Policy
Barsu In Ratnagiri Emerges As Preferred Location For Mega Refinery
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India Diversified Crude Supply Sources But Price Benefits Uncertain
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Strategic Petroleum Reserves An Albatross Around India’s Neck?
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Crude Oil Price To Cross $ 100/Barrel By Second Half Of 2022?
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India Initiates Measures To Smoothen Energy Transition
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Regulation
History Of The Anti-Consumer Tilt In Petroleum Pricing
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How LPG (Domestic), Kerosene Emerged As Politically Sensitive Products?
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Hyderabad-Based MEIL Outsmarts, Adani, IOC In CGD Round
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Govt. Offers 15 Blocks Under Special CBM Bid Round
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Alternative Energy / Fuel
IEA Five-Year Renewable Capacity Forecasts by Country/Region, 2020-25 and 2021-26
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Oil India To Set Up Green Hydrogen Plant
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BPCL Plans Rs 250 Billion Green Power Push By 2040
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India’s LNG Use At Risk From High Prices
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New Projects
HOEC Plans To Start Drilling In Cambay
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IndianOil To Invest Rs 70 Billion In New Gas Distribution Projects
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BPCL Sets Up Superabsorbent Polymer Demo Plant In Kochi Refinery
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Market Watch
Karnataka Biggest Buyer Of IOC ‘Smart Cylinders’
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IndianOil Celebrates 50 Years Of SERVO
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Companies
Baker Hughes Company
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IEX Divests 4.93% Equity Stake In Arm IGX To IndianOil
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IndianOil Skytanking’s Fuel Concession At Noida International Airport
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HPCL To Import More Iraqi Crude For Its Expanded Refinery
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Press Release [FREE Access]
Petro Intelligence » How India’s Oil Exploration Was “Rigged”

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.



To download the latest issue 'Volume 28 Issue 20 - January 25, 2022', click here
Petro Intelligence [FREE Access]
Raising The Share Of Gas In Energy Mix: How And Why Hardeep Puri Can Ignite The Change
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Transfer Of ONGC Assets In The North East To OIL Not All That Easy
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Mukesh Ambani: Juggling With Too Many Balls In The Air?
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BPCL Selloff Fans Adani’s Ambitions
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Foreign Investment
Hunting Energy Services Partners With Jindal SAW
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Overseas Investment
Oil India Sells 20% Stake In Venture Partner For $25 Million
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India Offers Credit Line Of USD 500 Million To Sri Lanka For Purchase Of Petroleum Products
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Gas Scene
Domestic Natural Gas Scene in December 2021
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Declining Domestic Gas Production, Increasing Gas Import Dependency
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Natural Gas Price Trends: Global and Domestic
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Sector-Wise Consumption Of Natural Gas In November 2021
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Domestic Natural Gas Scene in November 2021
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IGL, An Emerging Giant In India’s Gas Sector
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Natural Gas Price Trends: Global and Domestic
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Coal Bed Methane (CBM) gas development in India
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Sector-Wise Consumption of Natural Gas In October 2021
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Domestic Natural Gas Scene In October 2021
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Sector-Wise Consumption Of Natural Gas
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Expanding Natural Gas Infrastructure
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Domestic Natural Gas Scene in September 2021
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Natural Gas Price Trends: Global And Domestic
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Dip In Capacity Utilisation of LNG Terminals
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Data Section
Monthly Upstream Data
Monthly Downstream Data
Historical database
Data Archives
Special Database
India’s Crude Oil Import Drops In December 2021
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Crude Processing Up In Volume, Processed More HS Crude In December 2021
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R-LNG, Domestic Gas Consumption Sector-wise
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Major Natural Gas Pipeline Network
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Oil Import - Volume and Value
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De-Growth in Passenger Vehicles Sale
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Refining Margins Down Asia, US Gulf Coast
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Indian Crude Basket Price In December In $
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Production And Consumption Of Petroleum Products
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Domestic Oil & Gas Production vis a vis Overseas Production
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Petroleum Products Consumption Growth Trend
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Capital expenditure of PSU oil companies
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Industry Consumption Trend Analysis of Petroleum Products During April November 2021-22
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Power situation Remains Unchanged in November
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Gross Refining Margins (GRM) of Indian refineries
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Consumption of MS, HSD, LPG & ATF
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Weightage of crude oil, natural gas and petroleum products in Wholesale Price Index (WPI)
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Consumption Growth Of Petroleum Products
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Rising Global petroleum product prices Result In Increased Refining Margins
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Global Refining Throughput Set To Increase
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Tenders [FREE Access]
ONGC
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