The Hindu Business Line : `We would be a $50-billion company in 5 years'

THREE years ago few would have bet that equity shares of state-owned Oil and Natural Gas Corporation worth about Rs 10,000 crore would be lapped up in about 11 minutes.

Or that it would own equity oil in some of the most prestigious and sought-after oil fields across the world. Or even that it would grow into an integrated giant with interests ranging from prospecting for oil to manufacturing petrochemicals.

Much of the credit for ONGC's spectacular growth goes to its Chairman and Managing Director of three years, Mr Subir Raha. It was under his leadership that ONGC ventured into the fields of frozen Siberia and volatile Sudan securing equity oil, vital to the country's long-term energy security. Mr Raha was also instrumental in the company taking over the loss-making MRPL and turning it around into a company with net profits of over Rs 500 crore.

In a chat with Business Line at at Vasundhara, ONGC's Mumbai HQ, Mr Raha spoke about some future projects and strategies and about the rationale behind its strategies. Excerpts:

Where do you think international oil prices are headed? Does this not affect ONGC Videsh Ltd's acquisition plans?

Current global oil demand is 80 million barrels per day. OPEC is talking of increasing output by two million bbl from July. But an increase in production will not be the only factor influencing global oil prices. A lot will also depend on the June 30 deadline for transfer of power (in Iraq). Also, terrorist strikes on oil facilities and workers in Saudi Arabia, US (presidential) elections - there are many things that will have to fall into place for prices to stabilise.

But the most important factor is that high prices in the summer have affected inventory build-up in the West. Which means they are heading towards a winter without sufficient stocks. This may affect prices. And yes, it will affect OVL and also MRPL but it is too premature to think on those lines.

How well has ONGC's Rs 3,557-crore ultra-deep water drilling campaign fared so far? Will there be any change in the campaign after problems with Transocean's drill ship that allegedly drifted away in the waters?

The rigs that we have employed from both Transocean and Dolphin meet contractual specifications. The process of employing these ships involves a third-party clearance and our own officials also verify it. What happened with Transocean was an accident. The rig had to snap the string because of weather conditions. I do not know much about drilling but experts tell me the officer in charge did a good job. So there is no question of changing contracts.

The campaign has seen actual discoveries. Of the two wells drilled, one was a dry well, another a success. The G-4 well has 0.8 trillion cubic feet of gas. Three other wells are being drilled at the moment.

Is it true that the company plans to change the way it awards contracts?

Yes, we are trying to do away with tenders for each and every work. The idea is, instead of coming out with tenders for each and every aspect of offshore field development, I give out the tender to one contractor who then appoints his own sub-contractors. It may cost me a bit more, but the responsibility is on one contractor. This saves a lot of time and unnecessary hassles for the company. At present we will be following this procedure for offshore contracts only.

What is the rationale behind the recently announced petrochemical projects?

Refining margins of independent refineries are around 2-3 per cent. But refineries that have petrochemicals plants integrated with them enjoy margins of between 12 per cent and 15 per cent. This is true of refineries in South-East Asia, Houston or even in Jamnagar. Refineries with integrated petrochemical plants save a lot in energy costs. And so it makes eminent sense to put up a petrochemical plant.

Also, in the case of most Indian refineries, even if heat efficiency is not a problem, naphtha disposal is. Naphtha forms 10 per cent of a refinery's yield. ONGC plans to put up a dual-feed cracker using both gas and naphtha as feedstock.

We are looking to set up propylene/ethylene crackers at Mangalore and Dahej. According to Mr Mukesh Ambani, Chairman and Managing Director of RIL, India's leading petrochemical producer, the country needs five more petrochemical crackers of one million tonnes each. We plan to build only two of these.

ONGC and subsidiary MRPL both have licences to retail petroleum products. What are your strategies for entering an already congested transport fuel retail market, especially when existing players are on an aggressive expansion spree?

MRPL entering the retail market is not top priority at the moment. The growth will come through ONGC. And yes, there is space to grow. Cumulative growth in consumption of petroleum products is at 10 per cent.

The Golden Quadrilateral is a big opportunity, especially with increasing auto population. There is a mega gasoline opportunity coming up.

There was a report that said the optimum number of retail outlets India needs is around 20,000. So there is going to be a shakeout. But it works in the consumer's favour.

What are your targets for ONGC five years from now?

I see ONGC as a fully integrated oil and gas company with interests in exploration and production, fuel retailing, petrochemicals and power.

I would not say `energy' company because we may also set up an insurance subsidiary for self-insurance, to begin with.

We would be a $50-billion company in five years. We are now a $10-billion company. A 10-per cent growth rate is not bad eh!