By R. Sasankan

State-owned Oil and Natural Gas Corporation has the remit to oversee oil exploration in the country. Its record has been patchy at best and downright rotten at worst. Over several decades, politicians and bureaucrats have intervened aggressively in the organisation's operations and completely wrecked outcomes.

How bad is it? Just one metric will prove the effects of the feckless intervention by unqualified and incompetent people in ONGC's affairs that I have tried to highlight in two previous columns of Petro Intelligence. ONGC has a subsidiary called ONGC Videsh Ltd which exclusively operates overseas; it has 35 assets in 15 countries. The comparison in the performance between the parent and child is quite stark. The department of public enterprises in the Government of India monitors the performance of the central public sector undertakings on the basis of the memorandum of understanding (MoU) that they sign each year with the government. In FY 2019-20, ONGC's performance was rated as "fair" and it achieved a pretty lowball score of 46.81. Put that in perspective: India imports 85 per cent of its crude oil requirement -- which only underscores the point that ONGC's exploration programme is woefully underperforming. In contrast, ONGC Videsh scored 78.59 and was conferred a "very good" ranking.

The basic purpose behind my earlier articles was to highlight how ONGC had been consistently weakened by poor leadership, both political and internal, since the early 1980s. Wrong people were elevated to positions of power and influence, thereby ruining almost the entire fabric of the organisation. The situation has got to a point where the petroleum ministry has swung around to the view that domestic crude production can be increased only by auctioning these producing fields or working out partnership arrangements with foreign oil companies. Again, I vehemently disagree with another unfounded, cavalier assumption.

During the time when I reported for premier newspapers of the country on the workings of the petroleum industry, I have covered ONGC extensively. I have a fairly good idea about how that great organisation was systematically ruined. A major problem area has been drilling. ONGC has over 120 rigs, both onland and offshore. While the onland rigs are fully owned by ONGC, a few of the offshore rigs are hired. I am not familiar with the oil scene in Russia and China but based on my understanding of the free world, I dare say that ONGC can easily claim credit for owning and operating the largest number of oil rigs.

That may sound like a weird statistic, given the fact that India isn't known to possess prolific hydrocarbon reserves. Normally, a well is drilled only after identifying a prospective area through seismic surveys and interpretation of data thus obtained. Oil companies hire rigs depending on the number of such prospective blocks. But ONGC has to keep drilling irrespective of prospectivity as it is saddled with rigs that cannot be allowed to rust. It has the dubious distinction of drilling the largest number of dry holes among national oil companies.

So, how did ONGC land itself in such a mess? In the 1990s, I came across a brilliant production expert who strongly believed that ONGC ought not to own more than 25 rigs. He was overruled and shunted out to innocuous places even though he was honoured by the company for his contributions: it named an elevator after him! He sought premature retirement.

 Let me go back to the basic problem that dogs ONGC: the irresistible craze for kickbacks. The ‘resourceful’ brain trust within ONGC saw the purchase of rigs as a lucrative source to rake in money. There is a kickback not only in buying but also hiring rigs. In the 1980s, ONGC entered into a fixed rate contract for a hired rig when the day rate was ruling very high. It failed to wriggle out or re-negotiates these contracts when the per day rate crashed a few months later. The then petroleum minister, Punjala Shiv Shankar, had a hard time justifying the contract in parliament. The downright bungling with the rig contracts would not have been possible without the 'consent' of the political boss. As one insider points out, not a single rig is either purchased or hired without the knowledge of the bosses in Shastri Bhavan.

And now let us turn to the ham-handed exploitation of India's sedimentary basins which have been drilled furiously that there are not many prospective areas left. Nevertheless, drilling continues and it is backed by techno-scientific data on record. There is criticism even from within that such data is manufactured by the fertile brains within the entity. Since 2017, ONGC has drilled around 500 wells per year of which 100 are exploratory wells whose cost is estimated at around Rs 100 billion.

The present slide in ONGC’s fortunes can be arrested only If the drilling strategy is altered drastically. A journalist is not competent to suggest a way out but can convey to his readers what experts have to say on the subject. They all agree that there is tremendous scope for pruning the rig fleet and drawing up a new exploration strategy. As bulk of oil production comes from the mature fields, there is limited possibility to obtain higher production from these fields. Marginal discovered fields offered to private operators will only contribute marginally to an increase in oil production.

ONGC and Oil India are under pressure to find new and reasonably large reserves of oil. According to experts, the mature basins can only provide marginal addition to reserves as most of these areas have been almost fully explored. The focus has to shift towards the frontier basins. Therefore, a significant variety and volume of G & G data has to be acquired by the government in these basins immediately.

One statistic that enhances the attractiveness of the Indian frontier basins is the way India stacks up against the global average for discovered hydrocarbon resources. In the rest of the world, younger sediments, or Cenozoics, account for 20 per cent of discovered resources while older sediments, Mesozoics and older, form 80 per cent. India presents a completely lop-sided picture with younger sediments forming nearly 95 per cent of discovered resources with a mere 5 per cent coming from the older sediments. This displays perverse intent since there is a vast expanse of older sediments in Indian basins, mainly in the frontier basins. It is possible that the early successes in the younger sediments prompted Indian companies to focus on these sediments.

But it may be time to re-orient that strategy. “Taking into account the global experience, it is perhaps time we focus our attention on the older sediments and attract players globally active in the E&P work in the older sediments, so that appropriate technology is available to change the skewed picture of exploration success in this country. The lop-sided picture of India’s exploration success with respect to the global picture can surely be a strong selling point,” says an acknowledged expert.