Analyzing, Monitoring and Controlling OF Budget A Summer Training Project Report (Finance)

Submitted in partial fulfilment of the requirement for the Award of degree of Masters of Business Administration

2011-2013

Submitted by: by: Pandey Ashutosh Kumar B.

Guided Dr. Shitole M.V

PREFACE

The purpose of this report is to explain what I did and what I learned during my Internship period with the Institute of Petroleum Safety Health & Environment Management (IPSHEM), a unit of Oil and Natural Gas Corporation Ltd located in Goa, India. This report is also a requirement for partial fulfillment of Oil and Natural Gas corporation (ONGC) Internship program. This report primarily focuses on Controlling, Monitoring and Analysis of Budget of IPSHEM. The report also implies various assignments handled by me, working environment and success and shortcomings of the system followed in the Organization.

The Internship program is designed in such a way that student can grasp maximum knowledge and get practical exposure to Industrial environment in minimum possible time. However, time is a major constraint in this program, but it provides an opportunity to the student in understanding the industry with special emphasis on development skills in analyzing and interpreting practical problems though the application of theories and techniques of financial management. This is a new platform of learning through practical experience, which incorporates survey and comparative analysis. And finally this Internship program has given me an opportunity to relate the theory with practice, to test validity and applicability of my classroom learning against real life industrial situations.

INDEX Chapter No 1 2 3 4 5 Particulars Introduction Research Methodology Conceptual Discussion Data Analysis Finding, Conclusion and Suggestions Page No

Chapter 1: INTRODUCTION

Overview of Industry as a whole: The Oil Industry started off more than five thousand years back. Oil sipping up from the ground was used to make the boats waterproof in the Middle East and also used as medicating as well as for painting different things. THE
DEMAND FOR

OIL

WAS MUCH HIGHER THAN WHAT IT ACTUALLY

PRODUCED AND THIS BROUGHT FORWARD THE CONCEPT OF MAKING OIL PRODUCTION COMPANIES WHICH IS COLLECTIVELY KNOWN AS THE

OIL

INDUSTRY. The Oil Industry is a very important industry in the world and a lot depends on the price of the oil and it has been observed that whenever the oil prices increase the price of various products also increases. The Oil Industry also through oil production accounts for a large amount of the consumption of energy. In this issue the Middle East is in the first position and the lowest consumption is done by the countries in Europe. According to the statistics the amount of oil consumed by the world every year is as many as 30 billion barrel among which nearly 25 percent of the oil consumption is done by United States of America. The Oil Industry can be parted in two, Upstream and Downstream. The importance of oil in the world evolved at a slow pace but once it was identified, it became one of the most important things in the lives of human beings. Oil Industry Statistics: The oil sector is considered to be one of the important areas of concern for the It has acted as a challenge before the global economic scenario. There is fast growing oil consumption in the nonAsian countries. The non-OECD Asia (Including both India and China) accounts for around 40 percent of the total increase in world oil use. From estimation it is found that to meet the projected increase in world oil demand the total petroleum supply in 2030 is required to reach 250 million barrels per day from 164 million barrels per day as of the year 2012.
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The world oil consumption has increased by 1.2 million barrels per day in the year 2005, even after the increase of 2.6 million barrels per day as in the year 2004. In the year 2004, China's oil use have increased by 0.9 million barrels per day and at the same time its demand increased by only 0.4 million barrels per day in 2005. Among the various sectors, the transportation sector in the world has led to a high pressure to the industry, as there are few alternatives to the petroleum.

The Indian Scenario After the Indian Independence, the Oil Industry in India was a very small one in size and Oil was produced mainly from Assam and the total amount of Oil production was not more than 250,000 tons per year. This small amount of production made the oil experts from different countries predict the future of the oil industry as a dull one and also doubted India's ability to search for new oil reserves. But the Government of India declared the Oil industry in India as the core sector industry under the Industrial Policy Resolution bill in the year 1954, which helped the Oil Industry in India vastly. Oil exploration and production in India is done by companies like NOC or National Oil Corporation, ONGC or Oil and Natural Gas Corporation and OIL who are actually the oil companies in India that are owned by the government under the Industrial Policy Rule. The National Oil Corporation during the 1970s used to produce and supply more than 70 percent of the domestic need for the petroleum but by the end of this amount dropped to near about 35 percent. This was because the demand on the one hand was increasing at a good rate and the production was declining at a steady rate. World's sixth largest oil consumer, India bought crude oil worth a staggering $160 billion last fiscal. According to a study by industrial body Assocham, the amount spent is equivalent to more than half of the country's total earnings from exports during the same period. Looking from the imports angle and

the impact on the trade deficit, crude oil along with gold imports accounted for 44.4 percent of India's total imports in 2011-12. Such high level of imports exerts paramount pressure on India's external payments .For the past five years, crude oil imports have been equivalent to about 40 percent of the country's total exports. In 201112, the figure was at an astonishing high of over 53 percent. India's exports crossed $300 billion in 2011-12, while imports stood at $485 billion. The maximum imports were of crude oil - about $160 billion while gold and silver contributed to $60 billion in the last fiscal. The study viewed that austerity in oil consumption will address a plethora of problems faced by India such as a rising trade deficit, a bulging fuel subsidy bill and other macro imbalances. Widening fiscal deficit and increasing of the current account deficit are among the main problems faced by the national economy as these two issues have had their impact on some of the recent ratings outlook downgrades done by the global agencies like Standard and Poor's and the oil austerity will surely help. The share of crude oil and gold imports has been increasing constantly for the last five years. These, together, accounted for 38.8 percent of the country's total import bill in 2007-08, which shot up to over 44 percent in the previous financial year. Crude alone was responsible for over 31 percent of the country's imports, while gold imports accounted for 12.6 percent. The crude oil imports have not increased only because of price increase in the last several years. In quantitative terms also, these imports have shown a rising trend. The quantity of petroleum imports has increased from 82 million tons in 2002-03 to 164 million tons in 2010-11. Simultaneously, the average price of crude oil has also been rising over the years barring 2009-10. As a result, the import bill of the country in rupee terms on account of oil imports has risen by over 500 percent between 2002-03 and 201011. These imports have also been a big drain on India's foreign exchange reserves. In 2002-03, petroleum imports as proportion to the country's foreign exchange reserves were 23.18 percent. The ratio went up to 34.80 percent in 2010-11, the paper disclosed. "However, with the crude prices falling in the international market, the equation is expected to change in the on-going financial year of 201213.Every fall in the crude oil prices was a good news for the Indian economy and the government's fiscal situation.
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The Oil that is produced by the Oil Industry in India provides more than 35 percent of the energy that is primarily consumed by the people of India. This amount is expected to grow further with both economic and overall growth in terms of production as well as percentage. The demand for oil is predicted to go higher and higher with every passing decade and is expected to reach an amount of nearly 250 million metric ton by the year 2024.

Some of the major companies in the Oil Industry in India are:

Oil India Ltd. Reliance industries Bharat Petroleum Corporation Limited Hindustan Petroleum

HIGHLIGHTS IN THE PETROLEUM & NATURAL GAS SECTOR DURING 2010-11 India has total reserves (proved & indicated) of 757 million metric tons of crude oil and1241 billion cubic meters of natural gas as on 1.4.2011. The total number of exploratory and development wells and metreage drilled in onshore and offshore areas during 2010-11 was 420 and 1005 thousand meters respectively. Crude oil production during 2010-11at 37.71 million metric tons is 11.91% higher than 33.69 million metric tons produced during 2009-10. Gross Production of Natural Gas in the country at 52.22 billion cubic metres during 2010-11 is 9.95% higher than the production of 47.50 billion cubic metres during 2009-10

The flaring of Natural Gas in 2010-11at 1.85% of gross production is lower than at 2.00% in 2009-10. The refining capacity in the country increased to 187.386 million metric tons per annum (MMTPA) as on 1.4.2011 from 183.386 MMTPA as on 1.4.2010. The total refinery crude throughput during 2010-11 at 206.15 million metric tons is higher about 7% than 192.77 million metric tons crude processed in 2009-10 (including data in respect of RIL, SEZ Refinery.) The production of petroleum products during 2010-11 was 190.364 million metric tons (including 2.168 million metric tons of LPG production from natural gas) against the last years production at 179.769 million metric tons (including 2.243 million metric tons of LPG production from natural gas). The country exported 59.13 million metric tons of petroleum products against the imports of 26.31 million metric tons (including 8.95 million metric tons of LNG) during 2010-11. The consumption of petroleum products during 2010-11 was 141.785 million metric tons (including sales through private imports) which is 3.60% higher than that of 138.196 million metric tons during 2009-10. The total number of retail outlets of Public Sector Oil Marketing Companies as on 1.4.2011 has gone up to 38964 from 36462 on 1.4.2010. The total number of LPG consumers of Public Sector Oil Marketing Companies as on 1.4.2011 was 125.266 million against 114.952 million as on 1.4.2010. The number of persons employed (including contract employees) in petroleum industry has been increased from 139865 on 1st April 2010 to 141929 on 1st April, 2011.

1.1 : Industry Profile (a) Exploration & Production sector in India: Exploration activity started in India way backing 1866 in the Northern Eastern state of Assam with the drilling of Digboi well, just seven years after drilling of the first oil well in Pennsylvania, USA. For about a century the E&P activity was restricted to the North Eastern part of the country and till early 1960s the total crude production in India was only about 10,000 bpd. Burmah oil was the only company engaged in E&P activity. With the growing demand the government recognized the need for exploring hydrocarbon resources and accordingly set up Oil and Natural Gas Commission in 1956. Burmah oil was also merged with Oil India limited. This was however taken over by the government of India in the year 1981. ONGC was converted into a public limited company in 1993.ONGC and OIL enjoy the status of national oil companies and have a duopoly of 90% and 10%share respectively. The national oil companies market their production directly except natural gas which is distributed through Gas Authority of India Ltd (GAIL). Thus, the upstream petroleum industry in India is over a century old, the Digboi field of Assam Oil Co having been put on production as early as in the year 1890. However, oil production in India exceeded the figure of One million tons per year only in the year 1961 when ONGC put the Ankleswar field on production. The production of crude oil increased to over 35 million tons per year in the year 1997-1998. This represents only less than 50% of the countrys

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requirement of petroleum. The balance has to be made good by imports putting our foreign exchange exchequer to a great strain. Considering the ever-growing demand of petroleum at the rate of about 7% per annum, and the dwindling reliance on indigenous production of oil and natural gas, the Government of India in 1991, decided to open up the exploration and production of oil and natural gas to the private sector. The ministry of Petroleum invites bids from the private parties/consortiums in a number of bidding rounds. Consequently, as many as 30 small oil and gas fields around 50 exploration blocks were awarded to private parties, for exploration and production work. It was also decided by government to import liquefied Natural Gas, to meet the ever growing requirement of natural gas in the country. The government also decided to open up oil exploration in the deeper continental shelf by private parties.

(b) Indian Oil and Gas Industry With the government gradually giving up control on the oil and gas sector in favor of market forces, Indian oil companies both upstream and downstream are getting exposed to international price fluctuations. This is changing the ground realities for this vital sector of the Indian economy.

(c) The Global Scenario Globally, the oil and gas sector is dominated by certain large private companies who have a presence in almost all segments of oil and gas value chain. Historically, oil price has been the single most important challenge facing the global oil industry. The problem is all the more acute as the large private companies account for only a small share of world oil production even as oil prices remain unpredictable and prone to wide production costs against the oil production costs of the Organization of Petroleum Exporting Countries and increasingly relying on technological innovations and other costs cutting measures to lower their own production costs.

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(d) The Indian Upstream Sector: For the upstream players (the crude oil producers), the linkage to international crude oil prices implies volatility in earnings. While a rise in international crude oil prices would translate into a positive contribution to the bottom line, a decline in the international prices, on the other hand, would exert pressure on the margins of all upstream countries. The national oil companies would, however, is protected from the downside risk by the floor price fixed by the government. But if the floor price is removed and the international oil prices drop to levels lower than the cost of production, even the national oil companies would require government intervention to protect their bottom line. What aggravates the risk further is the fact that declining oil production and stagnating reserves dedicate that the upstream companies venture into exploration areas that have a high-risk-high-return profile(like deep water blocks). And this has implications for future exploration and production (E&P) costs. Given the emerging scenario, ICRA expects the strategies of the upstream players to focus on: use of battery recovery techniques; employment of cost cutting measures; entry into high-risk-highreturn areas(with the assumption that oil prices will not fall below the cost of production);integration into downstream areas; partnering; venturing into other geographical regions; and, undertaking organizational restructuring. ICRA believes that through the employment of these strategies, domestic upstream players would be able to strengthen their position in their core business (E&P) while at the same time diversifying their risk portfolio and enhancing their revenue base.

(e) The Indian downstream sector: The phased dismantling of the APM has exposed the Indian downstream players (refiners and marketers of petroleum products) to market forces. The refining margins of the Indian refineries are now linked to the international refining margins. A fluctuation in the international prices of crude oil/ product translates into a variation in the domestic margin (although they are, to a large extent, protected by the positive net duty protection). In the first 18 months of decontrol (fiscal year 1999 and first half of fiscal year 2000) the profitability of Indian refineries has increased (and is expected to increase further) as their margins have increased following higher duty protection, and linkage of crude and product prices with international prices. However on the side, the expected surplus in the domestic market may limit this
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margin expansion. The other factor influencing the profitability of Indian refineries in the deregulated scenario would be refinery configuration, operating cost, and refinery location. The ownership of marketing and distribution infrastructure would be strategic importance and would enhance profitability as a marketing sector is decontrolled. While the profitability of the integrated players would be higher and more resilient to economic troughs, the pure refining companies would find it difficult to sustain profitability in a decontrolled scenario. Accordingly, the pure refining and marketing sector is likely to lead to severe competition among the various players in the industry, and a greater focus on branding and product differentiation. Given the changes taking place, ICRA expects the strategies of downstream players to focus on: strengthening import infrastructure; enhancing scale of operations; upgrading processing facilities; implementing environmental projects; strengthening marketing and distribution infrastructure and promoting brands; entering into strategic alliances; venturing into other areas of the energy value chain for optimizing the riskreturn profile; and restructuring the organization. (f) The Indian gas sub-sector: The share of natural gas in Indias energy mix has increased more than three times since the early 1980s. Energy efficiency, multiplicity of applications, and environment neutrality are the key factors that are likely to propel further rise in demand for gas in India. The increase in demand could come both from the existing uses of natural gas and from newer application. A rising demand for gas has implications on the supply level. An increased thrust on liquefied natural gas imports would signal positive developments on the supply front. ICRA also expects the decontrol of the oil sector to enable the existing oil companies to pursue gas distribution, is likely to benefit from the expected rise in natural gas supplies. Besides, its exposure to price risks would be minimal because of the fixed nature of natural gas transportation tariffs. Likely Strategic Initiatives: - ICRA believes that in response to the phased deregulation, the strategic initiatives of the various players in the energy value chain would focus on the following factors. Product mix. This will have to be in line with market demand. Technology would play a major role in influencing the product mix. Cost competitiveness. Technological advancements and scale of operations would have an impact on operating costs. Infrastructure/ Logistics. The ownership of infrastructure for sourcing crude oil and the logistics for distributing finished products would have a considerable impact on operating costs. Integration into different elements of the value chain would be imperative for bringing synergetic benefits,
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reducing volatility in earnings, and enhancing value addition. Brand building, pricing, and packaging. These would be used as tools to deliver greater value to customers.

1.2: The Key Players in Indias Energy Sector: Coal India Limited (CIL) was created after 1973-74 nationalization of Indias coal industry. CIL acts as a holding company and was designed to integrate and streamline the industry. Its eight regional subsidiaries accounts for about 90 percent of Indias coal output and operates 510 mines and 16 coking coal washeries. The Ministry of Petroleum and Natural Gas sets policies and overseas the oil and gas industry. In 1959, the Oil and Natural Gas Commission (ONGC) was formed by the government to run Indias main upstream activities. In 1994, it was changed from a Commission to a Corporation in preparation for eventual privatization. Oil India Limited (OIL) controls upstream activities in northeastern areas such as Assam. Indian Oil Corporation (IOC) is Indias latest refining and marketing company. It also is responsible for purchasing imported crude oil. Other refining/ marketing companies include Hindustan Petroleum, Bharat Petroleum, Madras Refineries, and Cochin Refineries. 1.3: Energy Scenario While the frequency of rise in oil prices is increasing each decade , the possibility of a downward trend in global oil prices seems bleak. Energy security, as an issue of national strategic importance ,came to take the centre stage of the planning process against the backdrop of frequent rise in global crude oil prices .Our strong dependence on fossil fuels will continue for most part of the 21st century .Energy security has an important bearing on achieving national economic development goals and improving the quality of life of the people The level of per capita energy consumption has for long been consider as one of the key indicators of economic growth .The continued dependence of the nation on fossil fuels is loaded against it with

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inherent price volatility linked to finite global reserves. In addition ,global warming, caused largely by greenhouse gas emissions from fossil-fuel generating system , is also a major concern. India needs to develop alternate fuels considering the aforesaid two concern. In addition, indiscriminate and inefficient burning of fuel wood in traditional chulhas and in industries for thermal process heat has resulted in environmental pollution and health hazards

Profile of the Organisation: 1.5: History of ONGC 1947 - 1960 During the pre-independence period, the Assam Oil Company in the northeastern and Attock Oil company in northwestern part of the undivided India were the only oil companies producing oil in the country, with minimal exploration input. The major part of Indian sedimentary basins was deemed to be unfit for development of oil and gas resources. After independence, the national Government realized the importance oil and gas for rapid industrial development and its strategic role in defense. Consequently, while framing the Industrial Policy Statement of 1948, the development of petroleum industry in the country was considered to be of utmost necessity. Until 1955, private oil companies mainly carried out exploration of hydrocarbon resources of India. In Assam, the Assam Oil Company was producing oil at Digboi (discovered in 1889) and the Oil India Ltd. (a 50% joint venture between Government of India and Burmah Oil Company) was engaged in developing two newly discovered large fields Naharkatiya and Moran in Assam. In West Bengal, the Indo-Stanvac Petroleum project (a joint venture between Government of India and Standard Vacuum Oil Company of USA) was engaged in exploration work. The vast sedimentary tract in other parts of India and adjoining offshore remained largely unexplored. In 1955, Government of India decided to develop the oil and natural gas resources in the various regions of the country as part of the Public Sector
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development. With this objective, an Oil and Natural Gas Directorate was set up towards the end of 1955, as a subordinate office under the then Ministry of Natural Resources and Scientific Research. The department was constituted with a nucleus of geoscientists from the Geological survey of India. A delegation under the leadership of Mr. K D Malviya, the then Minister of Natural Resources, visited several European countries to study the status of oil industry in those countries and to facilitate the training of Indian professionals for exploring potential oil and gas reserves. Foreign experts from USA, West Germany, Romania and erstwhile U.S.S.R visited India and helped the government with their expertise. Finally, the visiting Soviet experts drew up a detailed plan for geological and geophysical surveys and drilling operations to be carried out in the 2nd Five Year Plan (1956-57 to 1960-61). In April 1956, the Government of India adopted the Industrial Policy Resolution, which placed mineral oil industry among the schedule 'A' industries, the future development of which was to be the sole and exclusive responsibility of the state. Soon, after the formation of the Oil and Natural Gas Directorate, it became apparent that it would not be possible for the Directorate with its limited financial and administrative powers as subordinate office of the Government, to function efficiently. So in August, 1956, the Directorate was raised to the status of a commission with enhanced powers, although it continued to be under the government. In October 1959, the Commission was converted into a statutory body by an act of the Indian Parliament, which enhanced powers of the commission further. The main functions of the Oil and Natural Gas Commission subject to the provisions of the Act, were "to plan, promote, organize and implement programmes for development of Petroleum Resources and the production and sale of petroleum and petroleum products produced by it, and to perform such other functions as the Central Government may, from time to time, assign to it ". The act further outlined the activities and steps to be taken by ONGC in fulfilling its mandate.

1961 - 1990 Since its inception, ONGC has been instrumental in transforming the country's limited upstream sector into a large viable playing field, with its activities spread throughout India and significantly in overseas territories. In the inland areas, ONGC not only found new resources in Assam but also established new oil province in Cambay basin (Gujarat), while adding new petroliferous areas in the

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Assam-Arakan Fold Belt and East coast basins (both inland and offshore). ONGC went offshore in early 70's and discovered a giant oil field in the form of Bombay High, now known as Mumbai High. This discovery, along with subsequent discoveries of huge oil and gas fields in Western offshore changed the oil scenario of the country. Subsequently, over 5 billion tons of hydrocarbons, which were present in the country, were discovered. The most important contribution of ONGC, however, is its self-reliance and development of core competence in E&P activities at a globally competitive level.

After 1990 The liberalized economic policy, adopted by the Government of India in July 1991, sought to deregulate and de-license the core sectors (including petroleum sector) with partial disinvestments of government equity in Public Sector Undertakings and other measures. As a consequence thereof, ONGC was reorganized as a limited Company under the Company's Act, 1956 in February 1994. After the conversion of business of the erstwhile Oil & Natural Gas Commission to that of Oil & Natural Gas Corporation Limited in 1993, the Government disinvested 2 per cent of its shares through competitive bidding. Subsequently, ONGC expanded its equity by another 2 per cent by offering shares to its employees. During March 1999, ONGC, Indian Oil Corporation (IOC) - a downstream giant and Gas Authority of India Limited (GAIL) - the only gas marketing company, agreed to have cross holding in each other's stock. This paved the way for longterm strategic alliances both for the domestic and overseas business opportunities in the energy value chain, amongst themselves. Consequent to this the Government sold off 10 per cent of its share holding in ONGC to IOC and 2.5 per cent to GAIL. With this, the Government holding in ONGC came down to 84.11 per cent. In the year 2002-03, after taking over MRPL from the A V Birla Group, ONGC diversified into the downstream sector. ONGC will soon be entering into the retailing business. ONGC has also entered the global field through its subsidiary,
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ONGC Videsh Ltd. (OVL). ONGC has made major investments in Vietnam, Sakhalin and Sudan and earned its first hydrocarbon revenue from its investment in Vietnam.

Vision And Mission

To be global leader in integrated energy business through sustainable growth, knowledge excellence and exemplary governance practices. World Class Dedicated to excellence by leveraging competitive advantages in R&D and technology with involved people. Imbibe high standards of business ethics and organizational values. Abiding commitment to safety, health and environment to enrich quality of community life. Foster a culture of trust, openness and mutual concern to make working a stimulating and challenging experience for our people. Strive for customer delight through quality products and services. Integrated In Energy Business Focus on domestic and international oil and gas exploration and production business opportunities. Provide value linkages in other sectors of energy business. Create growth opportunities and maximize shareholder value. Dominant Indian Leadership Retain dominant position in Indian petroleum sector and enhance India's energy availability.

Objectives And Functions

HR Objectives Enrich and sustain the culture of integrity, belongingness, teamwork, accountability and innovation. Attract, nurture, engage and retain talent for competitive advantage. 18

Enhance employee competencies continuously. Build a joyous work place. Promote high performance work systems. Upgrade and innovate HR practices, systems and procedures to global benchmarks. Promote work life balance. Measure and Audit HR performance. Promote work life balance.Integrate the employee family into the organisational fabric. Inculcate a sense of Corporate Social responsibilities among employees.

http://www.ongcindia.com/people.asp#b Problems of the Company/ Industry: 1.4: Table illustrating Growth of Oil Industry at a glance

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Growth Expectations In Oil And Gas: (http://www.offshore-

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technology.com/features/feature81879/)

ICD Research surveys oil and gas executives' expectations for the growth prospects of their companies. The report provides an insight into the type and likelihood of structural changes in the competitive landscape in terms of mergers, acquisitions and business structure.

To gain insight into confidence levels and the mood of the oil and gas sector ICD Research carried out a survey of the industry's top executives. The results also revealed the likely effects that the recession and recovery will have on competition within the industry. 57% of respondents in the upstream and downstream oil and gas industry are more optimistic about revenue growth for their companies over the next 12 months, relative to the previous 12 months (Figure 1). A further 26% are neutral about revenue growth compared with 13% who were less optimistic about their company's revenue prospects. The overall high level of optimism in the oil and gas industry compared with Q2 2009 might suggest either a strong belief in the imminent end to the global economic upheaval or successful steps being taken by companies to increase revenues and reduce costs, and the emergence of new profitable markets. Downstream and midstream Companies in the downstream and midstream segment are more optimistic about revenue growth over the next 12 months (Table 1). The rise in fuel use for road and air transportation is primarily driving demand for refined petroleum products such as air turbine fuel and diesel. "Oil and gas buyers are more optimistic compared with suppliers about revenue growth in the next year." Moreover, the use of natural gas in commercial vehicles and industrial use is further driving investment in storage infrastructure for the refined petroleum products of compressed natural gas and liquefied natural gas. Companies are focusing on increasing their revenue generation by means of adding their refining and storage capacities with much of the global refining capacity additions coming into play in 2009-10 within Asian countries. Companies are also focusing on sustaining high operating rates, improving efficiency and reducing operating costs. Upstream oil and gas Explorers/producers and suppliers in the upstream oil and gas industry have voiced optimism about the industry growth rate. The majority of buyers and suppliers expect the industry to grow at a faster or equal rate against the global GDP growth rate of 2%. The GDP of advanced

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economies is expected to grow by 1% in 2010. In general, buyer companies are more optimistic compared with suppliers about revenue growth in the next year. Overall, suppliers' optimism level has increased considerably from 2009 due to the growth in optimism levels among the buyer companies across different industries. Some suppliers also have long-term contracts set up and greater selling power than buyers or are not unduly affected by reduced demand. The optimism level in the upstream oil and gas sector has considerably increased in 2010 from that of 2009 fueled by improved cash flows and credit metrics during the year as a result of higher oil prices. In the case of the downstream and midstream oil and gas sector, contract backlogs and the rise in oil prices are expected to provide the required support to activity levels and credit profiles of companies operating in the sector. Globally, the optimism level is high in the oil and gas sector due to a rise in exploration successes and a more stable oil price, indicating that the sector is on the recovery path. Regional growth expectations Analysis of respondents' expectations by region reveals that 45% of European respondents are optimistic about revenue growth over the coming year compared with 56% of North American respondents, 61% of Asia Pacific respondents and 63% from the rest of the world region (Table 2). "The GDP of advanced economies is expected to grow by 1% in 2010." The optimism level of European respondents is lower compared with other respondents as some countries in the region (for example, Russia) are facing major challenges due to a steep slowdown in production levels and credit difficulties faced by many companies across the oil industry value chain. The European oil and gas sector should rebound by 2010-11 driven by the increased funding for capital expenditures, leading to a considerable rise of investment in the sector. Optimism in North American companies substantially increased in 2010 over 2009 in tandem with the growth of the economy and GDP. The credit worthiness of large integrated upstream oil and gas companies is set to improve in North America driven by their oil-heavy upstream portfolios, sizable cash balances and reasonably low net debt levels. The optimism level is high in the rest of the world and the Asia-Pacific region due to the fast economic growth in countries such as China, India and in the Middle East. Investments in the oil and gas sector are expected to increase in Asia and the Middle East in sectors such as drilling, transportation and storage infrastructure segments. Essar Oil's gas reserve discovery in the Raniganj field in India is expected to drive up investment in this sector. Investment in natural gas transportation is exemplified by the recent signing of a gas transportation agreement between Origin Energy and Epic Energy for building a gas pipeline to connect Eastern Australia with the rest of the country.

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The International Energy Agency estimates that global refining capacity will increase by 1.8mbpd in 2009, with Asia accounting for around 80% of the increase. Successes in crude oil drilling sites in African countries such as Nigeria and Egypt also aided in increasing the optimism levels in these regions. The increase of spending in technology development such as high level engineering services and reliable engineering management further helped in boosting the optimism level of respondents across all regions. Small oil and gas companies "45% of European respondents are optimistic about revenue growth over the coming year." Around 61% of respondents from smaller oil and gas companies, with revenues up to $100m, are more optimistic about revenue growth as compared to respondents from medium and largesized companies (Table 3). This indicates that the recession might have leveled out the competition, resulting in smaller companies having fair access to a wider audience to impress and gain business. Many companies are forming partnerships to optimise working capital and reduce costs, and they are also planning to venture into low-cost countries in Asia for reducing production costs. The net difference in optimism trends for the oil and gas industry was mapped with the individual results of 19 other industries. The global and extensive nature of the ICD Research Survey 2010 helps us understand the position of the oil and gas industry in relation to other major industries. The oil and gas industry occupies seventh position in the list with a relative optimism trend of 44% in its favour. This indicates that the sector is well into the recovery path along with other sectors that are driving the economy. http://www.offshore-technology.com/features/feature81879/

Players in oil industry: 1) Oil India Ltd.: 2) Hindustan Petroleum Corporation Ltd., 3) Bharat Petroleum Corporation Ltd. 4) Gas Authority of India Ltd. 5) Reliance Industries Ltd.

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Oil and Natural Gas Corporation

Competitors information:
1) Oil India Ltd.: The story of Oil India Limited (OIL) traces and symbolises the development and growth of the Indian petroleum industry. From the discovery of crude oil in the far east of India at Digboi, Assam in 1889 to its present status as a fully integrated upstream petroleum company, OIL has come far, crossing many milestones. On February 18, 1959, Oil India Private Limited was incorporated to expand and develop the newly discovered oil fields of Naharkatiya and Moran in the Indian North East. In 1961, it became a joint venture company between the Indian Government and Burmah Oil Company Limited, UK. In 1981, OIL became a wholly-owned Government of India enterprise. Today, OIL is a premier Indian National Oil Company engaged in the business of exploration, development and production of crude oil and natural gas, transportation of crude oil and production of LPG. OIL also provides various E&P related services and holds 26% equity in Numaligarh Refinery Limited. The Authorized share capital of the Company is Rs. 500 Crores. The Issued, Subscribed and 24

Paid share capital of the company is Rs. 240.45 Crores. At present, The Government of India, the Promoter of the Company is holding 78.43% of the total Issued & Paid-up Capital of the Company. The balance 21.57% of the Equity capital is held by others. OIL has over 1 lakh sq km of PEL/ML areas for its exploration and production activities, most of it in the Indian North East, which accounts for its entire crude oil production and majority of gas production. Rajasthan is the other producing area of OIL, contributing 10 per cent of its total gas production. Additionally, OILs exploration activities are spread over onshore areas of Ganga Valley and Mahanadi. OIL also has participating interest in NELP exploration blocks in Mahanadi Offshore, Mumbai Deepwater, Krishna Godavari Deepwater, etc. as well as various overseas projects in Libya, Gabon, Iran, Nigeria and Sudan. In a recent CRISIL-India Today survey, OIL was adjudged as one of the five best major PSUs and one of three best energy sector PSUs in the country.

2) Hindustan Petroleum Corporation Ltd., HPCL is a Government of India Enterprise with a Navratna Status, and a Fortune 500 and Forbes 2000 company, with an annual turnover of Rs. 1,32,670 Crores and sales/income from operations of Rs 1,43,396 Crores (US$ 31,546 Millions) during FY 2010-11, having about 20% Marketing share in India among PSUs and a strong market infrastructure. HPCL's Crude Thruput and Market Sales (including exports) are 14.75 Million Metric Tonnes (MMT) and 27.03 MMT respectively in the same period. HPCL operates 2 major refineries producing a wide variety of petroleum fuels & specialties, one in Mumbai (West Coast) of 6.5 Million Metric Tonnes Per Annum (MMTPA) capacity and the other in Vishakapatnam, (East Coast) with a capacity of 8.3 MMTPA. HPCL holds an equity stake of 16.95% in Mangalore Refinery & Petrochemicals Limited, a state-of-the-art refinery at Mangalore with a capacity of 9 MMTPA. In addition, HPCL is constructing a 9 MMTPA refinery at Bathinda, in the state of Punjab, as a Joint venture with Mittal Energy Investments Pte. Ltd. HPCL also owns and operates the largest Lube Refinery in the India producing Lube Base Oils of international standards, with a capacity of 335 TMT. This Lube Refinery accounts for over 40% of the India's total Lube Base Oil production. HPCL's vast marketing network consists of 13 Zonal offices in major cities and 101 Regional Offices facilitated by a Supply & Distribution infrastructure comprising Terminals, Pipeline networks, Aviation Service Stations, LPG Bottling Plants, Inland Relay Depots & Retail Outlets, Lube and LPG Distributorships. HPCL, over the years, has moved from strength to strength on all fronts. The refining capacity steadily increased from 5.5 MMTPA in 1984/85 to 14.8 MMTPA presently. On the financial front, the turnover has grown from Rs. 2687 Crores in 1984-85 to an impressive Rs 1,32,670 Crores in FY 2010-11.

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3) Bharat Petroleum Corporation Ltd. Type Public Traded as BSE: 500547 NSE: BPCL Industry Oil and gas Founded 1976 Headquarters Ballard Pier, Mumbai, Maharashtra, India Key people R. K. Singh (Chairman & MD) Products Petroleum, natural gas, and other petrochemicals Revenue US$ 44.581 billion (2012)[1] Net income US$ 163 million (2012)[1] Total assets US$ 15.275 billion (2012)[1] Total equity US$ 3.117 billion (2012)[1] Owner(s) Government of India Employees 14,154 (2012)[1] Website www.bharatpetroleum.com

4) Gas Authority of India Ltd.

Formation of GAIL GAIL (India) Ltd was incorporated in August 1984 as a Central Public Sector Undertaking (PSU) under the Ministry of Petroleum & Natural Gas (MoP&NG). The company was initially given the responsibility of construction, operation & maintenance of the Hazira Vijaypur Jagdishpur (HVJ) pipeline Project. It was one of the largest cross-country natural gas pipeline projects in the world. Originally this 1800 Km long pipeline was built at a cost of Rs 1700 Crores and it laid the foundation for development of market for natural Gas in India. Current Businesses - Domestic GAIL, after having started as a natural gas transmission company during the late eighties, has grown organically by building large network of Natural Gas Pipelines covering over 9500 Km with a capacity of around 172 MMSCMD; two LPG Pipelines covering 2040 Km with a capacity of 3.3 MMTPA of LPG; seven gas processing plants for production of LPG and other Liquid Hydrocarbons, with a production capacity of 1.4 MMTPA; and a gas based integrated Petrochemical plant of 410,000 TPA polymer capacity which is further being expanded to a capacity of 900,000 TPA. The Company also has 70% equity share in Brahmaputra Cracker and Polymer Limited (BCPL) which is setting up a 280,000 TPA polymer plant in Assam. Further, GAIL is a co-promoter with 17% equity stake in ONGC Petro-additions Limited (OPaL) which is implementing a green field petrochemical complex of 1.1 MMTPA Ethylene capacity at Dahej in the State of Gujarat. GAIL has 31.52% stake along with NTPC as equal partner in JV company, RGPPL at Dabhol which operates largest gas based power generation facility in the country and is also setting up 5 MMTPA LNG terminal. Keeping in mind the requirement of growth and consolidation as well as opportunities arising out of New Exploration Licensing Policy (NELP) of Government of India, the company has moved into upstream of gas value chain i.e. Exploration & Production and currently has stakes in 31 E&P blocks including 2 blocks overseas (in Myanmar). GAIL is a pioneer in City Gas Distribution (CGD) business in India, with Indraprastha Gas Limited (IGL) in Delhi and Mahanagar Gas Limited (MGL) in Mumbai being its biggest success stories. Besides IGL and MGL, GAIL has set up several JVs for CGD to supply gas to households, transport sector & commercial consumers in various cities including Hyderabad, Agartala, Kanpur, Indore, Vadodara, Lucknow, Agra and Pune. In 2008, GAIL incorporated a wholly owned subsidiary, GAIL Gas Ltd (GGL) to exclusively focus on city gas distribution 26

business. GGL has been authorized for implementation of CGD projects in four cities namely Kota, Dewas, Sonepat & Meerut in the 1st round of bidding by Petroleum & Natural Gas Regulatory Board (PNGRB). Leveraging on its pipeline network, GAIL has built a strong Optic Fibre Cable (OFC) network of approximately 13,000 km for its own internal use and leasing of bandwidth as a carriers' carrier. As a part of its initiative towards reducing carbon footprint and creating a path of sustainable growth, GAIL is building a portfolio of renewable businesses. The company has successfully commissioned wind energy power projects of 118 MW across states of Gujarat, Tamil Nadu and Karnataka. Global Presence As a strategy of going global and further expanding global footprint, GAIL has formed a whollyowned subsidiary company, GAIL Global (Singapore) Pte Ltd. in Singapore for pursuing overseas business opportunities including LNG & petrochemical trading. GAIL has also established a wholly owned subsidiary, GAIL Global (USA) Inc. in Texas, USA. The US subsidiary has acquired 20% working interest in an unincorporated joint venture with Carrizo Oil & Gas Inc in the Eagle Ford shale acreage in the state of Texas. In addition to having two wholly owned subsidiaries in Singapore & USA, GAIL has a representative office in Cairo, Egypt to pursue business opportunities in Africa and Middle East. GAIL is also an equity partner in two retail gas companies in Egypt, namely Fayum Gas Company (FGC) and National Gas Company (Natgas). Besides, GAIL is an equity partner in a retail gas company involved in city gas and CNG business in China China Gas Holdings Limited (China Gas). Further, GAIL and China Gas have formed an equally owned joint venture company GAIL China Gas Global Energy Holdings Limited for pursuing gas sector opportunities primarily in China. GAIL is a part of consortium in two offshore E&P blocks in Myanmar and also holds participating interest in the joint venture company South East Asia Gas Pipeline Company Limited incorporated for transportation of gas to be produced from two blocks in Myanmar to China. Consistent track record GAIL has been a leading public enterprise with a consistently excellent financial track record. The Turnover and PAT have shown remarkable accomplishment with CAGR of 16% and 12% respectively in the last decade. GAIL has recently developed corporate growth strategy for the period 2011-20 and the same has been approved by the Board of Directors. GAIL aspires to become an integrated hydrocarbon major with significant upstream and downstream interests by 2020.

5) Reliance Industries Ltd. The Reliance Group, founded by Dhirubhai H. Ambani (1932-2002), is India's largest private

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sector enterprise, with businesses in the energy and materials value chain. Group's annual revenues are in excess of US$ 66 billion. The flagship company, Reliance Industries Limited, is a Fortune Global 500 company and is the largest private sector company in India. Backward vertical integration has been the cornerstone of the evolution and growth of Reliance. Starting with textiles in the late seventies, Reliance pursued a strategy of backward vertical integration - in polyester, fibre intermediates, plastics, petrochemicals, petroleum refining and oil and gas exploration and production - to be fully integrated along the materials and energy value chain. The Group's activities span exploration and production of oil and gas, petroleum refining and marketing, petrochemicals (polyester, fibre intermediates, plastics and chemicals), textiles, retail, infotel and special economic zones. Reliance enjoys global leadership in its businesses, being the largest polyester yarn and fibre producer in the world and among the top five to ten producers in the world in major petrochemical products. Major Group Companies are Reliance Industries Limited, including its subsidiaries and Reliance Industrial Infrastructure Limited.

India Petroleum Industry( Contribution in GDP ) Over the years India Petroleum Industry has played an influential part in triggering the speedy expansion of the country's economy by contributing 15% in the total GDP. Further to this, petroleum exports gave new dimension to foreign exchange earnings by drawing US$ 23.64 billion in the FY 2008-09. To assist and acknowledge the expansion of the sector, the Cabinet Committee on Economic Affairs felicitated 44 petroleum research blocks on November 2008 under the New Exploration Licensing Policy (NELP-VII).

Various Production Segments: Refinery production: Refinery production in context of crude oil escalated from 156.11 MT in FY 2007-08 to 160.67 MT in FY 2008-09. Indian Oil Corporation Ltd is looking forward to elevate the capacity of its Haldia refinery and Panipat refinery plants to 7.5 million tones and 15 million tones respectively in 2010. Natural Gas Production: The natural gas production in 2008-09 increased from the previous year's 32.40 billion cubic metres tonnes (BCM) to 32.84 BCM. In 2009 alone the Natural gas production was registered at 33,846 million cubic metres. Crude Oil Production: The projected production of crude oil during the 11th Five-Year Plan

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(2007-2012) is 206.76 MMT, while that of natural gas is 255.27 BCM. Cumulative production of crude oil between April-December 2009 was 25,152 MT, while cumulative production of refinery production during the same period was 119,283 MT.

India as an international refining destination India is steadily emerging as an international destination for oil refining with investment requirements lesser by 25% - 50% as compared to its Asian counterparts. As per the analysis carried out by Deutsche Bank, India is expected to enhance its refining competence by 45% in the next 5 years. Being the fifth biggest worldwide nation in context of distillation capacity, India enjoys 3% of the international capacity share. To move ahead in making its presence felt strongly in the global market, Indian petroleum firms are planning to raise their distillation capacity from the existing 149 mtpa to 243 mtpa by FY 2011-12.

Indian petroleum retail market Expansion of Indian petroleum retail market is triggered by the growth in automobile sales that resulted in major foreign investments. The growth is estimated to sustain and the market is likely to expand further by 20 million every year till 2030, placing India at the world map in terms of being the biggest automobile market.

Accordingly, the petroleum dealers Bharat Petroleum Corporation, Hindustan Petroleum Corporation and Indian Oil Corporation in collaboration with each other are looking forward to add 2,262 petrol pumps in India by 2010.

Investments in India Petroleum Industry In 2010 the state-owned oil firms are expected to splurge US$ 11.34 billion on developing supplies and constructing new shipping networks for petroleum and natural gas.

Indian Oil Corporation is looking forward to establish a petroleum plant in the state of West Bengal by bringing in investments worth US$ 596.63 million.

ONGC will bring in US$ 694 million for raising services at its oil fields in Assam and adjoining states to enhance the petroleum output. In addition it will also splurge US$ 5.65 billion on capital expenses in the next two years.

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GAIL (India) Limited and OVL, the international associate of leading oil and gas player ONGC, are expected to bring in investments worth US$ 250 million.

Future of India Petroleum Industry As per the latest CII-KPMG analysis, the energy industry of India will help tin the expansion of the petroleum sector by bringing in investments worth US$ 120 billion-US$ 150 billion in the next 3-5 years. By 2012, the prospects in India Petroleum Industry are estimated to accomplish US$ 35 billion to US$ 40. http://business.mapsofindia.com/india-petroleum-industry/

SWOT analysis of ONGC SWOT Strengths 1.Indias largest crude oil and natural gas producer 2.Strong brand name 3.High profit making 4.Has over 40,000 employees 5.It produces about 30% of India's crude oil requirement 6.Contributes 77% of India's crude oil production and 81% of India's natural gas production 7.Commemorative Coin set was released to mark 50 Years of ONGC All crudes are sweet and most (76%) are light, with sulphur percentage ranging from 0.02-0.10, API gravity range 2646 and hence attract a premium in the market. 8 Strong intellectual property base, information, knowledge, skills and experience 9 Maximum number of Exploration Licenses, including competitive NELP rounds. ONGC has bagged 121 of the 235 Blocks (more than 50%) awarded in the 8 rounds of bidding, under the New Exploration Licensing Policy (NELP) of the Indian Government. 10 ONGC owns and operates more than 26,600 kilometers of pipelines in India, including subsea pipelines. No other company in India, operates even 50 per cent of this route length.

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Weakness 1.Legal issues 2.Employee management 3.Bureaucracy 4.Human rights and rehabilitation issues Opportunity 1.Increasing fuel/oil prices 2.Increasing natural gas market 3.More oil well discoveries 4.Expand export market Threats 1.Government regulations 2.High Competition 3.Hybrid and electric cars in the market http://www.mbaskool.com/brandguide/energy/348-ongc.html

Introduction In 1989, the Institute of Petroleum Safety, Health and Environment Management (IPSHEM) was established by Oil and Natural Gas corporation ltd (ONGC) with the objective of promoting standards of safety, health and environment in petroleum sector in India. The Institute is committed to upgrade and develop human resources with a view to minimize the overall risk to human life, damage to property, process and the environment.

The main functions of the Institute are Training, Research and Development, Consultancy Services, Data bank and Information services and by serving in an Advisory capacity in evolving standards and procedures. The Institute offers training courses in Basic & Advanced Safety and Environment Management, Fire Safety, Offshore Survival & Safety and Coxswain Boat Handling etc. The offshore survival and safety and COXSWAIN program are practical training programs for offshore going personnel. It includes a certificate course in First Aid and Fire Fighting. The picturesque IPSHEM site spreads over 101.5 hectares with an exclusive sea front 1.15 km is situated about 60 km away from Dabolim Airport at Betul

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village, South Goa, in close proximity to the well known Mobor Beach. The Institute is being further upgraded by introducing Helicopter Underwater Escape Training (HUET) facility. Statistics show that 85% of accidents are caused by shortcoming in the system. It is, therefore, imperative that personnel engaged in this high risk and hazardous industry are exposed to latest issues and concepts involved in safety and environment management. IPSHEM's scientific and systematic HRD training programs are carefully conceptualized in theoretical and practical aspects to suit the requirements of target groups. IPSHEM also plays an advisory role in a number of committees appointed by the Government of India for the purpose of framing of regulations, review of environmental plans, formulation of guidelines, etc.

IPSHEM's work associations and collaborations include: National Institute of Oceanography (NIO), Goa National Environmental Engineering Research Institute (NEERI), Nagpur Indian Institute of Technology (IIT), Delhi Indian Institute of Chemical Technology (IICT), Hyderabad National Institute of Ocean Technology (NIOT), Chennai Institute of Occupational Health (IOH), Goa Loss Prevention Association (LPA), Mumbai National Productivity Council (NPC), Mumbai Goa University, Goa Pune University, Pune WAPCOS, New Delhi Training programs

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Basic And Advanced Training Programs IPSHEM offers training courses in Basic & Advanced Safety and Environment Management relevant to the Petroleum industry for all executives and Fire Safety Management courses for fire safety executives. For offshore going executives, an Offshore survival at sea and Coxswain Boat Handling program offers training under real life conditions so as to equip participants with maximum practical exposure. Specialized Training Programs The faculty for the training courses offered by IPSHEM comprises qualified and trained personnel with considerable experience in safety, health and environment management. Faculties for these training programs are also drawn from other organizations like BHEL, NIO, BARC, NEERI, etc. The specialized training courses offered are: Occupational Health and Ergonomics Safety in civil construction Safety auditors course Marine oil spill response Safety in logistics On-site Hydrogen Sulphide safety course Safety handling of explosives and radioactive devices in seismic and well logging operations

Safety Services Development of safety management systems and procedures offshore and onshore Emergency response planning/disaster management planning Fire prevention and control system services

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Other safety management services based on loss control philosophy Consultancy on petroleum safety for on-site solutions Safety auditing

Environmental Services Environment Monitoring - offshore and onshore Ambient Air Quality Monitoring Environment Baseline Data Generation Environment Auditing Environment Impact Assessment (EIA) Environment Database Oil Spill Modelling Environment Management Plan (EMP) Clients Foreign Service Institute, Ministry of External Affairs Petronet LNG Limited Hindustan Petroleum Corporation Ltd. Selan Exploration Technology Ltd. Enron Oil & Gas (I) Ltd. NIKO Resources Ltd. Gujarat State Petroleum Corporation Ltd. Oil India Ltd.
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Hindustan Oil Exploration Company Interlink Petroleum Ltd.

1.1: Profile of the Company

o

ONGC is now a Fortune 500 Company and is the only and the first ever Indian Company to figure in the Fortunes list of Worlds Most Admired Companies in the year 2007. Ranked as the number two E&P Company in world (Platts ranking of top 250 Energy Companies 2011), ONGC remains Indias Most Valuable PSU in terms of net profit and net-worth. ONGC has been ranked at 172nd position in the Forbes Global 2000 list for the year 2011 of the worlds biggest companies released on 21st April 2010. The ranking is based on Sales (US$ 22.6 billion), Profits (US$ 4.3 billion), Assets (US$ 44.6 billion) and Market Capitalization (US$ 53.2 billion). 57 Indian Companies find placed in the list among which ONGC has been ranked at No.3. ONGC has been ranked 24th among the Global publicly-listed Energy companies as per PFC Energy 50 (2011) Financial Express in its latest listing of top 500 Companies of India for the year 2010-11 has placed ONGC, second on composite overall ranking amongst all companies in India. ONGC also maintains its position as most valuable PSU of the Country. Business World, in its latest survey on Most Respected Companies 2011 (published on 14th February, 2011) ranked ONGC fourth amongst all the companies in both private and
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public sector in India. ONGC has emerged as not only the sector leader (oil & gas sector) but also the most respected company amongst all the PSUs.
o

Transparency International in a recently released report Promoting Revenue Transparency: 2011 Report on Oil & Gas Companies has ranked ONGC at top on parameters for organisational disclosure. ONGC ranked at 26th on reporting on anti-corruption programmes and at 16th place on Country-level disclosure International Operations. ONGC has been ranked 361st position as per Fortune Global 500 - 2011 list, based on revenues, profits, assets and shareholders equity.

Represents Indias Energy Security ONGC has single-handedly scripted Indias hydrocarbon saga by:

Establishing 7.38 billion tons of In-place hydrocarbon reserves with more than 300 discoveries of oil and gas; in fact, 6 out of the 7 producing basins have been discovered by ONGC: out of these Inplace hydrocarbons in domestic acreages, Ultimate Reserves are 2.60 Billion Metric tons (BMT) of Oil Plus Oil Equivalent Gas (O+OEG). Cumulatively produced 851 Million Metric Tons (MMT) of crude and 532 Billion Cubic Meters (BCM) of Natural Gas, from 111 fields. ONGC has bagged 121 of the 235 Blocks (more than 50%) awarded in the 8 rounds of bidding, under the New Exploration Licensing Policy (NELP) of the Indian Government. ONGCs wholly-owned subsidiary ONGC Videsh Ltd. (OVL) is the biggest Indian multinational, with 33 Oil & Gas projects (9 of them producing) in 15 countries, i.e. Vietnam, Sudan, South Sudan, Russia, Iraq, Iran, Myanmar, Libya, Cuba, Colombia, Nigeria, Brazil, Syria, Venezuela and Kazakhstan.

ONGC Group: Presence Across The Energy Spectrum

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Indias Most Valuable Public Sector Enterprise As per latest survey Business Today (BT) (February 6, 2011 issue) ONGC has been ranked as the 'Best Employers to Work For' among all PSUs. ONGC with an Index score of 40 stands at 13th amongst top 25 India Corporates. ONGC has also been ranked as the 'Best Employer to Work for' in the Core sector, even among the non PSU Corporates in India. 1.2: ACCREDITATIONS: ONGC Academy gets ISO-9001:2008 accreditation

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ONGC Academy was conferred with ISO-9001:2008 Certification for quality management on 1st November, 2010. ONGC bagged the Petrofed Oil & Gas Industry Awards 2009 and 2010 for excellence in various categories. ONGC bagged the 'Leading Oil & Corporate of The Year Award' for 2009 & 2010 and the 'Exploration & Production Company of the Year Award for 2010.

ONGC also bagged 'Innovator of the year Team category Award for 2009. MRPL clinched the 'Refinery of the Year Award' for 2010. ONGC bagged the first ever FE-EVI Green Business Leadership Awards, instituted by Financial Express and Emergent Ventures India. The award was received by CMD on the occasion of World Environment Day. ONGC bagged the Silver Trophy for Best HR Practices, 2011 at the inaugural ceremony of the NIPM National Conference held in Delhi on 14th February, 2011. The Shine.Com HR leadership Awards were announced by the IES Group of Companies in collaboration with the World HRD congress and Shine.Com of Hindustan Times. The Jury conferred upon ONGC, the award for the Best Leadership Practices in the area of Corporate Social Responsibility in a function in Mumbai on 9th February, 2011. ONGC bagged the Corporate Governance Certificate for excellence in corporate governance practices instituted by the Institute of Company Secretaries India (ICSI). ONGC bagged the PCRA 'Award for Excellence' for the Best Overall Performance in the Upstream Sector. ONGC bagged the 'Golden Peacock Award' at the 5th Global Conference on Social Responsibility. The award was received on from Chairman, World Council for Corporate Governance and Former Prime Minister of Sweden.

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 ONGC bagged the maiden Indian Chamber of Commerce Sustainability Vision 2011 Awards in the category'Sustainability Reporting and Transparency'. The award was handed over to ONGC during the Summit on India Sustainability Vision @ Future at New Delhi. ONGC bagged the awards on Best Financial Performance and Corporate Governance given by Department of Public Enterprises Government of India in association with Indian Chamber of Commerce and Deloitte, the Knowledge Partner.

Indian National Oil Champion: ONGC Domestic Operations

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Global Ranking ONGC ranks as the Numero Uno Oil & Gas Exploration & Production (E&P) Company in the world, as per Platts 250 Global Energy Companies

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List for the year 2008 based on assets, revenues, profits and return on invested capital (ROIC). ONGC ranks 20th among the Global publicly-listed Energy companies as per PFC Energy 50 (Jan 2008) ONGC is the only Company from India in the Fortune Magazines list of the Worlds Most Admired Companies 2007. Occupies 152nd rank in Forbes Global 2000 2009 list (up 46 notches than last year) of the elite companies across the world; based on sales, profits, assets and market valuation during the last fiscal. In terms of profits, ONGC maintains its top rank from India. ONGC ranked 335th position as per Fortune Global 500 - 2008 list; up from 369th rank last year, based on revenues, profits, assets and shareholders equity. ONGC maintains top rank in terms of profits among seven companies from India in the list. Pioneering Efforts ONGC is the only fullyintegrated petroleum company in India, operating along the entire hydrocarbon value chain: Holds largest share of hydrocarbon acreages in India (51% in PEL Areas & 67% in ML Areas). Contributes over 79 per cent of Indians oil and gas production. bout one tenth of Indian refining capacity. Value chain integration. Interests in LNG and product transportation business.

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ONGC GROUP: A Rich Heritage

Competitive Strength All crudes are sweet and most (76%) are light, with sulphur percentage ranging from 0.02-0.10, API gravity range 2646 and hence attract a premium in the market. Strong intellectual property base, information, knowledge, skills and experience Maximum number of Exploration Licenses, including competitive NELP rounds. ONGC has bagged 121 of the 235 Blocks (more than 50%) awarded in the 8 rounds of bidding,
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under the New Exploration Licensing Policy (NELP) of the Indian Government. ONGC owns and operates more than 26,600 kilometers of pipelines in India, including sub-sea pipelines. No other company in India, operates even 50 per cent of this route length.

Strategic Vision: 2001-2020 To focus on core business of E&P, ONGC has set strategic objectives of:

Doubling reserves (i.e. accreting 6 billion tons of O+OEG).

Improving average recovery from 28 per cent to 40 per cent. Tie-up 20 MMTPA of equity Hydrocarbon from abroad by 2018.

Accrete 1 Billion tons of resources from unconventional sources of energy.

The focus of management will be to monetize the assets as well as to assetise the money.

Sourcing Equity Oil Abroad ONGC has extended its operations beyond domestic arena, and now, through its wholly owned subsidiary, the ONGC Videsh Limited (OVL), is operating in 15 countries with 33 projects to source equity oil & gas for energy security of the country. Over the years OVL has emerged as the biggest Indian Multinational. ONGCs overseas arm ONGC Videsh Limited (OVL), continued to maintain robust growth with 5.042 MMT of Crude and 2.022 BCM of Gas during 2010-11.

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 ONGC Videsh Ltds (OVL) proved reserves (1P) as on 1st April 2011 stood at 202.908 MTOE, which next to ONGC, is the second largest holding of proved oil and gas reserves by any Indian Company. OVLs share of total reserves (3P) of oil and oil equivalent gas as on 1st April 2011 was 435.004 MTOE. There was an impressive reserve accretion of 466.23 MMT of oil and oil equivalent gas during the year 2010-11. The Reserves-to-Production (R/P) Ration considering proved reserves was 21 for the year 2010-11. OVL signed agreements with KazMunaiGas (KMG), the national oil company of Kazakhstan for acquisition of 25% participative interest in Satpayev exploration block in Kazakhstan. The agreement was signed on 16th April 2011 with KazMunaiGas in the presence of Dr. Manmohan Singh, Honble Prime Minister of India and H.E. Nursultan Nazarbayev, Prsident of Kazakhstan. The company now has participation in 33 projects in 15 countries, namely Vietnam (2 projects), Russia (2 projects), Sudan (3 Projects includes 2 Project in South Sudan), Iran (1 project), Iraq (1 project), Libya (1 project), Myanmar (2 projects), Syria (2 projects), Cuba (2 projects), Brazil (6 projects), Nigeria (2 projects), Colombia (6 projects), Venezula (2 projects) and Kazakhstan (1 project). Out of 33 projects, OVL is operator in 11 projects and joint operator in 6 projects. OVLs share of production of oil and oil-equivalent gas (O+OEG), together with its wholly owned subsidiaries ONGC Nile Ganga B.V. ONGC Narmada Ltd, ONGC Amazon Alaknanda Limited, Jarpeno Limited, Carabobo One AB and ONGC Mittal Energy Limited, increased from 8.87 MMTOE to 9.45 MMTONE, up 6.5%. Consolidated gross revenue of OVL increased from Rs.153.83 billion to Rs.186.83 billion, up 21% and consolidated net profit from Rs.20.90 billion to Rs.26.91 billion, up 29%.

OVLs strategic objective of sourcing 20 million tons of equity oil abroad per year is likely to be fulfilled by 2018.

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Significant International Footprint (OVL)

Frontiers of Technology State-of-the-art seismic data acquisition, processing and interpretation facilities Uses one of the Top Ten Virtual Reality Interpretation facilities in the world Alliances with Transocean, Schlumberger, Halliburton and Baker Hughes, IPR, Petrobras, Norsk, ENI, Shell

One of the biggest ERP implementations in the Asia.

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Best In Class Infrastructure And Facilities The Company operates with 27 Seismic crews, manages 240 onshore production installations, 202 offshore installations, 77 drilling (plus 44 hired) and 58 work-over rigs (plus 30 hired), owns and operates more than 26,598 kilometers of pipeline in India, including 6,707 kilometers of sub-sea pipelines. ONGC has adopted Best-in-class business practices for modernization, expansion and integration of all Info-com systems.

1.3: Financials (2009-10) ONGC groups turnover during 2010-11 has been Rs.127, 905 Crore with net profit of Rs.22,456 Crore. ONGC paid highest-ever dividend of Rs.7,486 Crore. The Net Worth of ONGC Group of companies is Rs.114, 531 Crore.

During 2010-11, the turnover of ONGC (on standalone basis) has been Rs.69,532 Crore with net profit of Rs.18,924 Crore; the highest-ever despite sharing under-recovery of Rs.24,892 Crore to the Oil Marketing Companies (OMCs) as per the instructions of the Government of India. Net worth of ONGC (on standalone basis) has been Rs.96,709 Crore. OVLs consolidated gross revenue increased by 21% from Rs.15,383 Crore during 2009-10 to Rs.18,683 Crore during 2010-11 and consolidated net profit increased by 29% from Rs.2,090 Crore during 2009-10 to Rs.2,691 Crore during 2010-11. The turnover of MRPL has been Rs.43,800 Crore, up 21% from Rs.36,141 Crore and net profit has been Rs.1,177 Crore, up 6% from Rs.1,112 Crore.

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The Road Ahead ONGC looks forward to become an integrated energy provider, with:

New Discoveries and fast track development Equity Oil from Abroad Downstream Value Additions & Forward Integration

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 Leveraging state-of-the art technology and global best practices New Sources of Energy Production from small and marginal fields ONGC has taken structured initiatives to tap unconventional energy sources, be it unconventional gases like Coal Bed Methane (CBM), Underground Coal Gasification (UCG), Shale Gas and Gas Hydrates, or unconventional energy sources like wind, solar etc. ONGC created a landmark for exploration of unconventional hydrocarbons when it succeeded in striking shale gas from its first R&D well RNSG-1 at Icchapur, near Durgapur, West Bengal in January11. Earlier, CBM production from Pilot Project at Parbatpur, Jharkhand had already started in January10, while Pilot UCG project has been launched in Vastan, Gujarat. ONGC Energy Centre Trust, a dedicated centre created by ONGC for holistic research in non-conventional energy sources, has taken up three projects viz., Thermo-chemical reactor for Hydrogen, Geo-bio Reactors and Fuel Cells. ONGC has already commissioned a 50 MW Wind Farm in Gujarat and plan is afoot to set up another 100 MW Wind Farm in Rajasthan. ONGC has also set up 3 Solar Thermal Engines at Solar Energy Centre, Ministry of New and Renewable Energy (MNRE) campus at Gurgaon.

Value-chain integration

Pursuing the globally-established integrated business model in petroleum industry, ONGC took up equity in the ailing Mangalore Refinery & Petrochemicals Limited (MRPL), a stand-alone refinery of 9.69 MMT capacity, in March 2003. This not only added that desired comfort to this Company in mitigating higher risk of E&P operation but also set an example in the Indian business history where a PSU has taken over a

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joint stock company and turned it around in a record time of one year. Moving ahead, ONGC has taken structured initiatives towards value-multiplier integration projects like Refinery, LNG, Petrochemicals, Power, SEZ, etc., to have presence in the entire hydrocarbon value-chain.

1.4: Corporate Social Responsibility ONGC is also a responsible corporate citizen and is playing an important role in strengthening the fabrics of the society. ONGC Group of companies promotes Education, Heath care & Entrepreneurship in the Community and support Water Management and Disaster Relief in the country. The company has increased its budget towards socio-economic development to 2% of net profit from 0.75%.

Corporate Governance ONGC also was the first Indian PSU to sign Integrity Pact, to bring in transparency in all its official transactions. It also has launched the Whistle Blower Policy, following the best Corporate Governance practices.

Health, Safety & Environment ONGC has implemented globally recognized QHSE management systems conforming to requirements of ISO 9001, OHSAS 18001 and ISO 14001 at ONGC facilities and certified by reputed certification agencies at all its operational units.

ONGC shares the global concern on Climate change and global warming. ONGC has drawn elaborate programme to become carbon neutral and has registered 6 CDM (Clean Development
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Mechanism) projects with United Nations Framework Convention on Climate Change (UNFCC). ONGC has already started earning CER (Certified Emission Reduction) credits, in the process, becoming the first Indian PSU to do so.

Human Resources ONGC has vast pool of skilled and talented professionals the most valuable asset for the company. 33,229 ONGCians (as on 31st March, 2011) dedicate themselves for the excellent performance of your company during the year. ONGC continues to extend several welfare benefits to the employees and their families by way of comprehensive medical care, education, housing and social security.

1.5: History of ONGC 1947 - 1960 During the pre-independence period, the Assam Oil Company in the northeastern and Attock Oil company in northwestern part of the undivided India were the only oil companies producing oil in the country, with minimal exploration input. The major part of Indian sedimentary basins was deemed to be unfit for development of oil and gas resources. After independence, the national Government realized the importance oil and gas for rapid industrial development and its strategic role in defense. Consequently, while framing the Industrial Policy Statement of 1948, the development of petroleum industry in the country was considered to be of utmost necessity. Until 1955, private oil companies mainly carried out exploration of hydrocarbon resources of India. In Assam, the Assam Oil Company was producing oil at Digboi (discovered in 1889) and the Oil India Ltd. (a 50%

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joint venture between Government of India and Burmah Oil Company) was engaged in developing two newly discovered large fields Naharkatiya and Moran in Assam. In West Bengal, the Indo-Stanvac Petroleum project (a joint venture between Government of India and Standard Vacuum Oil Company of USA) was engaged in exploration work. The vast sedimentary tract in other parts of India and adjoining offshore remained largely unexplored. In 1955, Government of India decided to develop the oil and natural gas resources in the various regions of the country as part of the Public Sector development. With this objective, an Oil and Natural Gas Directorate was set up towards the end of 1955, as a subordinate office under the then Ministry of Natural Resources and Scientific Research. The department was constituted with a nucleus of geoscientists from the Geological survey of India. A delegation under the leadership of Mr. K D Malviya, the then Minister of Natural Resources, visited several European countries to study the status of oil industry in those countries and to facilitate the training of Indian professionals for exploring potential oil and gas reserves. Foreign experts from USA, West Germany, Romania and erstwhile U.S.S.R visited India and helped the government with their expertise. Finally, the visiting Soviet experts drew up a detailed plan for geological and geophysical surveys and drilling operations to be carried out in the 2nd Five Year Plan (1956-57 to 1960-61). In April 1956, the Government of India adopted the Industrial Policy Resolution, which placed mineral oil industry among the schedule 'A' industries, the future development of which was to be the sole and exclusive responsibility of the state. Soon, after the formation of the Oil and Natural Gas Directorate, it became apparent that it would not be possible for the Directorate with its limited financial and administrative powers as subordinate office of the Government, to function efficiently. So in August, 1956, the Directorate was raised to the status of a commission with enhanced powers, although it continued to be under the government. In October 1959, the Commission was converted into a statutory body by an act of the Indian Parliament, which enhanced powers of the commission further. The main functions of the Oil and Natural Gas Commission subject to the provisions of the Act, were "to plan, promote, organize and implement programmes for development of Petroleum Resources and the production and sale of petroleum and petroleum products produced by it, and to perform such other functions as the Central

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Government may, from time to time, assign to it ". The act further outlined the activities and steps to be taken by ONGC in fulfilling its mandate.

1961 - 1990 Since its inception, ONGC has been instrumental in transforming the country's limited upstream sector into a large viable playing field, with its activities spread throughout India and significantly in overseas territories. In the inland areas, ONGC not only found new resources in Assam but also established new oil province in Cambay basin (Gujarat), while adding new petroliferous areas in the Assam-Arakan Fold Belt and East coast basins (both inland and offshore). ONGC went offshore in early 70's and discovered a giant oil field in the form of Bombay High, now known as Mumbai High. This discovery, along with subsequent discoveries of huge oil and gas fields in Western offshore changed the oil scenario of the country. Subsequently, over 5 billion tons of hydrocarbons, which were present in the country, were discovered. The most important contribution of ONGC, however, is its self-reliance and development of core competence in E&P activities at a globally competitive level.

After 1990 The liberalized economic policy, adopted by the Government of India in July 1991, sought to deregulate and de-license the core sectors (including petroleum sector) with partial disinvestments of government equity in Public Sector Undertakings and other measures. As a consequence thereof, ONGC was re-organized as a limited Company under the Company's Act, 1956 in February 1994. After the conversion of business of the erstwhile Oil & Natural Gas Commission to that of Oil & Natural Gas Corporation Limited in 1993, the Government disinvested 2 per cent of its shares through competitive bidding. Subsequently, ONGC expanded its equity by another 2 per cent by offering shares to its employees.
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During March 1999, ONGC, Indian Oil Corporation (IOC) - a downstream giant and Gas Authority of India Limited (GAIL) - the only gas marketing company, agreed to have cross holding in each other's stock. This paved the way for long-term strategic alliances both for the domestic and overseas business opportunities in the energy value chain, amongst themselves. Consequent to this the Government sold off 10 per cent of its share holding in ONGC to IOC and 2.5 per cent to GAIL. With this, the Government holding in ONGC came down to 84.11 per cent. In the year 2002-03, after taking over MRPL from the A V Birla Group, ONGC diversified into the downstream sector. ONGC will soon be entering into the retailing business. ONGC has also entered the global field through its subsidiary, ONGC Videsh Ltd. (OVL). ONGC has made major investments in Vietnam, Sakhalin and Sudan and earned its first hydrocarbon revenue from its investment in Vietnam.

Synopsis ONGC was set up under the visionary leadership of Pandit Jawahar Lal Nehru, going against the wisdom of the then multinational oil companies operating in the country, who had almost written India off as a Hydrocarbon Barren country. Pandit Nehru reposed faith in Shri Keshav Dev Malviya who laid the foundation of ONGC in the form of Oil and Gas division, under Geological Survey of India, in 1955. A few months later, it was converted into an Oil and Natural Gas Directorate. The Directorate was converted into Commission and christened Oil & Natural Gas Commission on 14th August 1956. In 1994, Oil and Natural Gas Commission was converted in to a Corporation, and in 1997 it was recognized as one of the Navratnas by the Government of India. Subsequently, it has been conferred with Maharatna status in the year 2010. Over 50 years of its existence ONGC has crossed many a milestons to realize the energy dreams of India. The journey of ONGC, over these years, has been a tale of conviction, courage and commitment. ONGCs superlative efforts have resulted in converting earlier frontier areas into new hydrocarbon provinces. From a modest beginning, ONGC has grown to be one of the largest E&P companies in the world in terms of reserves and production. ONGC as an integrated Oil & Gas Corporate has developed in-house capability in all aspects of exploration and production business i.e., Acquisition, Processing & Interpretation (API) of Seismic data, drilling,
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work-over and well stimulation operations, engineering & construction, production, processing, refining, transportation, marketing, applied R&D and training, etc. Today, Oil and Natural Gas Corporation Ltd. (ONGC) is, the leader in Exploration & Production (E&P) activities in India having 72% contribution to Indias total production of crude oil and 48% of natural gas. ONGC has established more than 7 Billion Tons of in-place hydrocarbon reserves in the country. In fact, six out of seven producing basins in India have been discovered by ONGC. ONGC produces more than 1.27 million Barrels of Oil Equivalent (BOE) per day. It also contributes over three million tons per annum of Value-Added-Products including LPG, C2 - C3, Naphtha, MS, HSD, Aviation Fuel, SKO etc.

1.6: Vision and Mission of the ONGC To be global leader in integrated energy business through sustainable growth, knowledge excellence and exemplary governance practices.

World Class Dedicated to excellence by leveraging competitive advantages in R&D and technology with involved people. Imbibe high standards of business ethics and organizational values. Abiding commitment to safety, health and environment to enrich quality of community life. Foster a culture of trust, openness and mutual concern to make working a stimulating and challenging experience for our people. Strive for customer delight through quality products and services.

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Integrated In Energy Business

Focus on domestic and international oil and gas exploration and production business opportunities. Provide value linkages in other sectors of energy business. Create growth opportunities and maximize shareholder value.

Dominant Indian Leadership Retain dominant position in Indian petroleum sector and enhance India's energy availability.

People "Not only had India... set up her own machinery for oil exploration and exploitation... an efficient oil commission had been built where a large number of bright young men and women had been trained and they were doing good work." - Pandit Jawahar Lal Nehru, India's first Prime Minister to Lord Mountbatten, on ONGC (1959). Today, ONGC is the flagship company of India; and making this possible is a dedicated team of nearly 33,000 professionals who toil round the clock. It is this toil which amply reflects in the aspirations and performance figures of ONGC. The company has adopted progressive policies in scientific planning, acquisition, utilization, training and motivation of the team. At ONGC, everybody matters, every soul counts. ONGC has a unique distinction of being a company with in-house service capabilities in all the activity areas of exploration and production of oil & gas and related oil-field services. Needless to emphasize, this was made possible by the men & women behind the machine. Over 18,000 technically-competent experienced scientists and engineers, mostly from distinguished Universities / Institutions of India and abroad form the core of our executive profile. They include geologists,
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geophysicists, geochemists, drilling engineers, reservoir engineers, petroleum engineers, production engineers, engineering & technical service providers, financial and human resource experts and IT professionals.

HR Vision, Mission & Objectives HR Vision "To build and nurture a world class Human capital for leadership in energy business".

HR Mission "To adopt and continuously innovate best-in-class HR practices to support business leaders through engaged empowered and enthused employees".

HR Objectives

Enrich and sustain the culture of integrity, belongingness, teamwork, accountability and innovation. Attract, nurture, engage and retain talent for competitive advantage. Enhance employee competencies continuously. Build a joyous work place.

Promote high performance work systems. Upgrade and innovate HR practices, systems and procedures to global benchmarks.

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Promote work life balance. Measure and Audit HR performance. Promote work life balance.Integrate the employee family into the organisational fabric. Inculcate a sense of Corporate Social responsibilities among employees.

Measuring HR Performance HR Parameters have been incorporated in the MOU by ONGC since 199495, to systematically and scientifically evaluate effectiveness of HR Systems, which enables and facilitates time bound initiatives.

HR Parameters of MoU for 2009-2010

Mentoring and coaching HR Audit Engagement Survey

Continuous professional education credit course for finance executives of ONGC. A Motivated Team HR policies at ONGC revolve around the basic tenet of creating a highly motivated, vibrant & self-driven team. The Company cares for each & every employee and has in-built systems to recognize & reward them periodically. Motivation plays an important role in HR Development. In order to keep its employees motivated the company has incorporated schemes such as Reward and Recognition Scheme, Grievance Handling Scheme and Suggestion Scheme.

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Incentive Schemes to Enhance Productivity

Productivity Honorarium Scheme Job Incentive Quarterly Incentive Reserve Establishment Honorarium Roll out of Succession Planning Model for identified key positions

Group Incentives for cohesive team working, with a view to enhance productivity

Training & Development An integral part of ONGCs employee-centered policies is its thrust on their knowledge upgradation and development. ONGC Academy, previously known as Institute of Management Development (IMD), which has an ISO 9001 certification, along with 7 other training institutes, play a key role in keeping our workforce at pace with global standards. ONGC Academy is the premier nodal agency responsible for developing the human resource of ONGC. It also focuses on marketing its HRD expertise in the field of Exploration & Production of Hydrocarbons. ONGCs Sports Promotion Board, the Apex body, has a Comprehensive Sports Policy through which top honours in sports at national and international levels have been achieved.

Transforming The Organization ONGC has undertaken an organization transformation exercise in which HR has taken a lead role as a change agent by evolving a communication strategy to ensure involvement and participation among employees in
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various work centers. Exclusive workshops and interactions/brainstorming sessions are organized to facilitate involvement of employees in this project.

Participative Culture Policies and policy makers at ONGC have always had the interests of the large and multi-disciplined workforce at heart and have been aware of the nuances and significance of cordial Industrial Relations. By enabling workers to participate in management, they are provided with an Informative, Consultative, Associative and Administrative forum for interactive participation and for fostering an innovative culture. In fact, ONGC has been one of the few organizations where this method has been implemented. It has had a positive impact on the overall operations since it has led to enhanced efficiency and productivity and reduced wastages and costs.

A Model Corporate Citizen Respect and dignity are the key values that underline the relationship ONGC has with its human assets. Conscious about its responsibility to society ONGC has evolved guidelines for Socio-Economic Development programmes in areas around its operations all over the country.

Education Health Care and Family Welfare Community Development Promotion of Sports and Culture

Calamity Relief Development of Infrastructural Facilities Development of the Socially & Economically Weaker Sections of Society Benefit and Welfare

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Sports Around 150 sportspersons including 95 international level performers are on the rolls of ONGC representing your Company in 15 different games. ONGC hosted the ONGC Nehru Cup International Invitational Tournament during 2007-08. Chess Queen Koneru Humpy was conferred with Padmashri and Badminton ace Chetan Anand received the Arjuna Award. Reigning World Billiards Champion Pankaj Advani retained his title after an 'all ONGC Final' in which Dhruv Sitwala was the Runner-up

Arjuna Awardee Virender Sehwag became the first Indian and third cricketer to score two triple Test centuries. Your Company won the Petroleum Minister's PSPB Trophy for Overall Best Performance in 2007-08 for the fifth year in succession.

Corporate Social Responsibility ONGC is spearheading the United Nations Global Compact - World's biggest corporate citizenship initiative to bring Industry, UN bodies, NGOs, Civil societies and corporate on the same platform. During the year, your Company has undertaken various CSR projects at its work centres and corporate level. Women Empowerment Women employees constitute about 5% of ONGC's workforce. Various programmes for empowerment and development, including programme on gender sensitization are organized regularly.

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Organization Chart

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Board of Directors: CMD and FUNCTIONAL DIRECTORS

Sudhir Vasudeva Chairman & Managing Director

A K Hazarika Director (Onshore)

U N Bose Director (Technology & Field Services)

S V Rao Director (Exploration)

K S Jamestin Director (HR)

Aloke Kumar Banerjee Director(Finance) SPECIAL INVITEE

GOVERNMENT NOMINEES

Mr. S Bhargava Addl. Secy. MoPNG, Govt. of India

Bimal Julka Additional Secretary & D K Sarraf Director Managing Director, OVL General, DEA, Govt of India
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INDEPENDENT DIRECTORS

Anita Das

Deepak Nayyar

Arun Dr. D Ramanathan Chandrasekharam

Prof S K Barua

O P Bhatt

Sushama Nath

OIL AND NATURAL GAS CORPORATION LIMITED INTEGRATED TRADING DESK Integrated Trading Desk of Oil and Natural Gas Corporation (ONGC Group) on behalf of ONGC Group of Companies comprising of ONGC Limited, and its subsidiaries ONGC Videsh Limited (OVL), ONGC Nile Ganga BV (ONG BV) and Mangalore Refinery and Petrochemicals Limited (MRPL) organizes Import/ International Sale of Crude Oil, Export of Petroleum Products and Petrochemical Products through Tendering Procedure for all the Group Companies of ONGC. ONGC Group presents a lot of business opportunities to prospective Business Partners in the area of international sale/ import of Crude Oil and Export of Petroleum products and Petrochemical Products.

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ONGC Group is one of the fast growing groups in the world and its parent company ONGC is Indias flagship exploration and production (E&P) company, accounting for about 60% of total proved reserves in the country. It is a fullyintegrated petroleum company, and operates along the entire hydrocarbon value chain. A Fortune-Global 500 Company, it is not only the largest E&P Company in India but also one of the most valuable companies in India. Platts recognized it as No. 1 E&P Company in the world and 18 th among leading global Energy majors in its `Platts Top 250 Global Energy Company Ranking 2010. Among one of the top profitable companies of India, it produces value added products like Naphtha from its own plants, which are available for export. ONGC Videsh Limited (OVL) is an overseas arm of ONGC, engaged in Exploration & Production Activities. It trans-nationally operates E&P Business in various countries across the globe. OVL has 33 projects spread over 14 countries across the globe with 9 producing assets in 7 countries namely Sudan, Russia, Vietnam, Syria, Brazil, Columbia and Venezuela. It is further aggressively pursuing Oil and gas exploration blocks in various other countries. Nile Blend Crude Oil from its Sudan Project and SOKOL Crude Oil from Sakhalin 1 project in Russia are available for sale in International Market. Mangalore Refinery and Petrochemicals Limited (MRPL), located in a beautiful hilly terrain north of Mangalore city on west coast of India, have a State of Art Grassroot Refinery at Mangalore and is a subsidiary of ONGC. The Refinery has got a versatile design with high flexibility to process Crude oils of various API and with high degree of Automation. MRPL has a design capacity to process 11.82 million metric tons per annum (MMTPA) and will soon be upgraded to 15 MMTPA. It is the only Refinery in India to have 2 Hydrocrackers producing Premium Diesel (High Cetane) and 2 CCRs producing Unleaded Petrol of High Octane. Lately it has ventured into production of Petrochemicals Products (Mixed Xylenes, Para Xylenes, Propylene, Benzene) LOBS and Petroleum Coke, which are in addition to its production of the whole range of Petroleum Products (Naphtha, Jet Kero, HSD/Gas Oil, FO, Reformate, etc.). Currently all type of Petroleum products viz. Naphtha, Jet Kero, HSD/Gas Oil, FO, Reformate, VGO and Mixed Xylene under Petrochemical Products are available for export. STC of Mauritius is buying one Million MTPA of Petroleum Products from MRPL spread over three year period with total value about two billion USD.

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ONGC conducts its business only with entities (overseas) registered on its Mailing Lists on principal to principal basis. Interested counter-parties are requested to submit their request for registration in prescribed format. The Application for registration shall be submitted in prescribed Registration Form on applicant companys printed letter head, duly filledin, signed indicating date and place of submission and supported with all the requisite documents, as prescribed. For convenience of prospective counterparties, Guidelines to fill-up the Registration Form are also available separately. The request for registration on Mailing Lists of ONGC shall be considered only upon receipt of details/documents as prescribed inter-alia including Audited Annual Reports, Auditors Report, Bank & Trade References. However, it may kindly be noted that we at ONGC deal on principal to principal basis and not through any intermediary/agent. It may also be noted that the decision of ONGCs management shall be final and binding as regards to consideration of requests for registration. Once registered, your company would be eligible to access transactions related to Import/International Sale of Crude Oil and Export of Petroleum Products and Petrochemical Products of all Group Companies of ONGC, carried out through ITD, as per the interest shown by your company and accepted by ONGC.

Brief Analysis of Company performance:

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Consolidated Financial Performance

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68

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Standalone Overview

month

FY11

Result

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ONGC offices in India

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Chapter 3: BUDGET

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3.1: what is budget Budget is nothing but A systematic plan for the expenditure of a usually fixed resource, such as money or time, during a given period . Budget is a plan that outlines an organization's financial and operational goals. So a budget may be thought of as an action plan; planning a budget helps a business allocate resources, evaluate performance, and formulate plans. While planning a budget can occur at any time, for many businesses, planning a budget is an annual task, where the past year's budget is reviewed and budget projections are made for the next three or even five years. Budget helps to coordinate the activity of organization. A good budget is characterized by following Participation : involve as many people as possible in drawing up budget Comprehensive : embrace the whole organization Standards : base it on established standards of performance Flexibility :consider changing circumstances Feedback : constantly monitor performance
Analysis of cost and revenue: this can be done on the basis of product

lines, sections or cost centers.

3.2: Importance of Budget Budget plays a vital role in Management for Planning and Control of organizations operational and financial activities and helps in regulation of expenditure in compatibility with organizational goals and objectives. In corporations like ONGC where operations are enormous, and as we all know in ONGC the nature of the business is complex & it involve huge expenditure, hence Budget plays an important role in ONGC. It sets forth
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both Physical and financial targets, intended to be achieved considering the organizational objectives in a given time frame with respect to various activities viz: 1) Exploration, 2) Drilling, 3) Production, 4) R&D, 5) JV operations etc. Spread over different Assets, Basins, Plants, Institutes, JV Groups. 3.3 : Need of budget process Need of budget is very important to each organization, hence budget process require to find out objectives, procedures and Performa of the organization it should start with formulation to utilization and control. The setting of Physical targets by considering resources availability ,and then converting these physical targets into financial outlays, and also it is necessary to find out real estimation of expenditure and revenues requires and for this a great degree of skill required and it also involves co-ordination between various technical and finance personnel. Hence an idea came out to have a reference documents which refers to the methodology and procedure of budgets and thus this document is known as BUDGET MANUAL. The manual is expected to be guide for budget preparation and helpful for day to day budgetary activities to the Finance and Technical personnel involved at the work centers. The manual is divided into various chapters 1) background, 2) objectives & scope 3) formulation process, 4) methodology on utilization & review 5) Control & reporting mechanism. The budgetary process is a significant tool of financial control vested with the management of a commercial entity. This financial control mechanism becomes more prominent for a flagship Navratna Public Sector Undertaking (PSU) like ONGC. Since the Company is a Government of India (GOI) undertaking, plan budget of the Company forms part of the plan budget of GOI through its administrative ministry i.e. Ministry of Petroleum and Natural Gas (MoP&NG).
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Section 21 (1) (a) of ONGC Act, 1959 stipulates that the corporation shall, by such date in each year as may be prescribed, submits to the Central Govt. for approval a budget in the prescribed form for the next financial year showing the estimated receipts and expenditure, and the sums which would be required from the Central Govt. during that financial year.

3.4:

STEPS THAT COMES IN BUDGET

Budget is nothing but a plan and following are points that comes under budget 1) The physical data collected from various units and that physical data is examined for consistency in line with the companys objectives and is put up to Executive Committee for approval.
2)

Once the physical targets approved by Executive Committee, the financial outlays under various activities with further details are worked out.

3) These data are line with the requirements of the Ministry and the draft plan is prepared
4)

That draft plan is discussed in the Executive Committee meeting and put up to the ONGC Board for approval.

5) The draft plan is discussed with the MOPNG at various levels and changes as suggested by the Ministry are deliberated and incorporated after consideration by ONGC Board. 6) The draft five year plans is then put up to the Planning Commission where it is reviewed in line with countrys economic policies & projected growth and after review, it gets approved.

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The first year plan (physical as well as financial) of the five year plan is known as Budget Estimates of that year subsequent years plan are Start-up Term Plan (STP). The Budget Estimates are prepared keeping in view the STP of that year in approved five year plan. The approved Budget Estimates becomes the Annual Plan of that year and the basis for MOU parameters signed by ONGC with the Ministry.

3.5: Overview of budget formulation process In the context of ONGC Ltd., the Budget can best be defined as a statement of targets both physical and financial, required to be achieved, in terms of exploration, drilling, production and other allied activities as also connected expenditure vis--vis revenue. As we have seen above that budget is an essential elements ,and budgeting is taken as the principal tool available to the management for Planning and control of physical operations and financial resources. A main feature of Budget is the mutual enrichment of function between management and accounting. Accountant plays important role in budget process. Accountant is like a Chief navigator. He provides the log of past recorded fact allows for variations and gives the answers, in terms finance, about the results of taking specified course of action. He helps the management by converting the Physical Plan into financial figures i.e. the budget. ONGCs budget normally starts after completion of Annual Accounts in order to have actual utilization of budget and actual cost of various activities. It is envisaged to have the Board approval for the Budget Outlays of RE of the current period and BE for the next Financial Year by the end of September/ October of every year. The budget is prepared on the basis of the resources requirements under the natural conditions and same wise financial outlays under various activities are prepared using the budget software. The Budgeting activity consists of (i) Survey; (ii) Exploratory Drilling;
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(iii) Development Drilling; (iv) Capital; (v) R&D; and (vi) JVs. The Asset/Basin level activities are converted into financial outlays taking the unit cost as per rate of contracts or realistic unit cost of the activity.

3.6: POINTS THAT COMES UNDER BUDGET FORMULATION PROCESS Budget requirement in organization is prepared by various units under natural heads that involves CAPITAL, STORES, SPARES, CONTRACTUAL, MANPOWER AND OTHER CHARGES. That budget requirement is reviewed and approved by VCB that is Virtual Corporate Board and they submit it to CBG that is Corporate Budget Group within the limit of approved indicative financial outlays Activity wise financial outlays submitted by Virtual Corporate Boards (VCB) are examined/ reviewed by Corporate Budget Group. and CBG consider that physical work program approved by concerned Director and reasonable cost of activities, availability of resources, etc. Then after it is necessary to present draft proposal budget to EC by Corporate budget Cell (CBC). EC moderates the company wide total financial outlay based on the total internal resources likely to be available during the budget period at global level. The moderation is done without reviewing the unit wise physical activities proposed to be taken up and completed in the budget period. Corporate Budget Cell requests all the units to moderate the budget as per the directives of EC. CBC then finalizes the budget agenda for obtaining approval of FMC and Board. After approval of the Board, the approved budget is communicated to all units so that the budget is uploaded in SAP.

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3.7 : OBJECTIVE & SCOPE OF BUDGET Preparation of budget is essential for the Organization as budget help organization to be in a well directed manner and for enabling its various Assets / Basins / Plants to operate with the maximum efficiency through Planning, Co-ordination and Control. (A) Objective The objectives of the budget are:
a)

One of the important objective of budget is to Facilitate the company in the preparation of its Revised Estimates (RE) , Budget Estimates (BE) and Commitment Budgets. Facilitate the company in monitoring actual performance against the planned budget; (if there is any difference in actual performance as compare to planned performance so company can take various steps to reduce that difference). In view to statutory requirements with regards to declaring the Companys plans to be included in the GOIs five year plans. Define the roles and responsibilities of each location, region and Corporate Budget Cell (CBC) which will help in budget preparation and monitoring.

b)

c) d)

(B) Scope Scope of budget including following things:

a) b) c) d) e)

Budget formulation. Budget monitoring- periodic budget utilization and review. Budgetary control in SAP. Process Documentation. MIS and Reporting.

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3.8: Detailed flow of budget process and the functions and sections involved in it:

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Board of Directors

DDDDDDDDDDD DDirectors
Finance Management Committee (FMC) Executive Committee Corporate Budget Cell Regional Budget Coordinator (MR)

Location Budget Coordinator (Asset)

Location Budget Coordinator (Basin)

Location Budget Coordinator (Plants)

Location Budget Coordinator (Institutes &HQ)

Location Budget Coordinator (JVOG)

Director (Onshore)/ Director (Offshore)

Director (Exploration)

Director (Offshore)

Functional Heads

Functional Heads

Functional Heads

Functional Heads

Functional Heads

Location Budget Coordinator (Services) Services Heads

Section Heads

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3.9: Budget procedure

Physical targets are very imp for preparation of budget, as the budget exercise is start with physical targets and preparation of physical target responsibility of Asset, Basins and Plants in consultation with the service heads. Physical targets once approved by the respective directors are forwarded to the CBC for review, consolidation and inclusion in the budget agenda and that is to be presented to the Board of Directors (BoD). The next step is compilation of the financial budget, for which information gets from assets/ basins/ plants at location level, and than that information gets compiled at the regional level and finally it gets consolidated by the CBC. (To begin with, financial data with regard to service cost comes from section heads of each service type to the Location Budget Coordinators (LBC) of services, and that financial data should approved by the Head of Services.) . The LBC of Services compiles the budgets prepared by each section head and allocates the service cost to the respective asset/ basin/ plant based on inputs/ allocation criteria received from section heads of each service type

The above allocated plans are then forwarded to the respective functional heads of assets/ basins/ plants. The functional heads assess the financial budget for each activity corresponding to the physical targets

Once the assessment of the financial budget got complete then, they forward the budgets report to their LBCs. The respective LBCs review these budgets for consistency, accuracy and prudence and forward them to the Regional Budget Coordinator (RBC) for compilation at regional level. The RBCs bring together the budgets received from assets, basins and plants and they look out for the accuracy and correctness of data received. The RBC then may find out any clarifications required from the functional heads on a case to case basis. After approval of RBCs, the budgets are forwarded to CBC.

CBC makes a presentation of the same received from RBC to the Executive Committee (EC).

Then EC reviews the budget proposals and gives directives regarding the level of physical target that can be achieved and same of financial
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outlays. Views of EC are passed on to the work center for moderation/review of the budget proposals in line with decisions of the EC.

Once the moderation/review done by work centers those Final budget proposals is forward to CBC, and that final budget proposal is again compiled by CBC and in case they are still not in line with the decisions of EC, financial outlays proposed by work centers are moderated by Corporate Budget Cell.

The detailed budget agenda is done when finalization of physical targets and financial outlays prepares by EC, CBC and then that budget agenda is present to FMC (Finance Management Committee) for suitable recommendation to the BoD. The BoD after considering the recommendations of FMC approves the budget. The approved budget is then conveyed to each location for uploading to SAP.

The item wise budget, duly adjusted to the overall approved budget by the Board, is loaded to SAP by each LBC. Monitoring the budgets is then the primary responsibility of the function heads of the locations. The secondary responsibility of budget monitoring lies with the LBCs, RBCs and the CBC

3.10: DESCRIPTION OF BUDGET

Budgeting activity Budgeting activity/process is divided into three segments namely (a) Budget formulation; (b) Periodic budget review; and (c) Effective Budget control through SAP.

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(a)Budget formulation First step of budget process is budget formulation. It starts with framing up and finalization of physical target which is approved by concern directors. During the Budget formulation stage, the existing ongoing schemes, new proposed schemes and other capital acquisition programs would be mapped with complete justification of taking up such programs and likely impact on the profit of ONGC would need to be analyzed. Only approved schemes need to be considered in the budget. But however there should be proper review of such schemes in case of status and progress by EC and after review these would be considered in budget. 1) The physical activity and it financial outlay would be reviewed in detail by Corporate Budget Cell and presented to EC for review and decision. 2) EC may focus mainly on physical program proposed by various units vis--vis the resources availability and corresponding financial outlays of the Company. 3) After the budget is finalized by EC, the revised physical program would be discussed along with the corresponding financial outlay with all units and same would be used for working out the revised budget proposal for approval of the Board.
4) After approval of the Board, the approved budget would

be communicated to all units. The Budget would be uploaded in the SAP by unit finance budget coordinator. (b) Periodic budget review Next step comes under budget process is A regular system of budget utilization and review. Quarterly budget review mechanism will be established and then gradually move to monthly budget review system and detailed exercise would be done by all units, and variation analysis takes place. It includes comparison of budgeted physical program and actual performance, and also the actual performance with budgeted financial outlays. Detailed reasons of all the variations would be worked out by each location and forward the
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same to CBC. Based on the inputs from the locations, the quarterly budget review would be presented to EC by CBC and units would be requested to put forward the action plan to meet the gaps in the previous quarter so that the budget is fully utilized in terms of planned physical activities.

(c) Effective Budget control through SAP. ONGC has developed exclusive SAP software for the maintenance of its financial affairs. The software is highly sophisticated kind of managing the overall monetary transaction through an integrated network connecting all units of the firm. Third and final stage of budget processing which comes after budget formulation and utilization activities is effective budget control through SAP, it is imp to establish effective budget control system in SAP. The budget codes would be linked to all finance codes through cost centre hierarchy. The physical performance would then be uploaded in SAP and entire budget review process, including working out the variation analysis would be generated/ supported by SAP. Units would be requested to make out reasons for all variations. After approval of budget by the Board, the item wise budget would be uploaded in SAP by the respective units. As and when the PO is issued, the budget is assigned in the system and the same gets utilized at LIV stage. On weekly basis, listing of open PO would be reviewed by all units and confirmation uploaded in SAP.

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Chapter 4: BUDGET FORMULATION

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It is stated previously that physical target is essential part of budget formulation following are some stages include in physical target fixation 4.1: The stages/activities for physical targets fixation:

The physical targets for the budget estimates shall be framed by the Assets/ Basins. And the formulation of physical targets for Survey and Exploratory Drilling will be done by respective Basins; the physical targets for Development Drilling, Work-over operations/ SideTracking activities and Production of Crude Oil, Natural Gas and other Value Added Products (VAP) would be framed by the respective Assets. While framing the physical targets by the Assets/ Basins, there should be the achievable level of work program needs to be factored.

The Physical Targets for Drilling and Work-over Activities are to be

submitted by assets/basin and that needs to be correlated with physical inputs, like, the rig availability etc. Assets / basins require to consult the service head before fixing the , drilling physical targets, and the targets are need to be supported with Bar Chart of rig months required vis--vis rig months available. In case the rig availability is not adequate due to uncontrollable factors, the physical plans for Drilling and Work-over need to be reviewed/ revised; so that total requirement of rig months matches with the rig availability

The physical targets get approved by the Virtual Corporate in their VCB meeting where location Managers of the services referring to the same will also be present. Thereafter the Physical Targets shall be got approved by the Virtual Corporate from the concerned Directors. The stages for Financial Outlays corresponding to approved

4.2:

physical targets: Virtual Corporate will find out Financial Outlays and also find out approved Physical Targets which is based on the per unit cost of the inputs and those inputs required to be used in completing the activities of Survey, Exploratory Drilling, Development Drilling and Operating cost. For this purpose, the actual cost per unit of various activities of the previous year needs to be factored and the actual cost is circulated by the Corporate Costing section.

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 While working out activity wise financial outlays, cost of services provided by services/ expenditure incurred by other locations also need to be considered and the same will form the basis of resource allocation to services Virtual Corporate also works out total financial outlays for funds allocation after adjusting for inter unit transfers Virtual corporate submits Activity wise Financial Outlays collected by them. and then these Activity wise Financial Outlays are examined/ reviewed by CBC. These activity wise financial outlays are approved as physical work program at achievable level and at given cost of activities, availability of resources, etc. Based on above parameters, Corporate Budget Cell will convey the level of Indicative Financial Outlays to Virtual Corporate after obtaining approval from Director (Finance).

4.3 : Point to remember in preparation of Financial Outlays: There are different types of natural heads like Capital, Stores , Spares , Contractual , Manpower and other charges so Virtual Corporate will find out item-wise budget requirement under above natural heads Line Item-wise budget proposals under natural head into activity-wise budget outlays and per unit budgeted cost of activities by allocation of common costs to the activities using the budget software

Line-item wise budget requirements will be reviewed and moderated at the work centers so that budgeted cost of activities fall within the acceptable level of last years actual costs and also that natural head budget remains within the limits of recommended activity wise financial outlays

To find out budgeted cost of activity it is necessary to work out actual utilization of services during the budget period. Accordingly, phasing of expenditure should be carried out to RE, BE and CBE for third year and beyond as per the requirements; so that the budget outlays and the budgeted activity costs are kept at realistic levels.

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 The budget proposals will be reviewed thoroughly by the Virtual Corporate Boards of the respective Assets/ Basins/ Plants/ Institutes/ Services etc. The final budget proposals will be approved by respective Asset Managers / Basin Managers / Heads of Institutes / Chief of Services.

After approval by Virtual Corporate, item wise financial budgets under natural heads, corresponding Activity Outlays, budgeted cost of activities and budgeted contribution will be submitted to Corporate Budget Cell Corporate Budget Cell will present the draft budget proposals to the Executive Committee. Assets Managers / Basin Managers and Service Chiefs need to justify their budget requirements in detail in case of variation over the previous years actual along-with the procurement status of cases already processed. Work Centers will revise/ moderate the budget proposals as per the directives of EC and submit the revised/ moderated budget to the Corporate Budget Cell. Corporate Budget Cell will finalize the budget agenda for obtaining approval of the FMC and the Board. 4.4: Points for framing up the Financial Budgets: (a) Budget under CRC Structure With the introduction of CRC structure, the budget of the Virtual Corporate is prepared at cost center level under the CRC Structure. Then the budget is submitted by the Virtual Corporate after deliberations in their VCB. (b) Budget to be kept at Consuming Work Centers It is always better to keep budget at the work centers where the material / services are to be utilized/ consumed and not at the work centers where payments are to be made. If the budget provision is not kept at the consuming centers, it will not reflect the true contribution and cost of activities for the Virtual Corporate (c) Administrative Approval and Concurrence at pre-budget stage

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The Administrative Approval and concurrence needs to be obtained prior to including Schemes Capital and Capital procurements of significant value in the budget proposals. As system of Financial Concurrence is being done in the SAP System through release of PR at different levels, hence Necessary action to taken for the financial concurrence and that may be started in advance so that there is adequate time for the finance officers to examine and concur the proposals and to get those items included in the budget. (d) Token provision to be created for cases at conceptual stage Some cases are still kept at conceptual stage, then for such cases the token provision should be kept so that these are not treated as unbudgeted items. This will also help to avoid the unnecessary loading of the budget, as many of such cases may not materialize during the budget period. This is applicable mainly to schemes and major capital acquisitions/ up-gradations/ refurbishments etc. (e) Consumption Based Budget (Operational Budget) Budget is always presented to the Board and the Planning Commission in terms of activity wise financial outlays to find out activity-wise costs, consumption of the Stores and Spares and it is needs to be considered rather than procurement of the same. In any case procurement budget is derived from the planned consumption for the targeted level of activity. Accordingly, the work centers will be required the details information of opening stock, planned consumption and the planned closing stock (considering buffer stock, maxima-minima level etc. as per the policy of the Corporation) and they required all information in the budget software. Planned Closing Stock +Planned Consumption = Opening Stock. The consumption figures will be used for working out activity wise outlays and activity wise budgeted costs (f) Procurement Budget It has been found out that, work center will keep substantial amount of funds in revised estimates as fresh items to start procurement action or to issue purchase order however at the end of the every year budget of such items remains unutilized .and it may result in adverse impact on current years utilization and it will also have adverse effect on the demand for throw forward budget in next year

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It is emphasized that budget is utilized in the year when material is received or services are utilized and not at the stage of creation of Purchase Order or opening of Letter of Credit. However actual utilization takes place at the stage of LIV (Logistics Invoice Verification) which happens at the stage of receipt of material/ actual utilization of services (g) Budget for Non Procurement Cases There are different non procurement items like manpower and other charges and these items are mapped with the accrual principle, that is, budget is utilized at the stage when expenditure is incurred and liability is provided even though actual payment is not made .hence there should be proper budget utilization for non procurement items and for this purpose budget provision for Manpower and Other charges should be kept in respective financial years (RE 2008-09 and BE 2009-10) (h) Replacement Capital Replacement Capital is chargeable to P&L A/c that is Non-Plan Replacement as per Corporate Policy will also form part of operational budget. . Accordingly, only those replacement capital items should be reflected under Non-Plan, which is chargeable to P&L A/c in the same year of occurrence as per Accounting Policy. The guidelines of Corporate Accounts regarding treatment of replacement capital needs to be factored while framing the plan and non-plan budget. (i) Budget for Non Operated Joint Ventures/ PSCs Budget for non operated joint venture or PSCs are kept only for ONGC share of expenditure .JV group need to be find out the achievable work program and also they have to convert the physical targets into financial outlays .The budget for non-operated JVs will be considered based on the approved budget by MC. Token provision should be kept in BE stage for that activity which is yet to be firmed up so that they can be reviewed or moderated during subsequent years budget exercise in RE stage based on the actual status of cases. Whatever budget is proposed by JVOG it has to provide to CBC in detail. (j) Budget for Operated Joint Ventures and NELP Blocks Full budget need to be provide under natural heads for various activity in case of operated joint venture and NELP Block .budget is also
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necessary in case of various services like Drilling, Logging, Geophysical Services, etc. which is required by JVs and NELP. And that will be planned by respective services .The same shall be allocated to JVs/ NELP Blocks through budget cost cycles run based on utilization of services. NELP blocks and JVs make budget for well material like Casings, Well Heads, etc. and Manpower, Office Expenditure, PEL fee etc. Thus, total activity budget of ONGC Operated Joint Ventures at 100% level needs to be worked out. (k) Commitment Budget Estimates Provision for long lead procurements and contracts including long term supply orders where delivery of material/ utilization of services is expected beyond BE will be kept in Commitment Budget Estimates and for this purpose a separate field is provided in Budget Software. It should be noted that ;in case of long term contracts or long term supply orders which are tied up for 3 year period and anticipated delivery or utilization of services during RE/BE period should be come under RE/BE column Anticipated delivery or utilization of services beyond the BE should be come under in CBE column this is same in case of LSTK contracts for Capital, works However, it should be noted that Commitment Budget should be kept only for those cases where long lead time is required in processing of the cases, procurement action need to be started in the current budget period and Purchase Orders are likely to be placed before next years budget exercise, otherwise such cases should be factored during the next years budget exercise.

(l) Reduction in Non Plan Expenditure Non plan expenditure affects the profitability of company as non plan expenditure is directly charge of to the profit and loss account. Accordingly, increase in Non Plan Expenditure will be permitted only if there is any increase in Physical Activity for Work-over Operations, Side Tracking, Maintenance, Revamping and Replacements. Further, in pursuance to the guidelines on expenditure management- fiscal prudence issued by the Govt. of India, austerity to curtail the expenditure on certain heads of Non-Plan

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expenditure needs to be adhere to by the PSUs. These instructions should be kept in view while framing budget.

4.5: Budget Drivers

The guiding Factors for allocation of Budget resources are:a. Budgeted Cost of Activities b. Inventory level c. Contribution d. Physical targets (a) Budgeted Cost of Activities The unit cost of activity is very important as it may help as guidelines for each Assets / Basins/ Services, and Regional Offices to find out budgetary outlays. The methodology for finding out the cost of activities for budgetary purpose will be same as per accounting cost cycle allocations in view of synchronization of budget and accounts. To facilitate the workings of Budgeted cost of activities, the Budget Software has an additional module for working out of the budgeted cost of activities. (b) Inventory The inventory management is essential to find out the level of inventory holding and carrying cost. While preparing budgets for Stores and Spares, the available items in stock must be kept in view. To meet this objective, the budget software provides additional fields for feeding planned consumption of Stores and Spares items. (c) Contribution While framing the Budget Estimates it must be kept in view that not only the Physical Targets set in the MOU are to be achieved but the financial parameters of Gross Margin, Net Profit/ Capital Employed and Net Profit/ Net Worth indicated therein are also to be achieved. Further budget allocation would be contribution centric. Hence contribution of the Assets/ Basins after meeting the plan expenditure assumes greater importance. The
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Assets/ Basins are therefore expected to prepare and calculate the budgeted contribution. (d) Physical target Budgetary resources are allocated in line with physical target.

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Chapter 5: BUDGET SOFTWARE

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5.1: operating process of budget software As stated above, Virtual Corporate will work out the budget requirements under natural heads viz. Capital, Stores & Spares, Contractual, Manpower and Other Charges within the limit of indicative Activity-wise Financial Outlays. To compile item wise budget requirement under CRC structure and to facilitate working of the activity costs for budget purpose, the budget software is an integrated module to calculate the activity wise outlays and budgeted cost of activities from line item wise natural head budget fed in the budget software which is circulated every year to all the work centers after necessary modifications at the beginning of budget exercise. To run all the budget activity in organization it is always better to have budget software, ONGC upload budget software, and while executing budget software after loading in PC it displays various function and stages available in software , namely Set-up, Masters, Data entry, Utilities, Costing Allocation, Reports etc. however to run all function of budget process in sufficient manner in budget software various guidelines are provided

5.2:

Important features of budget software 1. Master - Cost Centre and Scheme Master

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It explains the importance of Cost Centre in Budget Software and the procedure to create new Cost Centers and new Schemes in Budget Software. As SAP has been functioning at all the work centers, Cost Center hierarchy as per SAP needs to be considered for creation of cost center master. 2. Schematization of the Budget

The size of Other capital of the Virtual Corporate has been growing at a much higher rate than the projected expenditure which comes for questioning during deliberations in the Planning Commission. The Assets / Basins are therefore advised to identify the capital items, which are forming part of the approved projected schemes. To facilitate compilation of budget for Schemes, Schemes have been classified as under:i. ii. Processing iii. iv. v. vi. vii. Major Acquisition Program Major Refurbishment / Up gradation of Equipments Info com Initiatives R&D Schemes & R&D Equipments. Major Buildings & Civil Works viii. Joint Ventures Board Approved Schemes Other Schemes relating to Oil & Gas Production &

To provide above schemes budget software has provided with specific code for the Schemes While feeding the budget data, same Scheme code to be used for all the packages/ items like Compressors, Trunk Lines, Flow Lines, Installations, etc. covered under the Scheme. Scheme code master along-with section-cost center master will be created centrally at the locations by location Budget Coordinator before circulating the budget software to various users for feeding budget data.

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3. Data Entry

Data entry help budget software by providing data to budget software however it may require Indigenous or Imported or DRE menu, it is depends on various natural heads. There are six Natural Heads: 1. Capital 2. Contractual 3. Stores. 4. Spares 5. Manpower 6. Other Charges. The First Four heads are filed in the Indigenous/Imported sub-heading of Data Entry and the remaining two are filled in the DRE subheading of the Data Entry.

4.

Utilities

The following six options are available under Utility Menu: 1)

2) 3) 4)

Merge Database Backup/Restore Data Backup/Restore Master Backup/Restore Inter location allocation Delete IUT Received 6) Dump Data into Excel

5)

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5. Costing Allocations: The cost allocation cycles in the budget software have been designed in such a manner so that revised activity outlays can be worked out after each round of moderation/ revisions in the budget outlays and also that cyclical iterations of cost allocations are avoided. Accordingly, it is imperative that various stages of cost allocation cycles are run in sequential order for working out activity budgets and budgeted cost of activities

FOLLOWING ARE THE Stages THAT COMES UNDER Allocation Cycles

Cost

Stage 1: Creation of Summary data table from line item

budget for working out Activity Budget

Stage-2: Allocation of Directly identified amounts from one

activity to another

Stage-3:

Allocation of Logistics Services, Engineering

Services and Project Overheads of the location to other activities.

Stage-4: Allocation of other Intermediate Activities to Final

activities.

Stage-5:

Incorporation of allocations received from other

locations and change of activity codes if required.

Stage-6: Physical targets for final activities to work out cost of

activities.

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5.3: REPORT OF BUDGET SOFTWARE

Budget software provides reports of all activities. The reports are of two types namely Budget Reports and Costing Reports.

(A) Costing Reports Software provides following reports for the Costing module of the budget software: 1. Summary of allocations made 2. Summary of allocations received from other locations 3. IUT Reconciliation - The report will be run by Regional Budget Coordinator and Corporate Budget Cell to find out if all the Inter unit allocations have been incorporated by the transferee locations in their budgeted costs . 4. Service Level Outlays and Costs- The report provides Outlays for the services including the allocations received from other intermediate services, Physical Parameters and Cost per unit of the Services. 5. Final Activity Outlays and Cost- The report provides Outlays for the Final Activities after incorporating all the allocations received, Physical parameters and Cost per unit of the Final Activity. The report also provides summation of activity budget in terms of Capex and Opex. For Basins, the report also contains a section providing Finding Cost, Reserve Accretion and Finding Cost per unit. 6. Schedule 21 Details of Opex- This report provides Opex Budget Details under Schedule 21 heads of Accounts so that Opex budget may be compared with actuals of past years on like to like basis.

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7. Detailed Cost Sheet- This report provides Detailed Activity Cost Sheet giving Direct Expenditure in Natural Heads and allocations received from other activities. The report will help in analysing the reasons for increase in the budget outlays/costs for activities. (B) Budget Reports Software provides following reports for the Analysis of the Budget Data in the software: 1. Line Item Wise 2. Summary 3. Budget Head Wise 4. Scheme budget All these reports can be run at the Location level, Regional Level and Corporate Level. However, before taking any report at Regional/ Corporate Level, Data has to be merged at Regional/Corporate Level by using Merge Data Base option in the Utilities Menu. At Regional/Corporate Level, the report will provide summary details of entire Region/Company. Further, all reports can also be saved in Excel formats in case users want to make further analysis of data. Besides the above, in the Dump Data to Excel option in the utility menu, facility has been provided to transfer the input data files of Indigenous & Imported, DRE, Section Cost Centre Master, Scheme Master, Allocations made at Stage 1 to Stage 6 and Allocations received from other units. The users may use this option in case they want to make some further analysis of the budget and cost data in excel work books.

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Chapter 6: CONTRIBUTION OF UNIT

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6.1:

Guidelines for working out the Contribution of the Units: In order to meet the budgeted contribution towards both plan and non plan expenditure it needs to be worked out at unit level and should slowly move towards working out budgeted P&L a/c and balance sheet by units. It is indicated that the producing unit has to work out the revenues and statutory levies for the products and capture the operating expenditure from the software to work out the contribution for meeting Plan expenditure proposed in the budget. And afterwards the net contribution after meeting the Plan and non-plan budget needs to be calculated by the units for appraisal to EC. The method of working out the same is explained below:

(a) Revenue computation: In respect of Crude oil, natural gas and value added products, the budgeted sales numbers would be derived from the budgeted production after deducting the elements like transit loss, used for internal consumption, used for mining purposes and flaring (in case of natural gas) and suitable adjustment for accretion/ decretion in stock. After working out the sales figures, the revenue would be derived based on the following prices: 1. Crude oil First based on annual refinery of crude, the refinery wise sales price of crude is drawn.
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 The price would be based on MOU terms. While the FOB price would be as per budget circular and as per agreed price build up in the refinery wise MOUs the other elements of crude will be based. As the international price of crude oil is recognized in US$/bbl, therefore considering the applicable BMT (barrel to ton) factor as applicable to the crude production field the price in MT basis would be drawn. The BMT factors are given in the MOUs also. In respect of Assam crude, new BMT factors have been agreed with Assam refineries which may accordingly be taken. The conversion of US$ rate to INR is done as per norms stated in the budget circular on FE rate.

2.

Natural Gas.

The government regulates the price of gas produced by ONGC. Hence Government has recommended concessional price per MCM for north east and other than north east. These prices are for calorific value of 10,000 K.Cal/M3. Therefore, the prices are to be moderated as per projected calorific value of the gas from each location.

- In respect of ONGCs share of JV gas, the price would be governed by contracts signed with the customers. In case contracts are expiring during the budget period The prices prevailing in the same market or price under negotiation would be considered ,if no such data is available the prices as applicable in expiring contract would be considered. - When it comes to NELP blocks, where there is full marketing freedom, the price of natural gas would be as per budget circular. 3. Value added petroleum products After matching FOB price of crude considered in budgeted, the FOB prices of LPG, SKO, Naphtha/ARN, HSD, RCO etc are worked out. (b) Statutory levies Following methods would be followed:

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1. Crude oil: With keeping in view various elements of crude price build up like import cost, sales tax etc, the price is set. And there are some other levies like royalty, OID cess ,sales tax, NCCD, education cess, octroi. 2. Natural gas:

Royalty: royalty is payable in addition to the APM price. VAT/Sales Tax: The rate of VAT varies from state to Octroi: when natural gas supplied to Mumbai refineries BPCL and HPCL the octroi is charged. VAT/Sales Tax: when its within the state vat is not Excise Duty: The rates are as per budget circular Octroi: This is applicable on products supplied to

state;

of

3. Value added petroleum products: applicable.

Mumbai refineries of BPC and HPC. 6.2 Sharing of under-recoveries of oil marketing Companies The under-recoveries of oil marketing companies held under the decision of government. the under-recovery is done in four price administered products namely LPG, SKO, MS and HSD. PPCA plays a vital role in it.

6.3 Operating Expenditure Contribution from each unit is obtained by deducting operating cost from net revenue. AS OPERATING COST AFFECTS THE PROFITABILITY .the budget for Operating Expenditure should be kept on realistic basis and the increase in Operating expenditure will only be permitted if there is any increase in Physical Activity.

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6.4 Plan Expenditure : The plan can generate plan expenditure from the software under the following activity: Survey Exploratory Drilling Development Drilling Capital R&D 6.5: Net Contribution of the unit After deducting the non-plan and plan expenditure from the net revenue, the net contribution of unit is obtained. The net contribution thus obtained is the performance parameter of the unit and budget allocation would be supported by this performance parameter.

6.6 Budgeted Profit & Loss account and budgeted Balance Sheet: After consolidating the revenue and expenditure of the producing units, Basins, Institutes and Headquarters the budgeted Profit & Loss account and budgeted Balance sheet is drawn by the Corporate Budget Cell.

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Chapter7: BUDGET TIMELINE

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7.1 Budget Timelines: The preparation of RE, BE and CBE is in three stages and is required to be completed within the time limit set, there should be always proper timeline to be maintained for budgeting activity. However RE, BE, CBE is done in following three steps for preparation within the time frame set for these activities: Stage 1: Determination of physical targets Stage 2: Formulation of activity-wise indicative financial outlays corresponding to approved physical targets Stage 3: Determination of financial outlays based on approved indicative financial outlays

7.2 Budget upload in SAP Once the Revised Estimate and Budgeted Estimate get approved, the budget needs to be uploaded into the SAP system.

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Chapter 8: BUDGET ANALYSIS & UTILIZATION

8.1: Annual Budget estimates with monthly & quarterly targets

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Company needs TO PROVIDE MONTHLY TARGETS of all the physical plans and the corresponding financial outlays for effective budgetary control system. At the stage of annual budget formulation, based on the forecast along with the expected scale and speed of operations, availability of resources (both owned and hired), availability of funds etc the monthly target are fixed.. The purpose is to make(a)Efficient resource planning since monthly breakdown is available which calls for drawing up the daily resource deployment schedule including funds planning. (b)Variation analysis while comparing the budgeted activity with actual completed activity and comparison of cost. This process will look forward to complete the target on its time(physical activities, procurement of material and services to complete planned activity in time, will manage resources and funds so that can be deployed for alternative uses and to reduce the cost of activity if the budgeted cost has exceeded. The monthly utilization would be generated budget activity wise so that budget targets are compared with actual performance. For this purpose, monthly closing of financial accounts would be done at all the locations including closure of all service entry sheets and running of cost cycles. It will also include updating of unit cost. The monthly budget utilization reports will provide detail justification for each of the variation between Budget and actual and any corrective action proposed to be taken to contain the actual within approved budget. At the time of incurring expenditure and liability budget utilization is made and it provided in accounts even though actual payment may not have been made. Accordingly, budget provisions for such items are made commensurate to the expenses which are likely to be incurred in the respective FY.

Budget for Throw Forward Items

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In the case of RE where supply orders have been placed purchase action has already been started during previous year reappropriation from overall budget of BE covered such case However, re-appropriation may be made between Plan to Plan and Non-Plan to Non-Plan only. The throw forward cases, for which budget has been revalidated through re-appropriation from the budget of BE are to be shown under throw forward column of the budget software. 8.2: Treatment of budget re-appropriation/ surrender/ transfer Budget transfer Budget transfer can take place when funds are transferred from one asset/ basin/ service to another asset/ basin/ service. Before executing the T-code the LBC ensures the availability of the following information: Budget subtype; Fiscal year; Fund centre; Commitment item; and Amount for each item. Budget return Budget return procedure is used to return or reduce a previously budgeted amount. This is to be done only once during the year aligned the previously budgeted amount (BE) with the RE. Before executing the T-code the LBC ensures the availability of the following information: Budget subtype; Fiscal year; Fund centre; Commitment item; and Amount of budget return

Re-appropriation of funds Re-appropriation of funds can take place at the time of PR release stage the concurring officer approves the PR subject to availability of funds. At that stage, it is the indenters responsibility to make funds available before the PO release for which a requisition is
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made to the LBC. The requisition duly authorized by the Head of the indenting section clearly specifies the following: Amount of fund requirement; Commitment item against which funds are required; and Commitment items (giving three to four options) from which funds can be re-appropriated. With the help of above information. the LBC does re-appropriation funds, considering that re-appropriation can take place within commitment items under plan budget and within commitment items under non-plan budget. However, re-appropriation of funds from one commitment item in plan budget to another commitment item in non-plan budget and vice versa is not allowed. Treatment of above transactions Whatever revisions that can be made in budget are base on budget transfer, budget surrender and budget re-appropriation. The monthly budget utilization would consider the revised budget targets in the month subsequent to such transactions in SAP. 8.3: Role of Location wise budget coordinators in budget review The budget team at different location will carry out in dept variation analysis with comparison to the budgeted expenditure and actual expenditure. Variation for physical activity is carried out to find out reasons for differences between budget expenditure and actual expenditure which will help to form a basis for preparation of action plan and to correct the performance. With all the underlying above, the targeted physical activities would be completed within the budgeted/agreed cost of doing those activities. For effective budget review, location wise budget teams would be required to have complete data base for all physical schemes and monthly performance, cost data base and monthly updating of the same after monthly closing of accounts. The data base would give required inputs both for variation analysis and planning for corrective actions.

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BUDGET MONITORING
Utilization of budget is done once the plan is monitor by BOD &GOI on periodic basis through submission of quarterly report, namely, statement of actual expenditure. Corporate budget section monitors budget utilization with the aim of having 100% plan utilization variation between both physical and financial parameters in the budget and actual utilization are reviewed and required corrective action are taken after obtaining required clarification from the virtual corporate board. 8.4: Review of non-plan budget It has been decided that from 1st Dec09 onwards, all producing units would make monthly profit and loss and the balance sheets. The normal monthly projected profit and loss account would be prepared with the key financial parameters conveyed by corporate budget.

The contribution sheets would be made taking debit of funds required by the location and funded by corporate at predetermined rate.

The net contribution after such fund debit would be contribution to evaluate the operational performance of the unit. Budget team makes a comparison of budgeted activity and actual activity and makes detail variation of all the items of cost and revenue. After the variation is done the corrective steps are taken. 8.5: Monthly review of budget utilization by VCBs. The VCBs would review the monthly budget utilization, after the variation analysis has been done by budget teams. After variation analysis corrective action to contain the financial outlays within the approved numbers and ensure targeted physical performance within such outlay. 8.6: Process of monthly reporting to EC and PAC First the monthly budget report performance is reviewed by VCBs and then it will be reviewed by concerned director and EC and PAC. The detail review report of all variation would be then implemented on all location.
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Whenever the physical performance is going to fall short of budget, there would be corresponding reduction in the financial outlay. The quarterly budget review is then presented to EC and units are asked to put forward the action plan to meet the gaps in the previous quarter so that the budget is fully utilized. The system of budget utilization and review is made on quarterly basis and gradually to move to monthly budget review system. Detailed exercise would be done by all locations bringing out the variation analysis. Such variation analysis is done between budgeted physical program and actual performance also between the budget and actual financial outlays. Detailed reasons of all the variations would be worked out. 8.7: Improving budget utilization Points that makes improvement in budgeted utilization: In order to make delivery in time all the locations have to pursue with suppliers and services. GRVs should be prepared before closure of monthly accounts for all material received during the month; The process of Logistics Invoice Verification (LIV) should be carried out before closure of the monthly accounts. Indenters/MM should pursue with the contractors to submit the invoice for the services provided during the month latest by 5th of next month. And the service entry for the services utilized during the month should carried out before closure of monthly accounts.

Budget is mainly prepared for three periods: 1) Revised Estimates (RE) for the current Financial Year, 2) Budget Estimates (BE) for the Next Financial Year and 3) Commitment Budget (CBE) for the period beyond BE with yearly budget up from third year onwards.

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Wherever the funds requirement is spilling over two or more financial years, the budget provision is split financial year wise in different budget periods based on projected delivery schedule/utilization of services. Thus, budget for RE/BE period will not be loaded beyond utilization capacity. The budget period BE period would be loaded in SAP with year wise break up and would become a basis for next year budget formulation process.

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Chapter 9: BUDGETARY CONTROL

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9.1: Scope & Objectives of Budgetary control It is defined as the establishment of the Budgets relating the responsibilities of executives to the requirements of a policy, and the continuous comparison of actual with budgeted results either to secure by individual action the objectives of that policy or to provide a basis for its revision. In case of ONGC, Budgetary Control thus implies:a) Planning of physical targets and corresponding financial outlays at unit level. b) Integration of plans so that the activities of the company as a whole are coordinated; and c) The comparison of actual performance with the Plan so that deviations can be analyzed and wherever possible remedial action be taken. The importance of budgetary controls has increased in the present context when most of the producing fields in the Company have entered the maturity phase.

Keeping in view that there is continuous increase in rate of oils with increase in exploration and production and this necessitates for more effective and tight budgetary control so that maximum cost of economics need to be achieved

However this exercise needs to be done at the time of budget formulation it is very important to have tight budgetary control. Also

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ONGC follows the tight budgetary control system due to the size of its revenue. 9.2: Advantages of Budgetary Controls (I) It helps management to think about the future and it also help management in preparation of detailed plans for achieving the cost economy targets of each section and operation; (II) It clearly defines the area of responsibility and also make sure that managers of work centers are responsible for the achievement of budget targets (III) Provides a basis for assessing the performance of the organization at various levels through a variance analysis (IV) It also helps to find out any deviation from budget and take appropriate action to correct them

(V) One of important advantage of budgetary control is that it motivates employees by participating in the setting of cost economic targets and measures to achieve the same; (VII) Improves the effective and most optimum allocation of scarce resources.

9.3: Flexibility in Budgetary Controls The budgetary process provides flexibility to the managers in their operations and at the same time makes them accountable for cost of operations. At the corporate level, budget allocations to the assets, basins, services, institutes and corporate functions are made primarily on the basis of physical work program and overall resource generations. Budgetary control allows flexibility to the managers to take day to day expenditure decisions

9.4: Budgetary control though contribution approach

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The location wise budgets would be contribution centric. The EC would give targets of contribution to all the producing locations for a given product prices. Review and control overheads, reduction in inventory level, minimizing outsourcing of services and increase operational efficiency is the best way to achieve the budgeted contribution in the given time. Contribution targets of producing unit should be pure and clear and it is also decide by ONGC is that to give rewards for those producing location who achieve maximum savings and reducing the idle time for facilities without affecting the performance. Non-plan expenditure is having direct effect on P&L account and thus affects the profitability of the company. Therefore, increase in nonplan expenditure will be permitted only if there is any increase in physical activity for work over operations, side tracking, maintenance, revamping and replacements. Inventory management is very essential to optimize level of inventory holding and carrying cost. While preparing item-wise budgets for Stores and Spares, the available items in stock must be kept in view. To meet this objective, the budget software provides additional fields for feeding planned consumption of Stores and Spares items. ONGC is currently enjoying the privilege of being number one profit making company in the country. While framing the Budget Estimates it must be kept in view that not only the Physical Targets set in the MOU are to be achieved but the financial parameters of Gross Margin, Net Profit/ Capital Employed and Net Profit/ Net Worth indicated therein are also to be achieved. The Assets/ Basins are expected to prepare Budgeted Profit Margin and Contribution and must emphasize on the achievement of overall efficiency/ productivity and cost effectiveness in all its operations.

9.5: Budget structure in SAP Once the approved overall budget is obtained from CBG, the LBC of each location than there should be uploading the commitment itemwise budget within the overall approved limit in SAP. Loading of
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approved budget is done to facilitate year-wise capturing of committed Pos.

9.6: Budgetary Control in SAP The system integration would provide for: Costing data base Inter unit cost comparison Freezing of scale of Basin budget in physical and financial terms and internal benchmarking Budget control at appropriate stage wherever activity unit cost is likely to increase and authorization process wherever the cost exceeds the budgeted parameters. Mapping of all investment phasing of Plan Budget Activities in SAP to enable capture unutilized budget in next year RE/BE Budget preparation mapped in SAP; Reports on budget and actual- both for physical activities and financial outlay to be generated from SAP; units to provide reasons for such variation. After approval of the budget by Board, the activity wise budget would be uploaded in SAP by the finance budget coordinators and confirmed by CBG. Once the above is done, budget is ready for use. The plan budget would be considered to be utilized on release of purchase order/work order in SAP. Non-plan budget would be considered to be utilized while processing LIV. Since the budget activities are synchronized with the account codes through cost centers hierarchy, the actual cost versus budget cost would be generated from SAP.

9.7: Budgetary control can be more effective with help of following point Details and updates on ongoing schemes

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Various new schemes are mapped in system so that they become basis for effective budget formulation and control. Budgetary review process schemes can be more effective by providing more review on progress of various ongoing schemes on real time basis and impact calculation of any slippages in the scheme. Updated details of working capital Quarterly budget report can be effective with the help of working capital turnover by operating locations. Since working capital decides the cash flow of the locations, it is expected that the locations would establish an effective mechanism to control the level of working capital as per targeted norms. For the purpose of budget control and reporting, following controllable components of working capital needs to be considered: (a) (b) (c) (d) (e) (f) Debtors beyond credit period; Inventory of finished goods; Inventory of stores and spares; Advances/deposits with suppliers/contractors; Refunds from various tax authorities/Government Departments; Cash balance

Details and updates on unit cost of E&P services This is a quarterly report on updated cost of activities by all locations. The data base for all the cost of services and system of regular updation is SAP is planned during this year. It is also planned to quarterly update the costing records at various locations so that the updated cost of various services is available. With the updated data base, this report would provide updated cost of all the available services and variance to be computed with regard to budgeted cost; In the event of increase in budgeted cost, locations would provide detailed reasons for all such increase and likely impact on annual contribution. They would also submit an action plan to take corrective actions to contain the cost within the targeted levels. In case the cost increase is inevitable, mid- period correction in the budget for internal review would be made;
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This report provides an opportunity to the location chiefs to review the increased cost and discuss the actions initiated to reduce or minimize the impact of increased cost with service chiefs.

9.8: Summing up The entire process of budgetary control calls for close review of all elements of cost, increasing operational efficiency (thus reducing the unit cost), effective and most optimum use/deployment of physical resources and facilities and achieving the targeted contribution. This is a very effective financial control process and desired savings in cost or budgeted improvement in unit level contribution needs to be achieved. Locations are required to carry out re-engineering processes to find ways and means to achieve this goal.

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Chapter 10: PROCESS DOCUMENTATION & BUDGET REPORT

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10.1: Process Documentation

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Process documentation is very important. As per budget procedure it is necessary to have documentation of process. Documentation work flow for entire budget process e.g. format for summary of physical and financial program, monthly budget utilization process; budget control points in work flow. In process documentation each and every document is in relation to document retention to its respective basin, assets, plants CBS etc. 10.2: Reports on Budgetary control processes One of the important and efficient financial control tool is the budget process and for effective budget process there should be establishment of regular system of generation of certain periodic reports which help management to take regular view of utilization of budget. . 10.3: Objectives of efficient reporting mechanism Reporting of budget process is necessary to provide a regular system of submission of key inputs to management for effective control of budget, physical activities ,deployment of resources both physical and financial and talking corrective action at location level to achieve the targets in a given time if reporting system is not effective than the management may not get the indication for necessary actions required for mapping the actual performance and taking corrective measures to cover up for any slippages or increase in cost. Since ONGC is large organization and it is owned by the Government, there are certain mandates to the company to achieve some minimum programs and ONGCs budget becomes a part of national budget and as such the country wide targets (for E&P activities) may fall apart in case the budget physical activities are not fully achieved in the budget period; ONGC is a listed company and major global FIIs and retail public are its stakeholders, effective budget reporting helps the ONGC to share the actual performance with the investors community and the status of anticipated achievements of its planned activities and likely impact on profitability of ONGC so that investors get a fair idea of value of their investments so long as the same is based to the performance of the company rather than industry/global outlook. Since ONGC is

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listed company, corporate governance regulations also require reporting on the performance of the company on regular intervals; Reporting on actual performance and effective micro detailing of variance analysis also allow the company to benchmark its performance and more especially the cost parameters with its global peers.

10.4

: Segmentation of budget reporting The reports may be segmented into: (a) Report on variance analysis while comparing the budget and actual figures- both in physical terms and financial terms; (b) Actual contribution/profitability achieved and impact of some activities spilled over and impact on contribution; (c) Deployment of funds and situations of idling of funds in the event of under-utilization of budget; (d) Review of inventory position and idling of other physical resources. Actual Head wise Summary Of budget Utilization for MAY12
Actual %age Approved Expenditure upto MayUtilizatio BE 2010-13 in May-12 12 n 61 1.04 7.32 12 45 0 7.48 16.62 970 14.25 68.1 7.02 132 6.2 8.15 6.17 1107 75.76 171.54 15.5 2315 97.45 262.59 11.34 61 1.04 7.32 12 2254 96.41 255.27 11.33

Natural Head Capital Spare& Stores Contractual Others Man Power Total Capex Opex

6.28 7.48 53.65 1.95 95.78 165.14 6.28 158.86

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CONCLUSION:
The Company is maintaining a very good management of financial services through the usage of advanced software and programs. But the usage of Budget Software is subtle, starting from installation of the software. It can be bettered-up. The cost cutting measures of the company are in a conventional path, they can be sorted-out more for in a technical way to decrease expenditure. An increase in the short term supply of oil is limited by available excess capacity, and by the oil that is stored in strategic reserves, company reserves and tankers. The supply of oil has witnessed an increase due to the shift from unconventional gas to liquid plays in shale production, which was in turn triggered by low natural gas prices. Despite the conservation efforts of repeated administrations, national demand for petroleum products continued to increase. So, ONGC instead of producing excess or almost excess quantity of oil, it should go for a limited supply for avoiding unbearable subsidies and losses.

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