To fulfil Oil Ministry’s grand vision, ONGC must take a slick new avatar

Richa Mishra New Delhi | Updated on June 28, 2021

Today 80% of ONGC’s production comes from only 24 fields, while remaining 190 fields contribute only 20%   -  REUTERS

Divesting non-core functions, focusing on exploration and strategy, key agendas

The Ministry of Petroleum & Natural Gas would like the public sector energy giant ONGC to reassess its role with an ultimate aim of becoming a resource owner, functioning like a holding company. ONGC should focus on strategising, exploring and developing India’s energy space while monetising and divesting its resources and generating funds to reinvest, according to the Ministry.

It wants ONGC to adopt a new business model by divesting non-core activities such as drilling, logging and field services to separate domain companies. ONGC’s performance as an oil and gas explorer has been reviewed by the Ministry on a regular basis for some time now.

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“In global post Covid-19 recovery phase, India is one of the most promising developing economies with a high growth potential and ONGC should take advantage of this opportunity,” an official involved with the process told BusinessLine.

Clean energy

“While developed countries may switch to renewables and other cleaner energy sources due to climate concerns, India still needs fossil fuels to meet its growing energy requirements. There is an urgent need to aggressively explore unappraised/unexplored sedimentary hydrocarbon areas in the next three years. Given the expected spurt in economic growth post Covid-19 recovery, there is high potential to attract investment, talent and resources in India,” the official added.

Also read: May crude production down, imports higher

Today, almost 80 per cent of India’s crude oil requirement are met through imports. Minister for Petroleum and Natural Gas Dharmendra Pradhan has been raising concerns at global platforms about the spike in global oil crude prices. In fact, on June 24, at a high level consultation meeting with OPEC Secretary General Mohammed Sanusi Barkindo, Pradhan flagged the rising crude oil prices and its impact on consumers and economic recovery. He emphasised that high crude prices are eerting significant inflationary pressure.

“ONGC, being the flagship central public sector enterprise, has grown up manifold and has resources, (but) it has not explored aggressively. Further, the engagement of ONGC on a large number of small fields has reduced its flexibility and project implementation capability. Today 80 per cent of ONGC’s production comes from only 24 fields, while remaining 190 fields contribute only 20 per cent,” he said.

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An official added: “It is time ONGC refocussed on core activity by acquiring more data and explore more. It should also monetise the resources/facilities and generate funds. The company should de-risk itself by inviting partners and move to new areas for exploration and business. Basically, it should first consolidate activities geographically/basin wise to achieve speed, efficiency and cost effectiveness.”

New business models

There is a need to develop new business models for monetisation of stranded assets/discoveries/spare facilities. Business models such as Design, Finance, Built and Operate as well as Annuity & Securitisation based models for development are to be explored, the official added.

“ONGC should now take the role of nurturing, handholding and expanding exploration and production activities in India by bringing small and medium-sized companies. This can be done by having partnership (technology/ finance/ consultancy/project execution/ management) with global players for difficult plays (HP-HT, ultra-deepwater exploration areas), new basinal areas (Gujarat Kutch, Bengal Basin) and for enhancing production from existing major fields,” the official explained.

Published on June 28, 2021

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