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BPCL’s Stake In Petronet LNG Ltd Poses A Fresh Problem
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H –Energy’s strategy To Become A Major Player In Gas Market
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Regulation
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Prognosticated Crude Oil & Natural Gas Resources Of India
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Assam Govt. Committed To NRL, Liquidity A Problem
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India’s Estimated Coal Bed Methane (CBM) Resources
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Alternative Energy / Fuel
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Companies
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Confidence Petroleum’s Unit Acquires Majority Stake In Sarju Impex
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Press Release [FREE Access]
Petro Intelligence » ONGC: It Is Not A Toss-up Between Privatisation And Atomisation

By R. Sasankan

It is easier to tear down an edifice rather build one -- and that is why one needs to be a little circumspect before rushing to pick up axes and crowbars in a reckless burst of iconoclasm. Petroleum industry experts have been caught up in a lively debate lately over the need to re-shape Oil and Natural Gas Corporation (ONGC), the premier upstream oil and gas producer, whose fortunes have been sinking for quite some time now.

Several proposals have been tossed around. Some experts want to split up ONGC into five or six companies; others want it to be privatised. A third coven has suggested that foreign companies should be roped in as partners with equity participation. The ONGC management, however, has been trying to douse speculation about a root-and-branch restructuring plan by vehemently denying that any such move is afoot.

The official line is pretty straightforward: “The expectation and the strategy for ONGC is to act as the fulcrum around which an ecosystem for a thriving oil and gas industry in the country can be created consistent with the expectations of fulfilling the Prime Minister’s vision to reduce import dependence.”

The brainstorming, however, continues, which is natural considering the complexity of the issues involved. But whatever the remedy, it should not be worse than the disease.

Several people occupying responsible positions have been putting out statements that appear to create the impression that India is floating on oil and gas. They lean towards the view that India's problem of oil and gas shortage can be resolved through a superficial restructuring of ONGC.

India is a large country with fairly large sedimentary basins but it is rated as a very small player in terms of oil and gas reserves. India does not account for more than 2 per cent of the oil and gas reserves in the world which is why it has so few oil discoveries strung out over five decades.

The early discoveries of oil and gas in states like Assam, Gujarat and later the western offshore areas were made with the help of the Russians. As India is not prolific in hydrocarbon reserves, discovery calls for intense drilling which calls for a proper prospectivity assessment. In the initial years, India was fortunate to have a visionary politician like K.D. Malviya to guide the fortunes of the industry.

It is pretty clear now that the privatisation of ONGC or splitting it up into smaller entities will not make much of a difference to the situation. Policy makers love the expression "restructuring" -- investing the term with a potency that goes beyond appealing headlines in the media even though it usually makes no difference to the ground reality.

The country’s oil experts have been fooling the country with periodic vision papers which promise a bright future in comparison to the dull present. ONGC had one such vision paper called the ONGC Vision2030 that sparked no change. It was replaced with a Vision 2040. ONGC has a new chief executive now. As a first step to a meaningful initiative on the subject, ONGC should be advised to stop such wasteful expenditure in producing Vision papers which have helped only to mislead the country.

At the risk of repetition permit me to point out that among the national oil companies in the world, ONGC must rank as the single largest owner of drilling rigs. In other countries, companies first look for prospective locations, conduct seismic surveys and hire rigs only after establishing the prosectivity of the location. But in ONGC, a corporate culture that fosters the pernicious practice of kickbacks nudges the corporation to acquire a large number of rigs far in excess of its actual requirements. To prevent these rigs from rusting on the ground, they are deployed in locations where prospectivity rates are low. That is one of the main reasons why ONGC has won the dubious distinction of drilling the most number of dry wells in the world.

ONGC’s problems cannot be discussed in one article. But it is pretty evident that a toss-up between privatisation and dismemberment presents a Hobson's choice that cannot achieve the ultimate objective of raising oil production. Such a policy can only further mess up the situation. Our balance recoverable reserves are not attractive enough to woo overseas oil companies which matter in the industry.

Bombay High has been the country’s largest field. The normal life of an oilfield is 20 years. Bombay High has been in operation for more 45 years and continues to be ONGC’s single largest producer. ONGC’s failure to follow correct production practices during the accelerated production plan of 1980s landed Bombay High in problems. Some oil pundits put the blame on Col S.P. Wahi, CMD in the 80s, for the colossal mess in production practices. There is little doubt that Wahi contributed enormously to the situation that wrecked the Bombay High reservoir but the then petroleum secretary Lovraj Kumar cannot escape his share of the blame. ONGC was a Commission and not a corporation those days and the Member in charge of production, Dr A.K.Malhotra, was only a structural engineer and not a production expert. Oil Production is a highly specialized area in the upstream oil industry .

There is a fundamental principle in oil production: the rate of production from a field has to be in tune with the behaviour of the reservoir. The petroleum ministry did not want the production to be lowered as the government headed by Mrs Indira Gandhi was going through an extremely difficult balance of payments problem. The gravity of the situation can be gauged from a statement that the then finance minister R. Venkataraman made in the Lok Sabha at that time: “If the Godavari blesses us, we can repay the IMF loan very quickly.” The naivete behind the statement is stark and his insufficient understanding of the business of oil production is perhaps understandable. Mr Venkaraman was a referring to a speculative report in the Time magazine that India’s Godavari basin was floating on oil.

As a journalist covering the petroleum sector very closely, I had covered these developments closely and can share with our readers that the entire political leadership was in favour of maximising oil production from Bombay High at that time. No one advised the leadership against producing in excess of what the reservoir permitted. This production practice wrecked the reservoir which could not be rectified even after spending Rs 300 billion on consultancy. In retrospect, this blunder has turned out to be a blessing in disguise for ONGC: Bombay High still exists as the largest field of ONGC without which ONGC would have lost it raison d'etre.

Oil pundits should debate whether companies such as ONGC and Oil India should fritter their tight resources on drilling in domestic sedimentary basins that have only very limited hydrocarbon resources. Why should they not be allowed to shift a substantial portion of their resources and manpower to countries where oil and gas assets can be acquired? ONGC Videsh and Oil India are already doing it but their scale of operation is too small to make an impact. The situation calls for an aggressive strategy which can only be decided at the highest level.

Petroleum minister Dharmendra Pradhan is known to enjoy a very good equation with Prime Minister Narendra Modi. Perhaps, he can ignite a new vision for ONGC after all.



To download the latest issue 'Volume 28 Issue 5 - June 10, 2021', click here
Petro Intelligence [FREE Access]
BPCL Selloff Plan’s Success Hinges On Creation Of Effective Regulator
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Farzad B: Pawn In The Game Of Geo-Politics
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ONGC: It Is Not A Toss-up Between Privatisation And Atomisation
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Numaligarh Refinery Merger: The New Paradigm In The North East
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Foreign Investment
BP Sets Up New Digital Hub In Pune
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Overseas Investment
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Gas Scene
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Domestic Natural Gas Scene In April 2021
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Trends In Natural Gas Price: Global and Domestic
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Gas Sector Presents A Positive Picture In March 2021
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Sector-wise Consumption Of R-LNG, Domestic Gas Since FY 2018-19
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Natural Gas: India’s Increasing Import Dependency
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Domestic Natural Gas Scene In March 2021
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Natural Gas Price Trends: Global and Domestic
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CGD Becomes An Attractive Business In India
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Sector-Wise Natural Gas Consumption In February 2021
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Domestic Natural Gas Scene in February In 2021
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Natural Gas Price Trends: Global & Domestic
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Domestic Natural Gas Scene In January Presents A Dismal picture
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Update: LNG imports over the years and sector-wise consumption of natural gas
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Data Section
Monthly Upstream Data
Monthly Downstream Data
Historical database
Data Archives
Special Database
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Import, Export Data For Petroleum Products During April 2021
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Indian Crude Basket Prices In May
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Crude Oil Import Increases In April 2021, OPEC Share Up
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Analysis Of Crude Oil Processed In April 2021
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New Refinery, Capacity Expansion Of Existing Refineries
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Total Picture of India’s Year-wise Total Import and Export of Petroleum Products
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Foreign Direct Investment Inflows Into Oil & Gas Sector
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Consumption of Petroleum Products Trend Analysis - April 2021
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Petroleum Products Consumption In April 21 Explained
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Production / Consumption Scene of Petroleum Products in April 2021
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Oil Demand Forecasted To Increase
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Global Rig Count Goes Down
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