Global oil majors have slashed spending and cut jobs in response to plunging oil prices but state-owned Oil and Natural Gas Corp...
Global oil majors have slashed spending and cut jobs in response to plunging oil prices but state-owned Oil and Natural Gas Corp (ONGC) is using the slump to build assets.
Oil majors including Shell, Total and BP have cut capital spending by at least USD 14 billion this year in response to the plummeting oil price.
Addressing company shareholders, ONGC Chairman and Managing Director Dinesh K Sarraf said energy industry, particularly the oil and gas sector, was facing challenging times due to the collapse of crude prices.
Oil prices, he said, have collapsed from USD 110 per barrel to sub-50 dollars a barrel due to lower growth in demand than expected from China, slow recovery in some of the developed economies and steady build-up of new supplies backed by strong North American output.
“While many of the global E&P companies have responded to this situation by cutting down their investments, ONGC takes this as an opportunity to build its assets in this environment of lower costs as well,” he said.
ONGC, he said, remains “steadfastly committed to the quest of energy security, a national priority endorsed by none other than our Prime Minister.”
Sarraf said ONGC has stepped up ongoing development efforts to bring new hydrocarbon volumes into the country’s energy basket. “Important projects have been given the go-ahead for development and more proposals to monetise our reserves are under various stages of finally being approved.”
Having reversed the decline in crude oil production in 2014-15, ONGC is now fully focused on implementing programmes to raise output from ageing and old fields.
“Every drop counts and ONGC’s production track record from its predominantly mature portfolio and commercially prudent and holistic management of producing assets is really remarkable,” he said.
Improved Oil Recovery and Enhanced Oil Recovery projects to maximise production have yielded positive outcomes – in 2014-15 over 34 per cent of ONGC’s crude production was a result of investments in these projects, he said.
“In fact, effective and judicious deployment of technological interventions have enabled your company to reverse the decline in domestic crude oil production in the last financial year,” he told shareholders.
Overall decline rate of ONGC’s mature portfolio is 2 to 3 per cent compared to 6 to 7 per cent encountered globally in similar fields.
Sarraf said ONGC has invested Rs 36,187 crore in these projects and realised an incremental oil gain of close to 95 million tons till FY’15.
The dollar value of the incremental production from these projects in FY’15 alone stood at USD 4.5 billion – around 4 per cent of country’s forex outgo on imports.
Sarraf said ONGC board has since April, 2014 approved the implementation of five major development projects, three in offshore and two in onshore, with an investment of around Rs 20,000 crore.
“With a capital outlay of over Rs 14,500 crore, ONGC has also moved into the next phase of its re-development programs for some of the prolific western offshore fields – Mumbai High North and Mumbai High South and Neelam,” he said.
Also, during FY’15, ONGC completed eight projects worth close to Rs 27,000 crore.
Nine projects with an investment of around Rs 22,000 crore have already been completed till now in the current fiscal and another twelve projects worth Rs 13,000 crore are planned for completion by May 2016, he said.
“All these projects are central to ONGC’s growth agenda for the future and their execution will positively impact your company’s hydrocarbon output as well as its financials. The company, in view of this substantial potential, has deployed the best of technologies and resources towards this end,” he said.
Sarraf said ONGC has discovered significant hydrocarbon reserves in the deep waters of eastern offshore in the Krishna Godavari Basin.
“In the prevailing scenario of low crude and gas prices, it is challenging to develop the same,” he said adding that the company was engaged in firming up a scheme for monetising these resources.