By R. Sasankan

When businesses stumble, top executives scramble to find a way to beat back the blues. Some try to re-write the rules of the game, others succumb to the allure of diversification. But there are several pitfalls that you could face when you wade into areas where your expertise is thin. And it can get deeply embarrassing if you are trying to make a strategic move that you tried before and didn't seem to yield the expected rewards.

India's upstream major Oil and Natural Gas Corporation (ONGC) seems to be mulling a course of action that will amount to straying from its original mandate which was to focus on the discovery of oil and gas fields. A report from international news agency Reuters says the Corporation is planning to set up a trading unit for crude and fuels of its group companies. Quoting a senior ONGC executive, the report adds that the plan is at a preliminary stage and that internal group is looking into the modalities of the issue including legal issues.

ONGC has had a hard time lately with its oil hunt mission. It has earned a bad reputation for drilling dud oil wells. After the sensational Bombay High find in the early 1970s, it has had a very patchy record with it oil discoveries in India's sedimentary basins. It is easy, therefore, to understand why its top executives are flirting with an idea that was first floated more than four decades ago.

But it's important to first provide a historical perspective before I pronounce my views on the latest gambit. In its original incarnation, ONGC was a Commission - called the Oil and Natural Gas Commission - that was set up in 1956. Its first oil discoveries were in the state of Gujarat. To refine the crude produced in the state, ONGC commissioned a 2 million tonne per annum refinery at Koyali in 1965 which came to be known as the Gujarat Refinery. The foundation stone for the refinery project was laid by then Prime Minister Jawaharlal Nehru.

In the 1970s, K.D. Malviya became the country's petroleum minister. He promptly asked the ONGC management to hand over the refinery to Indian Oil Corporation (IOC) and concentrate on exploration and production (E&P) only. Today, Gujarat Refinery with an annual capacity of 13.70 million tonnes is one of IOC's largest refineries.

Malviya's decision is truly historic even though the ONGC management at that time baulked at the unpalatable directive. Very few politicians would have had the courage or resolve to ram through an unpopular decision.

Malviya's direction forced ONGC to focus on exploration and production with greater vigour, eventually leading to the discovery of the Bombay High field in the early 1970s. Soon there were other discoveries like the Bassein gas fields, and Panna, Mukta and Tapti in the western offshore.

The development of Bombay High altered the missionary zeal of ONGC men and corrupted the political leadership as well as the ONGC management to some extent. Indian sedimentary basins are not known to be prolific in hydrocarbon reserves. For years, ONGC did not have a significant commercial discovery.

That is when there was a growing realisation that ONGC needed a dynamic leader who would shake the organisation out of its slumber. The mantle fell on Subir Raha who was brought in as ONGC chairman and chief executive. Raha had no upstream experience; he had worked all his life with Indian Oil Corporation and had proven to be a very competent downstream executive with a reputation for great personal integrity.

But at ONGC, Raha soon discovered that he was a fish out of water. Raha was feeling restless because he was unable to make an impact in ONGC's upstream business. That is when he stumbled on the idea of acquiring Mangalore Refinery and Petrochemicals (MRPL) which was up for sale. The country already had several established and competent refiners including IOC, BPCL and HPCL. What difference could ONGC make by acquiring a refinery like MRPL?

ONGC soon waded into a new turf and crossed the Rubicon, thereby breaching Malviya's strict boundary between upstream and downstream players. The move occurred at a time when the country's oil demand and imports were consistently rising. ONGC had an overseas subsidiary called ONGC Videsh which acquired oil assets overseas. But the sad truth is that this entity's overtures overseas have been very feeble. It has assets in 17 countries but it does not have any significant stake in any of them. As a result, it is content to be a bit player and does not seek to be nominated as an operator of an oil asset - its timidity in stark contrast to the attitude of its Chinese rivals who aggressively bid for control.

ONGC has failed to report a big commercial discovery in the country and naturally its frustration with the upstream operations has started to show. It is but natural for the chief executive of an upstream company to feel miserable when fresh oil and gas discoveries elude his grasp.

In the 1980s, in the wake of accelerated production from Bombay High, domestic crude production met 80 per cent of the country's demand. Now, India imports close to 88 per cent of its crude requirement. The only relief in recent months has been the discounted Russian crude which provoked US President Donald Trump to slap an additional 25 per cent tariff on goods exported to than nation from India.

If oil and gas fields cannot be discovered at home, why not explore overseas prospects? Why must you wade into an area where you do not have competency? Like Oil India - the other upstream player - ONGC is a cash-rich company. A number of oilfield assets are up for grabs in the US.

Why can't ONGC wind up ONGC Videsh and start directly acquiring oilfields there. If nothing, it could at least bid for a majority stake in these projects.

India has extremely friendly relations with President Vladimir Putin which it must seek to exploit to acquire stakes in oil and gas producing assets as well as exploration blocks in Russia. But instead of aggressively pursuing E&P options overseas, ONGC is trying to diversify into trading of crude and fuels where bigger downstream players like IOC, BPCL and HPCL operate. Is that a wise move?

What I am trying to assert is that ONGC ought not to divert from its primary E&P mandate.

Petroleum minister Hardeep Puri is a very astute leader and a person with great integrity. It is time for him to step up and - in consultation with the top leaders in the ruling party including Prime Minister Narendra Modi - must once again redraw the red lines, re-frame energy security strategies and provide a new impetus to the country's oil sector.