If India’s import dependence for oil has increased by 10 percentage points (pps) since 2015 to the current level of 87%, the dismal performance of state-run ONGC is to be blamed, as much as the policymakers’ failure to attract investments from global energy giants.
Even as ONGC’s performance has been on the wane for the last few years, the country’s largest oil explorer and producer hasn’t had a full-time chairman since April last year. Last week, ONGC got another officiating chairman, for the record third time, in its exploration director Rajesh Kumar Srivastava.
Srivastava has just four months to superannuate. His predecessor Alka Mittal was at the post for eight months. Subhash Kumar, who Mittal succeeded, officiated as chairman for nine months.
This is against the convention of a full-time chairman with average tenure of 3-5 years.
Though insiders in ONGC say decision-taking was not affected due to the absence of a full-time chairman, ONGC’s production of oil, gas and even “proven and probable” reserves have fallen over the last few years. Though the pandemic may have hit the company, the extent of the deterioration of poerformance has much to do with the poor strategic planning. Even the company’s capex has stagnated in recent years.
Oil and gas production fell, both on standalone and consolidated basis, over the last four years in the range between 10-16%. Proven and probable (2P) reserves accretion is down by 35%. It could not fully utilise the Rs 29,800 crore capex (RE) for the last fiscal. For FY23, ONGC’s targeted capex (BE) is Rs 29,950 crore.
“Broad reasons for under-utilisation (of capex) inter-alia include impact of COVID-19 related restrictions and consequent disruption in supply chain management, cyclonic disturbance in western offshore in 2021(Tauktae & Yaas), delay in statutory clearance (SPL) for mobilisation of marine spread, delay in Ministry of Defence clearance for Survey work in some blocks and delay in award of OALP blocks in OALP bid round- VI, delay in supply of drilling and work-over rigs by suppliers etc,” a parliamentary standing committee report, submitted on August 8 this year, stated.
According to recent Fitch report, “ONGC’s net leverage, measured by net debt/EBITDA (including ONGC Petro Additions on a fully consolidated basis), to rise to 2.2x in FY23 from 1.6x in FY22. This reflects a fall in ONGC’s consolidated EBITDA, hit by India’s decision to support its fiscal needs via sharing in the profit from domestic oil production and limiting retail fuel price increases, as well as ONGC and its subsidiaries’ large investment plans.”
While an ONGC official attributed the decline in production to Covid-related disruption which also led to push back some projects and decline in the reservoir pressure, ONGC’s oil output remained static this year compared with the corresponding period of last year, during which the second wave of the pandemic hit the country really hard. Gas production marginally fell to stand at 6,749 MMSCM in the April-July period of the current fiscal.
Meanwhile, a search-cum-selection committee on August 27 interviewed six candidates for the top job of ONGC. Though the committee is yet to come out with its choice, a full-time chairman can take over only after 2-3 months from the date of selection as the incumbent requires various clearances from different government bodies such as CVC.
An ONGC employee told FE on condition of anonymity, “Don’t we have an able person in the country to ably steer the company? True, even interim chairmen often do not hesitate to take a decision if it is a must, but he can’t get the approval of the Board as easily as the full-time chairman.”