Current low oil price a temporary phenomenon: NK Verma, ONGC Videsh

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Published: January 19, 2015 3:55:02 AM

Brent crude slumped to under $45 a barrel last week, gaining marginally to about $50 on Friday.

Brent crude slumped to under $45 a barrel last week, gaining marginally to about $50 on Friday. The over 60% price fall in recent months has led to concerns for oil-based economies and explorers, with analysts expecting up to 20% capex cut by explorers. This is happening at a time when India is mulling to offer oil and gas blocks under Nelp X. Petroleum minister Dharmendra Pradhan said on Friday that auctions will take place in 2015. NK Verma, managing director of ONGC Videsh (OVL), feels low prices are a temporary phenomenon that won’t have a cascading impact on domestic operations. Verma, who in his last assignment spearheaded massive exploration programmes at ONGC, tells Siddhartha P Saikia about the different facets of India’s exploration and production (E&P) scenario, and how more oil and gas could be drilled domestically. Excerpts

The production from domestic fields has been stagnant. Low oil prices are going to affect it further. What is the outlook for national oil companies (NOCs) and other operators?
It’s a fact. In last two decades, production of oil and gas has not kept pace with rising economic demand. However, robust growth has been witnessed, with new discoveries and production in the Barmer block (Rajasthan) by Cairn India and KG offshore deep waters by Reliance Industries. ONGC and Oil India have also maintained production levels, with inherent annual growth of 7-8% compensating the natural decline. ONGC made a series of new discoveries in KG offshore and Daman. However, earlier, these were scattered and not big enough to sustain standalone development.

Now, both areas are under cluster development with strong projected oil and gas profiles. The current low oil prices are a temporary phenomenon and they won’t impact domestic developments; in fact, service availability will be better and cheaper .Operators with blocks having international price remuneration will be impacted with a consequent effect on operating profits. Because of oil subsidy sharing, ONGC and Oil India were not getting the full price anyway, so their balance sheets may not be impacted to that extent.

The government is planning Nelp X. However, there are concerns that India lacks data for exploration. How can we improve it?
Till 1991, ONGC and Oil India were acquiring seismic and other data in larger areas based on their exploration perception for existing basins, including frontier areas with future outlook, which facilitated the opening of KG and Cauvery basins. However, later on, data collection became confined to the smaller blocks allocated to different operators and reconnaissance data collection ceased. As such, data density in non-allocated areas remained negligible. About a third of sedimentary areas require basic sub-surface information to stimulate exploration activity.
Recently, the government has taken initiatives to launch data collection by NOCs and private service providers. It can be further accelerated with an in-built mechanism for current E&P operations.

You have headed exploration at ONGC as well as OVL. What’s the strategy for reserve accretion and improvement in recovery from domestic mature fields?
In domestic basins, reserve accretion would require focused team attention on opening of new plays, leveraging exploration leads, working on new geological and geographic frontiers through innovative thinking and implementing out-of-the-box exploration ideas. During my stint in ONGC as director – exploration, I took number of initiatives. First, re-engineering the exploration process to accelerate decision-making, iron out bottlenecks and increase collaborative effort among teams. Second, creating centres of excellence by pooling experienced and young executives with adequate empowerment. Third, augmenting and standardising G&G software and other infrastructure to synergise the skill pool for exploration objectives. Fourth, accelerating skill development for young explorationists by training and job association. Similarly, better reservoir management through 3D modelling of major fields and dynamic monitoring was also fast-tracked.

The Prime Minister’s Make in India campaign is seen as a key transformational element for various sectors of the Indian economy. How do you see it impacting India’s E&P?
India’s E&P sector has been a major talent source for a number of international companies through recruitment of experienced and fresh executives. This can be developed through a structured mechanism, wherein India can be made a hub for locating service units. The oilfield service industry is not developed in India. It requires stimuli to evolve as a major forex earner.

ONGC has a large number of research institutes. How do these contribute to E&P activity? How do you see R&D expenditure panning out for India’s E&P sector?
ONGC institutes are primarily engaged in applied research to resolve field problems in domain areas, besides some initiatives for long-term technology imbibition and development. These institutes have contributed actively to sustained performance of ONGC with a fairly good spend.

However, under the fast-changing technological scenario, there is huge scope for enhancing their effectiveness and contribution towards new technology innovation.

In 2013, I initiated steps to augment R&D focus at these institutes. These included accelerating augmentation of R&D infra at the institutes, with adequate human resource and strong motivational measures, and inducting young research associates on live E&P projects.

Simultaneously, we discussed the idea with IIT heads, and it culminated into a joint ONGC research forum with IITs, wherein major domain themes concerning E&P activity were identified for collaborative research at ONGC Institutes and IITs.

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