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.
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