of various executives in its Book of Delegated Powers. The Company has in-house Internal Audit Department commensurate with its size. Audit observations are periodically reviewed by the Audit & Ethics Committee of the Board and necessary directions are issued wherever required.
8. Subsidiaries
(i) ONGC Videsh Limited (OVL)
ONGC Videsh Limited (OVL), the wholly-owned subsidiary of your Company engaged in overseas E&P activities, continued to maintain robust growth during 2007-08. It acquired 11 E&P projects in 6 countries during the year.
ONGC Videsh Ltd. (OVL) signed a joint venture agreement with Petroleous de Venezuela SA (PdVSA) on 8th April, 2008 at Caracus to take 40% stake in the San Cristobal oilfield located in Orinoco Heavy Oil belt of Venezuela; PdVSA will hold the remaining 60% stake. The agreement was signed by Mr. R.S.Butola, MD, OVL and Mr. Eleogao Del Pino, MD, PdVSA during the visit of Mr. Murli Deora, Hon'ble Minister of P&NG, G01. Under the agreement OVL and PdVSA will develop the field from its current production level of 20,000 bbl/d to 40,000 bbl/d.
The company now has participation in 38 projects in 18 countries. Of the projects acquired, NEMED Block in Egypt offshore is under appraisal phase; Blocks AD-2, AD-3 and AD-9 in Myanmar offshore; Blocks RC-8, RC-9 and RC-10 in Colombia offshore; Block ES-M-470 and Block SM-1413 in Brazil offshore; MTPN Block in Congo offshore and Block 11-12 in Turkmenistan offshore are under exploration phase. The Turkmenistan Block is held through ONGC Mittal Energy Limited (OMEL), a joint venture of OVL and Mittal Investment Sari.
Out of 38 projects, OVL is operator in 18 projects and joint operator in 2 projects in 11 countries. OVL is currently producing oil and gas from Greater Nile Oil Project and Block 5A in Sudan, Block 6.1 in Vietnam, Al Furat Project in Syria, Sakhalin-I Project in Russia and Mansarovar Energy Project in Colombia. Block BC-10 in Brazil is currently under development with production expected to begin in 2009-10. Block A-1 and A-3 in Myanmar, North Ramadan Block and NEMED in Egypt and Farsi Offshore Block in Iran have discoveries and appraisal work is being carried out. The remaining projects are in exploration phase.
OVL's share in production of oil and oil-equivalent gas (O+OEG), together with its wholly-owned subsidiaries ONGC Nile Ganga B.V. and ONGC Amazon Alaknanda Limited, increased from 7.95 MMTOE to 8.80 MMTOE, up 10.7%. Consolidated gross revenue of OVL increased from Rs. 118,610 million to Rs.169,540 million, up 42.93% and consolidated net profit from Rs. 16,633 million to Rs. 23,971 million, up 44.12%.
Direct Subsidiaries of OVL:
a) ONGC Nile Ganga B.V. (ONGBV):
ONGC Nile Ganga B.V (ONGBV) is engaged in E&P activities in Sudan, Syria and Brazil. ONGBV holds 25% Participating Interest (PI) in Greater Nile Oil Project (GNOP), Sudan; the other partners in this project are National Oil Company (NOC) of China (with 40% PI), a Malaysian NOC (with 30% PI) and a NOC of Sudan (with 5% PI). ONGBV's share in oil production from GNOP was 2.969 MMT during 2007-08. Besides, ONGBV also holds PI in AFPC Syrian producing asset and deepwater discovered Block BC-10 and exploratory Blocks ES-M-470 and Block SM-1413 in Brazil.
b) ONGC Narmada Limited (ONL):
ONGC Narmada Limited (ONL), a wholly-owned subsidiary of OVL is engaged in E&P activities in Nigeria. ONL holds 13.5% PI in deep I'i1x water exploration Block-2 in Nigeria-Sao Tome Et Principe, Joint Development Zone (JDZ). The Chinese NOC, Sinopec is operator with 28.67% PI.
c) ONGC Amazon Alaknanda Limited (OAAL):
ONGC Amazon Alaknanda Limited (ORAL), a wholly-owned subsidiary of OVL incorporated in Bermuda, is engaged in E&P activities and holds stake in E&P projects in Colombia, through Mansarovar Energy Colombia Limited (MECL), a 50:50 JV company with Sinopec of China. MECL is currently producing oil at 24,000 bbls/d. During 2007-08, OVL's share of production was about 0.349 MMT of oil.
Joint Venture of OVL
d) ONGC Mittal Energy Limited (OMEL)
OVL along with Mittal Investments Sari (MIS) promoted ISMEL ONGC Mittal Energy Limited (OMEL), a joint venture company incorporated in Cyprus. OVL and MIS holds 98% shares of OMEL in the ratio of 51(OVL): 49(MIS) with 2% shares held by SBI Capital. OMEL holds PI in the AFPC Syrian Assets through ONGBV, exploration Blocks OPL279 and OPL285 in Nigeria and Block 11-12 in Turkmenistan.
(ii) Mangalore (Refinery & Petrochemicals Limited (MRPL)
Your Company continues to hold 71.62% equity stake in MRPL, which has achieved new heights in excellence in both financial and operational performance during the year.
In view of the improved performance MRPL Board has recommended the dividend of 12%.
MRPL's launched its brand 'HiQ through its first retail outlet at Maddur, Karanataka.
MRPL Refinery was awarded prestigious Jawaharlal Nehru Centenary Award, for Energy conservation in refinery for the year 2006-07, instituted by the Ministry of Petroleum and Natural Gas, for the fourth consecutive year.
MRPL continues to be a major exporter of petroleum products with exports valuing Rs. 111,410 million during 2007-08 which is 41% of total dispatches. MRPL has been granted status of a PremierTrading House by DGFT, Govt. of India.
MRPL and Shell Gas B.V, Netherland entered into an agreement on 5th February, 2008 to forma joint venture company 'Shell MRPL Aviation Fuel and Services Private Limited' for marketing of Aviation Turbine Fuel to both Domestic and International airlines at Indian Airports.
Product supply agreement with STC, Mauritius for export of Petrol, Diesel, Aviation Turbine Fuel and Fuel Oil valuing US$ 2,000 million (approx.) has been renewed for a further period of three years starting from August 2007.
MRPL's Phase III Refinery Project is progressing as per schedule.
MRPL has acquired the Nitrogen manufacturing facilities from Essel Mining Industries Limited (formerly, Hindustan Gas Industries Ltd.), located in the close proximity of refinery at Mangalore, so as to ensure self sufficiency for this critical input.
Joint Ventures of MRPL
Kakinada SEZ Pvt. Ltd. (KSEZ) and Kakinada Refinery and Petrochemicals Pvt. Ltd (KRPL) Considering all circumstances and factors affecting the steering of these two projects, ONGC and MRPL have decided not to continue as equity partners in these two Joint Ventures and have accordingly withdrawn with effect from 23rd June, 2008. ONGC's proposed equity participation, through MRPL, was 46% in KRPL and 26% in KSEZ.
9. Exemption in respect of Annual Report of Subsidiaries and Consolidated Financial Statement:
In terms of approval granted by the Central Government under Section 212(8) of the Companies Act, 1956 copy of the Balance Sheets, Profit and Loss Accounts, Reports of the Board of the Directors and Reports of the Auditors of the Subsidiary Companies have not been attached to the Accounts of the Company. The Company will make these documents/details available upon request by any member of the Company interested in obtaining the same. Annual Reports of MRPL and OVL are available on website www.mrpl.co. in and www.ongcvidesh.com respectively.
In accordance with the Accounting Standard AS-21 on Consolidated Financial Statements read with Accounting Standard AS-23 on Accounting for Investments in Associates and with Accounting Standard AS-27 on Financial Reporting of Interests in Joint Ventures, Audited Consolidated Financial Statements for the year ended 31st March, 2008 of the Company and its subsidiaries form part of the Annual Report and Accounts.
10. Joint Ventures/ Associates
(I) Petronet LNG Ltd. (PLL)
ONGC has 12.5% equity stake in PLL. PLL has started expansion of Dahej LNG terminal to 10.0 MMTPA capacity and also setting up LNG Receiving and Re- gasification Terminal of 5.0 MMTPA at Kochi. The turnover of PLL during 2007-08 is Rs. 65,553 million (previous year Rs. 55,089 million) and net profit is Rs. 4,747 million (previous year Rs. 3,133 million) PLL has declared a dividend of 15% (previous year 12.5%).
(iii) ONGC Tripura Power Company Pvt. Ltd. (GTPC)
Your Company has promoted 'ONGC Tripura Power OTPC Company Pvt. Ltd. '(OTPC) which is setting up a 726.6 MW (363.3x2) Combined Cycle Gas Turbine based Power Generation project . This would facilitate monetization of the idle gas reserves of ONGC in Tripura. ONGC has 50% share in OTPC along with Government of Tripura (0.5%), IL&FS (26%) and balance 23.5% by Financial Institutions (FI) and other investors. Your Company placed Notice of Award on 23rd June, 2008 to M/s BHEL for generation project.
(iii) Pawan Maps HetIcapters Ltd. (PHHL)
Your Company, ONGC, has 21.5% equity stake in PHHL, which provides helicopter support for its offshore operations. PHHL has an operational fleet of 36 helicopters. The PHHL was successful in providing all the 12 Dauphin N Et N3 helicopters fully compliant with AS-4 as per the new contract with ONGC by December 2007. PHHL earned a net profit of Rs.95.2 million in the year 2006-07 (previous year Rs. 473.9 million).
(iv) Petronet MHB Ltd. (PMHBL)
ONGC has equity stake of 28.76% in PMHBL, which owns and operates a pipeline between Mangalore Hassan - Bangalore and provides direct evacuation facility of MRPL products. The company has achieved a throughput of 2.141 MMT which is 50% higher than that in 2006-07. The total revenue of Rs 57,640 million is 48.91% higher as compared to 2006-07. As per audited results for the year 2007-08, the company has made a net profit of Rs. 3.841 million, for the first time since inception.
(v) Dahez SEZ Ltd. (DSL)
Your Company with 23% equity stake along with GIDC (26%) is promoting a Special Economic Zone (SEZ) at Dahej in the coastal Gujarat. SEZ has been formally approved by Ministry of Commerce and Industry and Gazette notification issued. Master Plan for the SEZ has also been finalized. ONGC, as the anchor tenant, is implementing its C2+ extraction plant, the product of which will be utilized as feedstock to OPaL.
(A) ONGC Petro-additions Ltd. (OPaL)
OPaL, an SPV promoted by ONGC, with 26% stake and management control, and GSPC with 5% holding, is implementing a mega petrochemical complex as an anchor industry in Dahej SEZ. The project has been reconfigured according to current market demand-supply dynamics with estimated investment of Rs.124,400 million. Contract for site infrastructure development has already been awarded. Tenders for Dual Feed Cracker unit and Project Management Consultancy are under finalization. Project office has been established at Vadodara on 28th June, 2008.
(vii) Mangalore SEL Ltd. (MSEZ)
MSEZ was incorporated to develop the Special Economic Zone at Mangalore through a SPV As per the proposed equity structure ONGC will hold 26%, KIADB 23% and IL&FS + KCCI 51%. Formal approval for Sector Specific SEZ (Petro-Chemical) has been received from Ministry of Commerce and Industry on 6th November, 2007. Nearly 2,262 acres of land is under acquisition
(viii) ONGC Managalore Petrochemicals Ltd. (OMPL)
An aromatic petrochemical complex is being set up for 0.92 MMTPA Para-xylene and 0.14 MMTPA Benzene manufacturing facilities based on MRPUs aromatic rich Naphtha. The project is being implemented through a SPV - ONGC Mangalore Petrochemicals Ltd. (OMPL) with following equity participation: ONGC 46%, MRPL 3% and balance from Banks, Financial institutions #c strategic partners. 454 acres of land has been allotted by Mangalore Special Economic Zone. Site grading job is in progress.
(ix) ONGC TERI Biotech Ltd. (OTBL)
ONGC formed a Joint Venture in association with The Energy Research Institute (TERI) for addressing the requirement of Bioremediation, Microbial Enhanced Oil Recovery and prevention of wax deposition in tubular for its E&P operations. The JV has been incorporated on 26th March, 2007.
11. Other Business initiatives:
a. Memorandum of Understanding:
ONGC signed various MOUs during the year for cooperation and collaboration in various areas of activities as follows:
i. MoU with Institute for Energy Technology, (IFE) Norway on 11th March, 2008 To emphasizes Indo-Norwegian collaboration in areas of Trace Study Multiphase Flow and Corrosion Studies.
ii. MoU with HPCL on 18th July, 2007
Forsale of products and for sharing of HPCL's marketing infrastructure predominantly for MRPL products.
iii. MoU with GAIL on 24th July, 2007
For co-operation in purchase of gas from new sources to be developed by ONGC in KG & Mahanadi Basins and its transportation, distribution It marketing.
iv. MoU with Ashok Leyland Project Services Ltd (ALPS) on 4th November, 2008 For sourcing of LNG on long term basis at a competitive price and pursuing integrated E&P & downstream opportunities.
v. MoU with Shell on 23rd January, 2008
For co-operation in various areas of exploration &t production hydrocarbon, coal gasification, oil products, HSE, technology and business consulting services.
b. C2-C3-C4 Extracti an Plant
ONGC is setting up a C2-C3-C4 (Ethane, Propane and Butane) Extraction Plant at Dahej using LNG from PLL as feed stock. Overall progress of the project is 89.07% as on 31st March, 2008. The project is expected to be commissioned in 2009.
12. Information Technology:
Entire 3D seismic data and original logs of more than 9,000 wells were computerized under Project EPINET. Supervisory Control and Data Acquisition (SCADA) is being implemented covering entire production and drilling facilities.
The e-procurement process along with reverse auctioning has gone live and centralised electronic processing of vendors payment has been started for payment through National Electronic Fund Transfer (NEFT). All Welfare Trusts of your Company went on-line.
For Providing Urban amenities in Rural Areas (PURA), ONGC has plans to set up a PURA in each of the states where it operates. The picture shows a village in north-eastern state of Tripura, where the first PURA is being set up by ONGC
13. Health, Safety and Environment (HSE)
HSE occupies an elevated position in the business agenda of your Company hile all work centres are certified with ISO 9001, OHSAS 18001 and ISO 14001, extensive training is provided to the work force for ensuring the maintenance of HSE practices
Your Company has undertaken Mangrove plantation at Gulf of Khambat and implemented Bioremediation of oily sludge at various onshore installations.
Your Company has renewed 'Participant Agreement' with OSRL (Oil Spill Response and East Asia Response Limited) to combat major oil spills.
14. Clean Development Mechanism (CDM)
Your Company has formalized its corporate policy on Climate Change and Sustainability, thereby becoming, once again the first PSU to have this policy. It has got registered four CDM projects with United Nations Framework Convention on Climate Change (UNFCCC), with expected annual Certified Emission Reductions (CERs) of 119,865.19 more CDM projects are identified for development.
Your Company has signed an MoU with the United States Environment Protection Agency (US EPA) for identifying and capturing fugitive methane emission from various operations. It has also entered into an MoU with Statoil Hydro, Norway to develop Carbon Dioxide Capture and Sequestration (CCS), CDM and Carbon Management projects. Your Company has joined the global initiative on Carbon Disclosure Project (CDP) giving it access to the technologies adapted by different signatory companies in achieving sustainable development.
15. Human Resource
Your Company believes that its human resource is its greatest wealth. Therefore, it is the endeavour of your Company to nurture and develop this wealth.
Your Company continues to extend several welfare benefits to its employees and their dependants by way of comprehensive medical care, education, housing, and social security. During the year 2007-08 your Company implemented 84 new and revised welfare polices for its employees.
During the year, 60 employees were released under the Voluntary Retirement Scheme.
16. Human Resource Accounting
The organisational knowledge in your Company is the sum total of information and experience in the minds of our people, well as the cumulative knowledge in the organisational systems. This is a priceless asset, and therefore, beyond the mechanics of accounting.
There are, however, methods to measure the potential ability of all employees across the ranks, to produce value out of their knowledge and skills. The standard 'lev and Schwarte' model equates the anticipated future earnings as the surrogate of the 'Walue' of an employee. This model has been used as per the details given in annexure-d.
Based on these assumptions, your Company's Human Resource has been valued at Rs. 290,528.9 million as on 31st March, 2008.
These are unaudited figures.
17. Welfare Trusts
Employees Contributory Provident Fund (ECPF) Trust, managing Provident Fund accounts of employees of your Company, has settled 1,639 cases of final withdrawal and 2,029 cases for non-refundable withdrawals during the year.
The Post Retirement Benefit Scheme (PRBS) Trust of your Company, set up to provide financial security to superannuating employees separating on or after 01.04.2007, is to enhance the pension amount by almost 45%.
The Composite Social Security Scheme (CSSS) formulated by your Company provides an assured ex-gratia payment in the event of unfortunate death or permanent disability of an employee in service. Families of deceased employees get a financial assistance under the scheme ranging between Rs.1.5 million to Rs. 2.0 million. During the year, 61 bereaved families were supported through this Scheme.
ONGC Sahayog Trust has been created for welfare of secondary workforce or their heirs, who are in financial distress. Approximately Rs. one million was disbursed during 2007-08 amongst 23 such beneficiaries.
Your Company implemented the Employees Pension Scheme (EPS-1995) retrospectively w.e.f. 16th November, 1995 and remitted Rs. 215.09 million as employer's contribution.
Your Company complies with the Government guidelines on reservation for SC and ST The percentage of SC and ST employees, as on 1st April, 2008 was 15.9% and 8.4% respectively. During the year 2007-08, Rs. 12.50 million was spent for welfare of the SC and ST communities.
18. Industrial Relations
During the year, harmonious industrial relations were maintained in your Company and no man days were lost due to internal factors.
19. Grievance Management System
Your Company provides an easily accessible machinery to the employees for redressal of their grievances, either through informal channel (open hearing day) or through formal channel. All Key Executives of your Company have designated a publicized time slot thrice a week to meet public representatives for speedy redressal of their grievances.
20. Medical Services
Your Company has a comprehensive health care scheme for all serving employees and their dependants. Retired employees and their spouse are availing Company's medical facilities. In addition serving employees of CISF and KV (along with their dependents), posted at he Company's work centres are eligible for the Company's medical facilities.
21. Human Resource Development (HRD)
Many HRD initiatives were taken like; comprehensive rew of the performance incentive scheme, skill mapping for various disciplines. Assessment and Development Centre workshops for Surface Managers, Block Managers and Sub-surface Managers.
During the year, ONGC Academy organised 242 training programmes for 7,427 executives (86,840 training days). The Regional Training Institutes conducted 243 training programmes for 4,496 non-executives. Two unique qualification upgradation programs, one for Diploma holders (Unnati Prayas) and the other for Degree holders (Super Unnati Prayas) have been continuing.
An intense Leadership Development Programme for senior level (E7) Executives was launched from 17th January, 2008 at ISB Hyderabad.
The details of awards and recognitions to your Company are placed at Annexure-e.
22. Sports
Around 150 sportspersons including 95 international level performers are on the rolls of ONGC representing your Company in 15 different games.
Your Company's basketball team won the National Federation Cup.
Your Company hosted the ONGC Near Nehru Cup International Invitational Tournament during the year.
Chess Queen Koneru Humpy was conferred with Padmashri and Badminton ace Chetan Anand received the Arjuna Award. Reigning World Billiards Champion Pankaj Advani retained his title after an 'all ONGC Final' in which Dhruv Sietwala was the Runner-up.
Arjuna Awardee Virender Sehwag became the first Indian and third cricketer to score two triple Test centuries.
Your Company won the Petroleum Minister's PSPB Trophy for Overall Best Performance in 2007-08 for the fifth year in succession.
23. Corporate Social Responsibility (CSR)
ONGC is spearheading the United Nations Global Compact - World's biggest corporate citizenship initiative to bring Industry, UN bodies, NGOs, Civil societies and corporates on the same platform.
During the year, your Company has undertaken various CSR projects at its work centres and Corporate level.
24. Official Language
During the year, a series of initiatives were undertaken for promotion and propagation of Rajbhasha. Literary works in official language continued to be financially supported by your Company. In addition, all inductees at the executive level were exposed to the Official Language Policy of the Govt. of India.
25. Right to Information Act, 2405 (RTI Act)
An appropriate mechanism has been set up across the company in line with the RTI Act. During the year, 318 applications were received under RTI Act, out of which information has been supplied to 283 applicants, 3 cases have been transferred to other public authorities and 32 requests have been rejected. In addition, 90 first appeals were filed and 17 appeals were filed before Central Information Commission.
26. Women Empowerment
Women employees constituted about 5% of ONGC's workforce. Various programmes for empowerment and development, including programme on gender sensitization were organized.
27. Directors' Responsibility Statement:
Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, with respect to Directors' Responsibility Statement, it is hereby confirmed that:
(i) In the preparation of the Annual Accounts, the applicable accounting standards have been followed and there are no material departures from the same;
(ii) The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fairview of the state of affairs of the Company as at 31st March, 2008 and of the profit of the Company for the year ended on that date; (iii) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and
(iv) The Directors have prepared the annual accounts of the Company on a 'going concern' basis.
28. Corporate Governance
A report on Corporate Governance as stipulated as per Clause 49 of the Listing Agreement, together with Management Discussion and Analysis Report supported by a certificate from the Company's Auditors confirming compliance of conditions, form part of this Report.
Your Company, acknowledging its corporate responsibility, has voluntarily obtained a 'Secretarial Compliance Report' for the financial year ended 31st March, 2008 from M/s A.N. Kukreja & Co., Company Secretaries in whole-time practice, which is annexed to this Report.
In line with global practices, your Company has made all information, required by investors, available on the Company's corporate website www.ongcindia.com.
29. Statutory Disclosures
Section 274(1)(g) of the Companies Act, 1956 is not applicable to the Government Companies. Your Directors have made necessary disclosures, as required under various provisions of the Act and Clause 49 of the Listing Agreement. The information required under section 217(1)(e) of the Act read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, as amended is annexed as annexure-a.
None of the employees of your Company is drawing remuneration exceeding the limits laid down under provisions of section 217(2A) of the Act read with Companies (Particulars of Employees) Rules, 1975 as amended.
30. Auditors
The Statutory Auditors of your Company are appointed by the Comptroller & Auditor General of India (CRAG). M/s K K Soni & Co., M/s S C Ajmera & Co., M/s PSD & Associates, M/s. Padmanabhan Ramani & Ramanujam and M/s Singhi & Co. Chartered Accountants were appointed as joint Statutory Auditors for the financial year 2007-08. There is no qualification in the Statutory Auditors' Report.
The review by CRAG forms part of this report as annexure-c.
Notes on Accounts referred to in the Auditors' Report are self-explanatory and therefore do not call for any further comments.
Cost Audit:
Pursuant to the direction of the Central Government for Audit of Cost Accounts, your Company appointed Cost Accountants, for auditing the cost accounts of your Company for the year ended 31st March, 2008.
31. Directors
Pursuant to the provisions of Section 260 of the Companies Act, 1956 and Clause 104(1) of Articles of Association of the Company, Dr. R.K.Pachauri, Shri V R Singh, Shri R K. Choudhury and Dr. Bakul H. Dholakia, retire by rotation at this AGM and being eligible offer themselves for reappointment.
Shri D. K. Sarraf was appointed as an Additional Director and designated as Director (Finance) effective from 27th December, 2007 and holds office up to the 15th Annual General Meeting and in respect of whom, the Company has received a notice in writing from a member pursuant to the provisions of Section 257 of the Companies Act, 1956, proposing his name for appointment as a Director of the Company, subject to retirement by rotation under the Articles of Association of the Company.
Brief resume of the Directors seeking re-appointment, together with the nature of their expertise in specific functional areas and names of the companies in which they hold the directorship, number of shares held and the membership/ chairmanship of committees of the Board, as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges are given in notice convening the 15th Annual General Meeting of the Company, and form part of the Annual Report.
32. Acknowledgement
Your Directors acknowledge the involvement of the Government of India in the Ministry of Petroleum and Natural Gas and the support from the Ministry of Finance, the Reserve Bank of India and other agencies in Central and State Governments.
Your Directors recognise all shareholders, business partners, and members of the ONGC Family for their sustained support.
Your Directors wish to place on record their sincere appreciation for the dedicated contribution by the ONGCians in the remarkable performance and impressive results of your Company.
On behalf of the Board of Directors
New Delhi (R.S. Sharma)22nd July, 2008 Chairman & Managing Director
A. Energy Conservation
Annexure-a
1. Energy Conservation Measures taken
Your Company always gives emphasis to energy conservation measures and efficient use of energy in its entire venture of operation. Executive Committee in its 307th meeting had approved the training of ONGC Executives on Energy conservation techniques by PCRA.
Your Company has replaced old type filament lamps with CFL in most of its work centres and institutes. Old fixtures have also been replaced with modern energy efficient fittings. It has installed fuel efficient K-50 emergency generator engines, soft starter at E-1400-19 rig for motors above 30 HP, auto transformer starter for 100 HP motor at CW#1, bi-fuel (CBM gas & diesel) kit in 200 KVA Gen set in Bokaro, energy efficient top drive system on all offshore rigs.
Your Company has also installed solar water heaters at many work centres, solar panels at well heads at Bokar- Jharkhand and has started installing the 50 MW Wind power project at Gujarat
2. Energy Conservation measures taken earlier which are contributing to Energy savings
Your Company's proactive steps in energy conservation measures are paying off. Waste heat recovery systems, turbo-expanders, natural gas geysers are successfully running at various installations. Reduced loss of thermal energy through sustained maintenance of steam traps and inter-fuel substitutions are paying off.
3. Impact of Measures on reduction of energy consumption and consequent impact on the cost of production of the goods.
Above measures taken by your Company have resulted in reduction of significant quantity of fuel consumption (HSD, Natural gas and electricity) valuing about Rs.1, 570 million during the financial year 2007-08.
B. Research and Development
Specific areas in which R & D was carried out
Your Company has always focussed on technology-driven growth. Its eleven institutes spread over the country incessantly explore the latest technologies and alternative means to the ever surfacing challenges of E&P industry.
In Geology and Geophysics front, hybrid inversion of the pre-stack seismic reflection data with optimized source wavelet, reservoir modeling for enhanced oil recovery using fractals and 4D-4C Seismic, study of microbial, palynological and geochemical proxies for biogenic gas exploration, shale gas desorption studies on Cambay Basin and South Karanpura sub-Basin and study for prediction of oil production rate using the low frequency behaviour of the reflection coefficient from seismic data are among the prominent areas of R&D activities.
In microbial front, ONGC has undertaken studying paraffin control using indigenously developed PDS-10 bacterial consortium, improving flow efficiency in flow lines using FIB-19 bacterial system, enhancing oil recovery through microbial system for high temperature reservoirs (900C), implementing MEOR technique using S2 bacterial consortium for improving production from stripper wells. ONGC Energy Centre has outsourced projects to Indian biotechnical institutions (TERI Delhi, BHU Varanasi, ARI Pune, MCRC Chennai) for research and developing selective microbes.
You Company, ONGC, has also undertaken development of Visco-elastic surfactant based self-diverting acid (VSDA), a polymer free surfactant based acid system, for stimulation of heterogeneous / multilayered carbonate reservoirs, fracturing fluid for high temperature (1490C) reservoirs, venturi type surface chokes for stabilized flow in gas wells, water shut-off technique for gravel packed wells using cross linking polymer and using sodium thio-sulphate instead of thin-urea for water shut-off formulation (for PDO, Oman).
ONGC has also undertaken research on formulating polyamines enhanced High Performance Water based Mud (HPWBM) systems, evaluating the suitability of ordinary Portland Non API Cements for use in oil well cementation and formulating a new Low Toxic Mineral Oil (LTMO) package as a substitute for Synthetic Oil base mud.
In the new energy source front, ONGC Energy Centre has established a research project with leading research institutions like IIT, Delhi, UICT, Mumbai and CECRI, Karaikudi for conducting research on thermochemical processes for water decomposition. It has also undertaken a project to examine the archived well logs to identify potential uranium rich zones and generate geological models to predict uranium occurrence. Designing of leaching agents for in-situ leaching of uranium from sedimentary rocks is also planned.
7. Benefits derived as a result of the R & D projects:
Critical evaluation of all the geoscientific data coupled with over pressure modeling in Kavitam and surrounding area of Krishna-Godavari basin clearly indicate ample scope for exploration and exploitation of two major unconventional gas systems. Bacterial activity zonation - Aerobic, Sulfate reductive and Anaerobic zones have been established in KG on land and offshore area. The results of shale gas desoprtion study has led to evolving a methodology for deliberate search for hydrocarbons within basement rocks. Stochastic Inversion approach has demonstrated the efficacy of the technique in delineating thin pay sands. Various works on microbial front is helping in better flow management and environment friendly sludge disposal.
R&D in the area of drilling by your Company has come out with ceramic microspheres based high performance light weight cement slurry, cross linked stiff rubbery gel and synthetic fiber cement slurry for loss control solutions.
Application of selective dispersant and solvent that has been implemented in four wells of Heera field and one well of MH resulting in an additional oil gain of about 201 BOPD. Residue free Visco-elastic surfactant based self-diverting acid (VSDA) implemented in six wells of Heera field gaining about 714 BOPD. Formulation Et technique developed for Multistage Acid Frac job has been implemented in seven wells of Heera Field gaining about 701 BOPD. Thio-sulfate based water shut-off formulation was applied in three wells of PDO, Oman.
Application of cross linked biopolymer gel system for limiting water production in gravel packed well of Mehsana field to avoid deployment of work over rig resulted in good savings.
3. Future Plan of Action
You Company has plan to induct Low Frequency Acoustic Passive Seismic DHI (IPDS) technology for direct detection of hydrocarbons using low frequency acoustic waves, passive seismic tomography in Frontier Basin for providing a detailed 3-D seismic velocity and Poisson ratio model of upper few km of the crust. Plans are there for developing software for Seismic Imaging of Oil Production rates.
ONGC has developed polymer gel formulations for Nandasan, North Kadi fields of Mehsana and L-II and L -III reservoirs of Mumbai High Asset. The process for field implementation of findings is planned to be undertaken soon. Plan is also afoot for identifying suitable chemical additive for the flow assurance of problematic crude oil belonging to Gopavaram field, Rahjamundary and Sobhasan field, Mehsana.
Two REED projects on microbial front are being taken up; microbial conversion of heavy oil to methane gas and investigations on biogenic gas source and entrapment styles in Krishna-Godavari Basin.
In drilling front, ONGC has plan to undertake study of managed pressure drilling and its application, development and evaluation of suitable enzymatic breaker and a non acidic precursor formulation for effective clean up of filter cake, optimization of chemical composition of PHPA mud system with respect to Potassium chloride and amine based high performance water base mud system to stabilize troublesome BCS and Kopili shale.
Field trials HGS based drilling fluid at Mumbai High, high temperature polymeric drilling fluid for HTHP wells of KG Asset, mud loss pill in Mumbai Western offshore and amine based high performance water based mud system are also planned.
In production front, application of high temperature frac-fluid formulation in hydro- frac jobs in high temperature reservoir of GS-3A sand of Gandhar field to enhance the productivity is planned. It is also planned to develop suitable fracturing fluid for high temperature (165 degree Cendigrade) reservoirs, implement multistage acid fracturing in low permeable wells for improvement in productivity and undertake study on gas exploitation from isolated gas pools.
Your Company has also plan for undertaking study on application of composite materials for various useful purposes at offshore installations, gas hydrate induced corrosion, analysis and design of Deep-water foundation and riser systems, developing Electro-less Nickel Phosphorous (ENP) coating and many other projects related to deep-water, gas hydrates and offshore structural engineering.
4. Technology Absorption and Adaptation
ONGC has absorbed and adapted quite a number of new technologies. Structural Geology Software by M/S Midland Valley Exploration (MVE), 3D Basin Modelling technology - the PetroMod Software System and Petrobank Master Data Store (MDS) have helped in better data interpretation and storage. A new state-ofthe-art data acquisition system with 24 bit delta sigma technology and Multi-component seismic survey, 3D-3C technology, inducted in A&AA Basin area are adding value in data acquisition. SAR technology for imaging surface oil seeps that originate by slow leakage from oil and gas-filled traps has also been adapted for faster information gathering on prospective areas.
A Rapid Solvent Extraction Unit (Soxtherm System) for quick and efficient extraction of bitumen and removal of polyglycol contamination from sedimentary rock samples for detailed geochemical evaluation has been inducted.
In the area of Drilling, in addition to already existing hi-technologies, two new technologies, Twister technology and Extended Reach Technology (ERT), have been added.
5. Cailaborative projects with Foreign Institutes / Domain Expertsl MoU
Following collaborations and collaborative projects are noteworthy during the preceding year:
* Heads of Agreement signed with Petrobras for swapping of interests in deepwater blocks in India and Brazil on 4th May, 2007.
* Board accorded approval for assignment of 30% PI in block KG-DWN-98/4 and 25% in MN-DWN-2002/2 to BG subject to G01 approval.
* Engaged Dr. Ben & Law Consultant, USA, for Basin Center Gas and Shale gas.
* Dr. C. D. Johnston seismic interpreter hired for integrated study of Mahanadi Offshore basin.
* Engagement of Dr. G. Keller for study of subsurface samples for KT boundary sediments of KG basin.
* Participation of ONGC as sponsor in developing Action Learning Plans (ALPS) on Exploration topics with IHRDC, Boston, USA.
* Membership of Fold Fault Research Project (FRP) consortium, University of Calgary, with the objective of availing expertise in seismic imaging in structurally complex areas.
* A Geophysics SIG being formed under Energistics to promote collaborative development and improvement of industry geophysical standards.
* A research agreement has been signed between Royal Holloway and Bedford New College, University of London and ONGC for their collaborative program between the Fault Dynamics Research Group at Royal Holloway University of London and ten other sponsoring E&P companies like BP, Shell, Statoil, PDVSA etc. The outcome of the project will enhance the interpretation skills, strengthen the research capability and wider access to the international talent pools.
* Collaborative research projects undertaken with UPG Romania for outer Himalayan belt.
* Collaborative research project with University of California, Utah on Ganga basin.
* Collaboration with University of New South Wales, Australia - for establishment of micro CT scan centre.
* Long term collaboration with University of Calgary, Canada for participation, maintenance and service of High Pressure Air Injection set-up for studying FOR processes in heavy, medium and light oil reservoirs.
Collaboration with TERI, New Delhi for isolation, identification and development of methanogens for in-situ generation of methane from coal seams and for Microbial system for improving flow efficiency of oil in surface flow lines.
A collaborative job was taken up with MIS IKON Sciences, UK to determine a method to delineate thin pay sands in Tapti-Daman area which otherwise could not be mapped through conventional seismic techniques.
An MOU was signed for the collaborative project with C-DAC, Pune on 'Hybrid Inversion of the Prestack Seismic Reflection Data with Optimized Source Wavelet.
Strategic alliance was entered into M/s Canoro Resources Ltd for carrying out exploration and development activities in the northeast.
A long term technical consultancy for Structural Geology Modelling is being taken up with Midland Valley Exploration for 3 years at the cost of 42.7 million.
Pilot project for 4C-4D study in Vasai East for using fractal theory under MOU signed between NGRI, NTNU (Norwegian University of Science & Technology), Norway and ONGC.
MOU with MIS Fugro Geoscience India Private Limited (FGIPL) was signed for alliances in the areas of airborne geophysical surveys, seismic API, reservoir characterization, data solution and setting of Joint study centre (HUB).
MOU with M/s Petroleum Geo-Services ASA (PGS), Oslo, Norway for gaining access to a whole range of seismic solutions and services which are unique and represent the cutting edge of the technology, management processes and unique services like HD3D., Multi-Transient EM, PGS Megasurveys, Ramform offshore Seismic survey Vessel Design and Building, Fiber Optic Technology and setting up of Joint study centre.
MOU was signed with global oil major British Petroleum (Alpha) Limited to collaborate in Exploration 8t Production (E&P) business in India and abroad, which includes sharing of knowledge in Coal Bed Methane (CBM) and Deepwater exploration.
ONGC signed MOU with Norsk Hydro in the area of offshore exploration, development of Vasai field and KG-98/2 block.
ONGC has entered into an MOU with M/s Rocksource ASA, of Norway on for cooperation in E&P sector on Indian and international projects which include the use of Rocksource EM technology for exploration prospect evaluation.
MOU was signed with M/s MOL Hungarian Oil and Gas for alliance in hydrocarbon sector has been signed. Also approved assignment of 35% PI in HF-ONN-2001 / 1 block.
The ONGC Energy Centre has entered into a MOU with BARC to research thermochemical processes for water decomposition.
ONGC has signed an Agreement of Collaboration (AOC) with Skochinsky Institute of Mining (SIMNMRC), on 25th November, 2004 for Underground Coal Gasification.
a. Information Regarding Imported Technology:
Information Regarding Imported Technology (Imported during the last five years from the beginning of the Financial Year)
Technology Imported Year of Import
(i) 3D Integrated Quantitative Inversion & Modelling 2003-04(My Bench software from M/S Jason Geosystems)
* Network Enhancement Gigabit
* Two suits of Additional Licenses for G & G application of M/s Landmark.
* 18 TB RAID 5 Storage system, N/W & RAM Upgradation of Origin 2000server, Hard disk for octane workstations for processing and & 5 TB
* RAID 1 Disk for INTEG.
* RCCFA (Reservoir Condition Core Flow Apparatus).
* Fully automated capillary pressure and resistivity system.
* Mercury free PVT package.
* SEM with EDX system, model 6460 LV
* SGI Origin 300 - 4 CPU Machine + Octane 2.
* Network Access System (NAS).
* Automated LTO Backup System.
* New Layer 3 Switch for Network Upgradation.
* Forgas Software.
* PAL/ RAVE/ FZAP/ RFB/ Openvision and EMERGE - Softwarefor Enhancing 2D/ 3D Interpretation and Reservoir Characterisation.
* 3 Additional Licenses for Open Works of M/s Landmark Graphics.
* 1 Additional License for ZMAP (Mapping) of Landmark Graphics.
(ii) 8 CPU based P690 server and 3590E tape drive with Robotic 2004-05tape library - up-gradation of Petrobank server.
* SUN Fire 15K Unified interpretation Data server,
* 30 SUN Blade150 X Terminals, one SUN Blade 2000 & one SUN Blade 2500,
* GEOPROBE software from M/s LANDMARK Graphics.
* 4 Suites of Licenses from M/s Landmark Graphics.
* SGI-350 server and SGI TEZERO workstation OS-IRIX 6.5with LANDMARK application software (Openworks,
* Seisworks 2D & 3D and Earth Cube)
* Stand Alone System (96 CPU) Regetta with time and depth domain processing software 'GEOPDEPTH'.
* Stand Alone System (32 CPU) Regetta with time and depth domainprocessing software 'GEODEPTH'.
* 64CPU cluster system having 4TB disk space and time anddepth processing software for MV Sagar Sandhani.
* 10 Nos of 408-UL seismic data acquisition systems.
* 17 Field processing units for 3D field crew to monitor online data quality.
* DGPS-RTK Differential Global Positioning System for accurate positioning in topographic surveys.
(iii) * 'StrataBug' software for Bio-stratigraphy. 2005-06 * Log data processing software - GEOFRAME containing ELAN PLUS,dip-meter, image processing and interpretation package along with hardware.
* State of Art digital micro gravitymeter, Proton Precessionmagnetometer together with DGPS, Total station and Auto levelfor topographical survey to meet the requirements of precision GM survey.
* ISO Prime GC-IRMS
* Sun servers and work-stations for EPINET(Exploration Et Production Information Network)
* Suit of 2D/3D Move Software of Mid land valley
* Three Numbers PC based software from Geographix.
* Geosec2D Paradigm software installed in F15K server
* Configured five sun blade 150 systems with PCI cards andinstalled windows XP so as to work both as workstation and PC.
* IBM P690 (8CPU) Petrobank server upgraded to 32 CPUfor supplementing seismic data processing
* 3 No's of Mobile Processing Units (MPU) for reducing API cycle time.
PC based Seismic Interpretation system with matching hardware and software.
* High temperature anaerobic bio-reactor.
* Microscope with image analyser.
* Refrigerated centrifuge.
* Incubated shaker.
* High temperature incubator.
* High precision metering pump.
* End Face grinder.
(iv) Data Station (DASTA - 720) 2006-07
* GV Isoprime Continuous Flow Isotope Ratio Mass Spectrometry (CF-IRMS)
* Varian CP3800 Natural Gas Analyzer
* GC-MS-MS(Varian)
* Latest releases of Landmark / Hampson Russell / Jason /
* GeoQuest Interpretation Software installed as part of regular M&S.
* Geo-Vision Centre (Virtual Reality Centre) with SGI Onyx 3900 Server
* (16 CPU, 64 GB RAM) installed for 3 Pipe, Curved screen, immersive volume visualization using the software from M/s Paradigm.
* Petrel Suite of Software along with Interactive Petrophysics from M/s GeoQuest Systems Installed.
* Latest release of Solaris Operating System version 10 installed and configured for future migration of Landmark Application Software.
* Netvault Backup Software for Lanfree / SAN backup installed.
* ZFS (Zeta Byte file system) was created on one SUN machine with Solaris 10 for performance evaluation with respect to existing UFS file system.
* Biglron Foundry Gigabit Ethernet switch upgraded to 120 gigabit fiber ports along with redundant power module to provide seamless gigabit network connectivity to all servers and clients throughout GEOPIC.
* EPOS3SE upgraded to RFC (Rock & Fluid Canvas)
* Q - Marine. Sea bed logging.
* GX Technology.
* Digital Multilevel Vertical seismic profiling (VSP).
* Air borne Electromagnetic Survey.
* Multi Transient Electro Magnetic (MTEM) technique.
* Virtual Drilling Technology.
(v) Rapid Solvent Extraction Unit (Soxtherm System). 2007-08
* Petrobank Master Data Store (MDS), from M/S HaRiburton
* Offshore Services Inc. - a multi-client solution for the management of E&P technical data.
* 64 CPUs SGI ALTIX machine.
* 48 node IBM PC Cluster system with dual CPU per node equipped with Geocluster 4.1 application software of M/S CGG.
* 272 node IBM PC Cluster system with dual CPU per node equipped with OMEGA application software of M/S Western Geco
* Corporate Licensing of Interpretation software from
* M/s Hampson Russet, M/s Landmark, M/s Geoquest and M/s Paradigm.
* CGG Geocluster application software for processing.
* WGC Omega: application software for processing.
* StatMod MC and EarthMod FT modules added to Fugro-Jason's
* MyBench software suite.
* WD / Geosteering with Laterolog tool.
* Compact combo LWD tool.
* FPWD- Formation Pressure While Drilling tool.
* 'Air Injection Laboratory' for identifying candidate reservoirs for air injection as a part of FOR efforts.
* Cluster Computing capabilities have been established,which will reduce significant run-time of various G&G applications and reservoir simulation processes.
* Four licenses for G&G modules (Open Works-2,SeisWorks-1 and StratWorks-1 of M/s Landmark Graphic Corporation).
* Three licenses for Reservoir Simulation (Model Builder-3 ofM/s Computer Modeling Group Limited). * PC Cluster technology, both Hardware and Software,for seismic data processing.
* 3D - 3C Multi-Component Seismic Survey.
* Four numbers of State-of-the-art multi component digital VSP equipment.
* 14 new state-of-art data acquisition system with 24 bit delta sigma technology.
B. Has the technology been fully absorbed? Yes
C. If not fully absorbed, areas where this has not taken place, reasons thereof, and future plans of action Not applicable
7. Expenditure on Research & Development
(Rs. in million)Sr. Heads 2007-08 2006-07 No.
1 Capital 93.42 482.712 Recurring 1,753.32 863.563 Total REM Expenditure 1,846.74 1,346.274 Total R&D Expenditure as a percentage of Total Turnover, 0.30% 0.23%
8. Information on Foreign Exchange Earnings and Outgo:
(Rs. in million)Sr. Heads 2007-08 2006-07No.
1 Foreign Exchange Earnings 37,947.22 29,906.562 Foreign Exchange Outgo 74,009.98 87,761.69
Annexure-b
Statement of reserve recognition accounting:
Standardised measure of Discounted Future Net Cash Flows relating to Proved Oil and Gas Reserve quantities as on 31st March, 2008.
(Rs. in million)
Particulars Gross Value as at Present value (Discounted at 10%) as at
31st March 31st March 31st March 31st March 2008 2007 2008 2007Revenuesoil 6,596,884.02 6,104,400.92 3,060,469.75 3,039,324.43Gas 1,122,791.68 1,089,576.71 490,299.24 521,645.01Total Revenues 7,719,675.70 7,193,977.63 3,550,768.99 3,560,969.44CostsOperating, Selling & General 3,096,451.55 3,035,075.19 1,422,352.50 1,501,831.31Corporate Tax 1,030,614.89 1,025,459.00 474,884.82 488,610.98Sub-total 4,127 066.44 4,060,534.19 1,897,237.32 1,990,442.29Evaluated Cost of Acquisition of Assets, Developmentand Abandonmenta) Assets 755,244.21 369,623.75 406,247.75 276,278.43b) Development 261,147.88 179,031.55 167,629.32 131,176.02c) Abandonment 149,457.70 169,632.50 1,936.71 2,113.12Sub-total 1,165,849.79 718,287.80 575,813.78 409,567.57Total Cost 5,292,916.23 4,778,821.99 2,473,051.10 2,400,009.86Net future earnings fromProved Reserves 2,426,759.47 2,415,155.64 1,077,717.89 1,160,959.58
Notes:
1) The Revenues on account of crude oil and gas have been worked out on the basis of average price for the year 2007-08. The average price for crude oil is net of Subsidy Discount.
2) Expenditure on Development, Acquisition of capital assets, Abandonment costs and Operating Expenditure have been considered at current costs i.e as on on 31st March, 2008. Taxes and Levies have been considered at prevailing rates as on 31st March, 2008.
3) The reserves have been estimated by ONGC's Reserve Estimates Committee following the standard international reservoir engineering practices.
4) Only Proved reserves have been considered. Probable or Possible reserves have not been considered. These reserves exclude ONGC's share of foreign JV Assets.
5) Both revenues and costs have been discounted to present value using 10% discounting factor. The Net future earnings, therefore, represent the net expected future cash inflows from production of recoverable reserves of crude oil and gas.
6) However, neither the estimated net reserves nor the related present value should betaken as a forecast of future cash flows or value of these reserves because (a) future estimated production schedules used in the valuation process are subject to change, (b) up-gradation of Probable and Possible reserves would significantly affects the gross and net present value of the expected future cash inflows, (c) future crude oil and natural gas prices are subject to change and (d) future expenditure on production (operating), development, acquisition cost of capital assets, abandonment costs and rates of taxes and levies, which may be at variance from those assumed herein.
Annexure-c
Comments of the Comptroller and Auditor General of India under section 619(4) of the Companies Act, 1956 on the accounts of Oil and Natural Gas Corporation Limited for tile year ended 31st March, 2008
The preparation of financial statements of Oil and Natural Gas Corporation Limited for the year ended 31st March 2008 in accordance with the financial reporting framework prescribed under the Companies Act, 1956 is the responsibility of the Management of the Company. The Statutory Auditors appointed by the Comptroller and Auditor General of India under section 619(2) of the Companies Act, 1956 are responsible for expressing opinion on these financial statements under section 227 of the Companies Act, 1956 based on independent audit in accordance with the auditing and assurance standards prescribed by their professional body the Institute of Chartered Accountants of India. This is stated to have been done vide their Audit Report dated 25th June, 2008.
I, on the behalf of the Comptroller and Auditor General of India have conducted a supplementary audit under section 619(3)(b) of the Companies Act, 1956 of the financial statements of Oil and Natural Gas Corporation Limited for the year ended 31st March, 2008. On the basis of my audit nothing significant has come to my knowledge which would give rise to any comment upon or supplement to Statutory Auditors' report under section 619(4) of the Companies Act, 1956.
For and behalf of the Comptroller and Auditor General of India
Sd/- K.P. Sasidharan Principal Director of Commercial Audit & ex-officio Member, Audit Board II Mumbai
Place: MumbaiDate : 11th July 2008.
Annexure-d
Human resource value
Employees as on 31st March, 2008:
Employee Group Age Distribution Total
Upto 31 31-40 41-50 51-60 2007-08 2006-07(A) TechnicalExecutive 564 1494 9703 6618 18379 18305Non-Executive 42 762 2571 622 3997 5072Total (A) 606 2256 12274 7240 22376 23377(B) Non-TechnicalExecutive 154 435 1912 2137 4638 4365Non-Executive 86 876 2945 2075 5982 6068Total (B) 240 1311 4857 4212 10620 10433Grand Total (A+B) 846 3567 17131 11452 32996 33810
Note: Whole time Directors excluded.
Valuation as on 31st March, 2008: (Rs. in million)Employee Group Age Distribution Total Upto 31 31-40 41-50 51-60(A) Technical
Executive 10,091.9 23,745.9 107,673.4 36,973.8 178,485.1Non-Executive 455.7 7,669.7 22,484.0 2,781.0 33,390.4Total (A) 10,547.5 31,415.6 130,157.4 39,754.8 211,875.4
(B) Non-Technical
Executive 2,670.1 6,689.8 19,720.1 11,344.5 40,424.5Non-Executive 894.5 8,104.8 21,742.4 7,487.2 38,228.9Total (B) 3,564.6 14,794.6 41,462.5 18,831.7 78,653.5Grand Total (A+B) 14,112.2 46,210.3 171,619.9 58,586.6 290,528.9
(Rs. in million)Employee Group Value per employee 2007-08 2006-07(A) Technical
Executive 9.7 9.4Non-Executive 8.4 7.7Total (A) 9.5 9.0
(B) Non-Technical Executive 8.7 8.3Non-Executive 6.4 6.2Total (B) 7.4 7.1Grand Total (A+B) 8.8 8.4
* Valuation based on most widely used ' Lev & Schwartz' model.
* Aggregate future earnings during remaining employment period of employees, discounted @8% p.a., provides present valuation
* Future earnings based on current emoluments with normal incremental profile.
Annexure-e
Recognitions, awards and accreditians
1. Global Rankings/ Recognitions:
* The Numero Uno E&P Company in Asia, as per the ranking of the top 'Platts 250 Global Energy Companies list for the year 2007' based on Assets, revenues, profits and Return on Invested Capital (ROIC) (September 2007)
* Ranked 20th among the Global publicly-listed Energy companies as per 'PFC Energy 50' (Jan 2008).
* Occupies 198th rank in 'Forbes Global 2000' 2008 list (up 42 notches than last year) of the elite companies across the World; based on sales, profits, assets and market valuation during the last fiscal. In terms of Profits, ONGC maintains its top rank from India.
* Ranked 335th position as per Fortune Global 500 2008 list; up from 369th rank last year, based on Revenues, Profits, Assets and Shareholder's equity. ONGC maintains top rank in terms of profits among seven companies from India in the list.
* The first and only Indian Company to be enlisted in Fortune's 'Most admired Companies 2007'.
2. Indian Rankings/ Recognitions
* Ranked as the most respected Public Enterprises in India in 2007 'Business World Survey,' with 19th position in the league of the most-respected Indian Corporates.
* Rated 'Excellent' in MOU Performance Rating for 2006-07 by the Department of Public Enterprises, Ministry of Heavy Industries in Public Enterprises, GOI.
* Oil Industry Safety Directorate (OISD) has selected Ahmedabad Asset and MRPL for the year 2006-07 (as number one in Group-4 category (Oil & Gas Assets) and second in Group-1 Refinery category respectively).
Topped the visibility metrics in Indian Oil and Gas Sector; the only PSU in the top 10 of the list of Indian Corporate Newsmakers.
3. Awards & Accreditations
* 'Golden Peacock Global Award 2007 for Excellence in Corporate Governance 2007', for the 3rd consecutive time, conferred by World Council for Corporate Governance.
* Bagged the coveted winner's trophy of the maiden 'Earth Care Award for excellence in climate change mitigation and adaptation' under the category of GHG mitigation in the small/medium and large enterprises.
* Secured the 'Jury's Special Appreciation Award' under 'Employer Branding Awards 2007', for being considered by the jury as the only organization in PSU that is considered an Employer Brand.
* ONGC was awarded 'Petroleum Minister's Trophy for 2006-07' in recognition of its best overall performance in 15 sports disciplines under the Petroleum Sports Promotion Board (PSPB), for the fourth consecutive year in a row. ONGC also received the overall 'Excellence Trophy' for corporate contribution towards promoting sports in the country
* Conferred with 'Partners in Progress' Award', instituted by the 'Legends of India', an independent endeavour to promote Indian Art and Cultural within the country and abroad, for its support and contribution in the field of Art and Cultural.
* Conferred with 'Infraline Energy Excellence Award' for its services to the Nation in Oil Ft Gas Exploration and Production category.
* Bestowed with 'AmityAward for Excellence' in Cost Management.
4. Awards to ONGC's Business Units
Ahmedabad Asset:
* Golden Peacock Environment Management Award - 2007 - instituted by World Environment Foundation.
* Safety Innovation Award - 2007 from Safety and quality Forum - instituted by the Institution of Engineers India.
* Oil Industry Safety Award - 2006 - instituted by Ministry of Petroleum Et Natural Gas, Govt. of India.
Ankleshwar Asset:
* Safety Innovation Award for the year 2006-07.
* Green Tech 'Silver Award -2008'.
Tripura Asset:
* Longest Accident Free Period to Tripura Asset from Director General of Mines, Dhanbad.
Rajamundry Assets:
* Green Tech Environment Excellence Silver Award-2006 for Mandapeta GCS.
* Certificate of Appreciation for Ponnamanda Gas Compression Station for outstanding achievement for 'Environment Management' during the year 2006 from the Greentech Foundation.
* Greentech Safety Silver Excellence Award-2007 to the Drilling Rig E-1400-16
* Greentech Safety Gold Excellence Award-2007 to the Lingala Group Gathering Station
* Certificate of Appreciation for Excellent performance in Safety for the year 2007 from Greentech Foundation to Mori Gas Compression Station.
Cauvery Asset:
* Greentech Award for Environment Excellence for the year 2006 in Petroleum Sector to Narimanam Group Gather Station.
* Best Technical Audit Performance Award for the year 2007 to Kuthalam Group Gathering Station.
* Greentech Safety Award 2008 in petroleum sector to Cauvery Asset, Tripura Asset, Rajahmundry Asset, Ahmedabad Asset, Offshore Engineering Services and to Hazira Plant for the sixth time.
* Golden Peacock Awards instituted by Institute of Director (IOD) under the categories of 'Training and Innovation'. Institute of Drilling Technology (IDT) received the award for Excellence in Training and Cauvery Asset for Excellence in Innovation.
5. Awards to CMO & Directors:
* Mr. R S Sharma, CMD, ONGC has been conferred the 'CNBC-TV18 Award 2007' for excellence in the Oil and Allied Services category.
* Mr. R S Sharma, CMD, ONGC has been conferred with the 'CNBC-2007 CFO Award' for Excellence in Financial Management in the category of Best performing CFO in the Oil, Gas and Chemicals sector, for the third time in a row.
* Mr. R S Sharma, CMD, ONGC has been coffered 'Distinguished Fellowship' of the Institute of Directors (IOD) in recognition for dedicated public service i.e. commendable performance in management.
* Dr. A K Balyan, Director (HR) has been conferred the award of 'Best HR-Head' by Amity International Business school.
* Dr. A K Balyan, Director (HR) was conferred with 'Lifetime Achievement Award in Human Resource' during the 9t' Convention on Leadership in Mumbai on 28th September, 2007. The award was presented to Dr. Balyan for his remarkable achievements in the area of managing Human Resource of the best PSU in the country.
* Dr. A K Balyan, Director (HR) was conferred the 'Exemplary Leader Award' under 'Employer Branding Awards 2007'.
* Dr. A K Balyan, Director (HR), conferred with fellowship of World Academy of Productivity Science.
The Nobel Peace Prize 2007 has been conferred jointly to Intergovernmental Panel on Climate Changeheaded by Padma Bhushan Dr. R K Pachauri who is on the Board of ONGC and to Mr. Al Gore, former Vice-President, USA for efforts to build up and disseminate greater knowledge about man-made climate change, and to lay the foundations for the measures that are needed to counteract such change.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
The Economy:
India's progressive emergence as one of the world's more stable and dynamic economies has fuelled widespread confidence in the BRIC thesis, which forecasts that along with Brazil, Russia and China, India is on its way to the top four slots in global economic hierarchy.
One milestone to the coveted journey was crossed on 25th April 2007, when India moved into the Trillion Dollar Economy Club of the ten economies (The Times of India, New Delhi edition, 26th April 2007). However, the caveats on the path of onward journey became loud and clear on 1st July 2008, when the same daily reported 'With the dollar breaching the Rs. 43 mark, the economy is down to $995 billion. High oil prices have triggered a domino effect that has ultimately robbed India of the trillion-dollar tag'.
The concern is neither specific to India, nor Asian economies. The issue of high crude oil prices snowballing into wider economic slowdown is a global one. Though non-fundamental factors like speculation and weak dollar may also have played a role in crude price increase, it is largely the traditional fundamentals of demand and supply which are the major reasons. Demand for petroleum has been growing globally, whereas supply of this finite resource remained under pressure.
Industry Structure and Developments:
Crude Oil Price:
The average spot price of the WTI crude was just $66.051barrel in 2006. The crude oil price touched a ceiling of $77/barrel (Source: EIA) in last fiscal while pitching tent in the 60s for a major part of the year and even going down to 50s for sometime.
Arrival of fiscal 2008 showed no indication of the coming storm till August 2007; the prices remained within 70s, but thereafter the climbing started and finallyzoomed past the psychological barrierof $100/barrel soon. Since then it has not looked back, and crossing new milestones almost every day, even crossing $147/barrel for a day before cooling down to about $ 125 / barrel in July 2008.
Skewed demand supply axis:
According to the World Economic Outlook, April 2008, the global GDP rate, at constant prices, has grown by an average 4.59% annually in the last five years. The growth is led by developing economies with an average annual growth of 7.28% in the last five years. China and India lead with a five-year average annual growth rate of 10.6% and 8.57%, respectively.
This growth has translated into growing demand for oil. On the contrary, the supply had lagged behind this rising demand. For long, the FSU (Former Soviet Union) countries and OPEC bailed out such crisis despite dwindling supplies from other major oil producers. But now, according to the BP Statistical Review of World Energy 2008, even OPEC has registered a fall in oil production by 1.2% in 2007 as compared to last year. The global oil
production too has declined marginally by 0.2% and every other producer, namely the European Union (EU), OECD, OPEC and non-OPEC, except Former Soviet Union (FSU) countries, have registered adecline.
Opportunities & Threats:
The Scientific American, in an article published in April2008, has described the last decade as The Lost Decade'. It points out that when the oil price collapsed from $25 to $12 per barrel at the end of 1990s, E&P companies slashed their technical and scientific staff. Secondly, in spite of the booming markets of the early to mid 2000, E&P industry failed to invest in infrastructure and equipment to sustain profitability. The situation orchestrated the biggest failure in sharpening the E&P edge to locate new oil and gas sources.
However, high oil price regime has now encouraged the industry to invest in developing oil and gas capacity and monetizing them. There is unprecedented level of E&P activities the world over. The EV companies are now stretching themselves beyond conventional resource centres, exploring frontier areas including deepwater and ultra-deepwater provinces. Finally, there is a genuine effort to recover The Lost Decade'.
According to Cambridge Energy Research Associates (CERA) and United States Geological Survey (USGS), a large pool of hydrocarbon still lies undiscovered. The three big oil field finds in Brazil, namely Carioca, Tupi and Jupiter, fuelled these theories. Your Company's discoveries in Indian East coast in well UD-1, opening up the ultra-deep regime in India and finds by few other companies have given us cause for optimism.
However, the increased E$P activities have a flip side, the steep rise in the cost of hiring services and equipment. According to IHS Energy, costs have more than doubled in last four years worldwide. An ultra-deepwater drill ship which your Company hired at a day rate of US$ 192,000 in 2003 is available in 2008 for US$ 525,000 per day for mobilization end-2010. Nonetheless, the industry believes that these costs are viable going by the hopes from yet-to-be-discovered assets.
The Priorities:
Locating new oil & gas assets and bringing them to stream remains the immediate and top priority. Simultaneously, the industry will have to be more accurate and cost effective to ensure adequate supplies of oil and natural gas at an affordable price. Developing technologies for tomorrow becomes imperative.
Gas is gaining prominence as the bridge fuel and efforts are on to exploit India s natural endowment in gas in all its dimensions; like Coal Bed Methane (CBM), Underground Coal Gasification (UCG) and Gas Hydrates. These require technology and capital infusion.
Demand management through conservation and by enhancing efficiency of automobiles, electrical and household appliances, through Green buildings and introducing Mass Rapid Transport Systems are also priorities for which industry will have to extend a helping hand to synchronize these efforts. At the same time, the industry needs to collaborate in efforts looking for supplements beyond hydrocarbons.
Strategic Pursuits:
Your Company's long-term strategy focuses on strengthening the core Exploration and Production (E&P) activities in oil & gas. Improving Reserve Replacement Ratio by intensifying exploration is your Company's first priority. Increasing production, arresting decline in matured fields and expeditious development of discovered fields are the other priorities. The desired level of investment to create new infrastructure, to maintain the old ones to support enhanced levels of E&P activities are also on our strategic agenda. Your Company has taken structured initiatives in these priorities as detailed in the Directors' Report.
Deepwater oil & gas provinces hold lot of promise. Your Company made significant discoveries in deepwater and ultra-deepwater provinces in Krishna-Godavari (KG) and Mahanadi basins. These prospects have been assigned priority for expeditious development. Technologically, ONGC has achieved a number of milestones in deepwater exploration, which have been adopted as standard by many global operators.
Besides its focus on Oil & Gas E&P, your Company, mandated to secure Energy Independence of India by diversifying sourcing of energy, is also investing to leverage the natural endowment of the country of having one of the largest Coal Reserves in the world. Pilots on Clean Coal Technologies Like Coal Bed Methane (CBM), Underground Coal Gasification (UCG) are being run. It has also brought up ONGC Energy Centre Trust for holistic research on alternate energy sources.
ONGC is committed to sourcing equity Oil & Gas through its wholly-owned subsidiary ONGC Videsh Ltd. (OVL), which is being seen as the growth vehicle of the ONGC Group. Currently OVL has 38 Oil it Gas projects in 18 countries and is one of the biggest Indian multinationals with an overseas investment of around 5 billion dollars.
Capacity expansion of Mangalore Refinery Petrochemicals Ltd.(MRPL), a subsidiary of ONGC from 9.69 to 15 MMTPA (Million Tonne Per Annum) is under implementation and this expansion will further strengthen your Company's efforts towards value-chain integration.
Value-multiplier projects in sectors like, Refining, Petrochemicals, LNG, SEZs, Power, have huge potential towards inclusive and integrated growth for your Company. All these projects are in time and will be on stream soon, bringing additional revenue. Your Company, after detailed feasibility studies, has decided to come out of the earlier proposed refinery and SEZ projects at Kakinada, Andhra Pradesh.
Physical Performance:
Reserve Accretion:
Your Company had struck 35 new discoveries (13 new prospects and 22 pools) in the concluding fiscal of 2007-08. Initial In-place (1113) hydrocarbon accretion in 2007-08 was 182.23 Million Tonne Oil Equivalent (MMTOE), which is highest in last ten years, against IIP accretion of 169.52 MMTOE last year. The Ultimate reserve (UR) was 63.82 MMTOE as against 65.56 MMTOE in last year.
Seismic Survey:
This year your Company acquired 8,158 Km of 2D seismic survey and 19,360 Sq. Km of 3D data.
Drilling:
Out of the 322 wells, that your Company drilled in 2007-08, 98 were Exploratory Wells (against 87 in 2006-07) and 224 Development Wells (against 178 in 2006-07). This year 90 wells were drilled in offshore, which is highest since Last fourteen years.
Your Company is always focused on quality and new technology. This year, all the development wells in Offshore (57 nos.) were hi-tech wells with a record cycle speed of 1,407 Mtrsl RM (highest since last fourteen years). At the same time, 30 hi-tech wells were drilled in onshore during the year as against 17 in the last fiscal.
Production (Excluding JVs)
Crude oil production during the year (2007-08) was 25.945 Million Tonne (MMT) as against 26.051 MMT in the previous fiscal.
Natural Gas production was 22.334 Billion Cubic Meter (BCM) as against 22.442 BCM in the previous fiscal.
Marginal shortfall in oil (0.4%) and gas (0.48%) production is primarily due to the gas Leakage incident at Balol area of Mehsana and deferment in G1 ft GS-15 project completion.
Gas sales in 2007-08 was 17.822 BCM as compared to 17.989 BCM during 2006-07.
VAP production during the year was 3.257 MMT as against 3.238 MMT in the previous year.
Outlook:
Your Company has set an ambitious outlook for the XI five year plan (2007-12). It has envisaged 3% higher production from its existing mature fields producing for over thirty years. To achieve this target, your company has enhanced its E&P outlay by about 52% for XI plan period compared to X plan period actual expenditure. In the first fiscal of XI five year plan period the result is encouraging as far as drilling, reserve accretion and production are concerned.
Your Company's structured initiatives and planned investment in the area of IOR (Improved Oil Recovery) and FOR (Enhanced Oil Recovery) schemes have already yielded more than 40 MMT of oil and envisages to produce cumulatively 110 MMT by 2030. 12 projects are already complete and 7 are under implementation. The Mumbai High-North Phase-II Redevelopment plan has also been launched.
Your Company is determined to bring new and Marginal fields to production on fast track. Out of 109 marginal fields, 87 fields are already monetized and balance 22 fields are prioritized for development as per the new marginal field policy of the Government.
Human Resources/in industrial Relations:
Within the given mandate, your Company crafted ample welfare measures for its employees. These measures, aimed at retaining talent, helped in restricting attrition that had assumed alarming proportion. In 2007-08, 261 resignation cases were accepted against 361 during 2006-07.
Your Company focuses on maintaining competitive competence of its employees and invests extensively to augment human resource capacity and quality through tailored training and development programmes.
The pay-roll strength as on 31st March, 2008 was 32,996.
Health, Safety & Environment (HSE)
Your Company has adopted integrated QHSE (Quality, Health, Safety & Environment) management systems at its installations and facilities. As on 31st March, 2008 total 471 installations (including operational facilities, offices & colonies) have been certified conforming to international standard requirements. All these installations & facilities have successfully sustained the re-certifications during annual surveillance audits.
Corporate Social Responsibility:
Corporate Social Responsibility (CSR) initiatives of your Company aim to strengthen the societal fabric by promoting education, healthcare, infrastructure development, entrepreneurship in the community, water management etc. 'Project Saraswati' and ONGC-Pura are the landmark initiatives by your Company. It extends its helping hand during Disaster Relief measures, as and when required. Your Company earmarks 0.75% of its Profit After Tax of previous year for its CSR projects.
Cautionary Statement:
These discussions are 'forward looking' within the meaning of the applicable laws and regulations. Actual performance may deviate from the explicit or implicit expectations.
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