ASSIGNMENT

Submitted by
MANU ANTONY
2nd MBA
MIIM
KUTTIKANAM

1.What are the growth strategies adopted by ONGC?

The case describes the growth strategy and

diversification plans of the Government owned Oil
and Natural Gas Corporation Limited (ONGC), the
largest oil exploration and production (E&P) company
in India. ONGC has near monopoly in India's oil E&P
industry producing nearly 90 percent of the country's
crude oil and natural gas. Till the late 1990s, the
company was mainly confined to upstream activities
of E&P. In order to reduce risks inherent in confining
to one activity and to achieve financial stability and
steady growth, ONGC acquired a major equity stake
in Mangalore Refinery and Petrochemicals Limited so
as to enter the downstream activities of refining.
With this, ONGC became the first integrated oil
company in India. The case examines the benefits
and drawbacks of oil E&P Company entering into
refining and retailing businesses. The case also
discusses the possible benefits and disadvantages of
ONGC's plans in 2004 to enter insurance, power
generation and shipping businesses as part of its
diversification program.
The Oil and Natural Gas Corporation Limited (ONGC)
was the largest oil exploration and production (E&P)
company in India. The company enjoyed a dominant
position in the country's hydrocarbon sector with 84
per cent market share of crude oil & gas production.
Around 57 per cent petroleum exploration licenses in

India for over 588 thousand sq. km belonged to

ONGC.
The company was the first to achieve Rs 100 bn net
profits in the Indian corporate history. ONGC's major
products included petroleum, crude natural gas, liquefied
petroleum gas (LPG), kerosene and petrochemical
feedstock. For the fiscal year ended 2002-03, the
company reported gross revenues of Rs 353.872 bn and
net profit of Rs 105.293 bn. With market capitalization of
US$ 15 bn, ONGC was ranked 260 in BusinessWeek's
Global 1000 list of the world's top companies by market
value, for 2003-04. Since the mid 1990s, ONGC had faced
the problem of declining crude oil and gas production.
The company made efforts to consolidate its position in
the business by acquiring foreign oil equity through its
wholly owned subsidiary, ONGC Videsh Limited (OVL).
With ONGC's core business showing signs of stagnation,
the company chalked out a massive diversification plan to
go into downstream activities such as LNG marketing,
diesel, naphtha and kerosene. ONGC was also
contemplating forward integration opportunities in gas,
petrochemicals and the power sector.
The company also announced its intentions of entering
the insurance and shipping business in the next couple of
years. However, ONGC's diversification plans received a
major setback when the Government of India (GoI)
announced that the company should stick to its core
business rather than venturing into 'unrelated' areas. to
independence, there were two companies in India
involved in the exploration of oil - the Assam Oil Company
in the North-Eastern region and the Attock Oil Company
in the North-Western region.

Both companies had meagre oil exploration outputs as

major parts of India were deemed unfit for exploration of
oil and gas resources. In October 1959, the body received
further elevation, both in status and powers, with the
Commission being converted into a statutory body by an
act of Parliament. This act came to be known as the
ONGC Act in 1959.
According to the act, Oil and Natural Gas Commission's
main functions were, "to plan, promote, organize and
implement programmes for the 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..."

Conclusion
ONGC tried to overcome the declining production of
oil and natural gas by focusing on new domestic
production enhancement programs, offshore
exploration and technology upgradation. To improve
productivity and financial performance, ONGC
concentrated on human resources development and
financial restructuring. For the fiscal year 2004-05,
ONGC planned to spend approximately Rs 100 bn on
capital expenditure relating to exploration and
development of domestic oil and gas properties. As
part of production enhancement, redevelopment of
Bombay High oil wells was given top priority. This
involved two projects called Bombay High North
Redevelopment and Bombay High South
Redevelopment, which were expected to cost around
Rs 82 bn. The program aimed to achieve an

additional 76 mn tonnes of producible reserves of oil

and gas. ONGC expanded its global operations
through its subsidiary OVL, by making sizeable
capital investments in Vietnam, Sakhalin (Russia) and
Sudan.

Identify various objectives and how effectively they

implemented it?
Oil And Natural Gas Corporation has been
established to carry out the objectives specified in
the Memorandum & Articles of Association of the
Company. The main objectives are:
1.To acquire whole or any part of the undertaking,
business, the assets/liabilities, rights, obligations,
power, goodwill, privileges, functions and associated
establishment of whatever nature of the Oil & Natural
Gas Commission [Established under the Oil & Natural
Gas Commission Act (No. 43 of 1959)] and for that
purpose carry into and carry into effect such
agreements, contracts, arrangements as may
become necessary.
2. To plan, promote, organize and implement

programmes for the development of Petroleum

Resources and the Production and Sale of Petroleum
and Petroleum Products produced by it and for all
matters connected therewith.
3. To plan, promote, organize exploit and implement
programmes for the efficient development of
petroleum and petroleum products and alternate
resources of energy, and the production, distribution,
conservation and sale of Petroleum and other
products/services produced by it and for all the
matters connected therewith.
4. To carry out exploration and to develop and
optimise production of hydrocarbons and to
maximise the contribution to the economy of the
country. To carry out geological, geophysical or any
other kind of surveys for exploration of petroleum
resources; to carry out drilling and other prospecting
operations; to probe and estimate the reserve of
petroleum resources; to undertake, encourage and
promote such other activities as may lead to the
establishment of such reserves including geological,
chemical, scientific and other investigations.
5. To search for, purchase, take on lease or license,
obtain concession or otherwise acquire any estate or
interest in, develop the resources of work, dispose off
or otherwise turn to account, land or sea or any other
place in whole of India or in any other part of the
world containing or likely to contain, petroleum,
petroleum resources or alternative sources of energy

or other oils in any form, asphalt, bitumen or similar

substances or natural gas, chemicals or any
substances used, or which is thought likely to be
useful for any purpose for which petroleum or any
oils in any form, asphalt, bitumen or similar
substances or natural gas is, or could be used or to
that end to organise, equip or employ expeditions,
commissions, experts and other agents and to sink
wells, to make boring and otherwise to search for,
obtain, exploit, develop, render suitable for trade,
petroleum, other mineral oils, natural gas, asphalt, or
other similar substances or product thereof.
6. To undertake, assist, encourage or swap or
promote the production of petroleum resources and
to carry on in all their respective branches all or any
of the business of producing, treating, (including the
redefining of crude oil) storing, transportation,
importing, exporting, swapping and generally dealing
in or with, petroleum or other crude oils, asphalt,
bitumen, natural gas, refinery gasses, liquefied
petroleum gas and all other kind of petroleum
products, chemicals and any such substances
aforesaid.
7. To carry on all marketing and distribution of all
kinds of petroleum products and to purchase or
otherwise acquire manufacture, refine, treat, reduce,
distil, blend purify and pump, store, hold transport,
use, experiment with market distribute, exchange,
supply, sell or otherwise dispose of, import, export
and trade and generally deal in any and all kinds of

petroleum products, oil, gas and other volatile

substances.
8. To carry on all or any of the businesses of the sale
and purchase of petroleum and other crude oil,
asphalt, bitumen, natural gas, liquefied petroleum
gas, chemicals and all kinds of petroleum products,
treat and turn to account in any manner whatsoever
petroleum and other crude oils, asphalt, bitumen,
natural gas, liquefied petroleum gas and all kinds of
petroleum products, chemicals and any such
substance as aforesaid.
9. To establish, provide, maintain and perform
scientific, technical, engineering, project
management, consulting/contacting services
including but without limiting to technical studies,
design, construction, maintenance, repair all kinds of
works and buildings, procurement, inspection
expediting, management of construction and related
services for petroleum reservoir, storage and
transportation of oil, gas and other minerals by
pipeline in or otherwise, seismic data acquisition,
interpretation, logging, drilling, cementing, other oil
fields related equipment.
10. To promote, organise, or carry on the business of
consultancy services in any field of activity in which
the Company is engaged in or connected therewith.

3.Compare and contrast between growth and current scenario?

The scenario at ONGC during the growth stage

was as follows;
Signed technology deals with global giants to obtain
critical insights into redeveloping its mature fields. in the
last 50 years, adding over 7.1 billion tonnes of In-place
Oil & Gas volume of hydrocarbons in Indian basins.
Against a global decline of production from matured
fields, ONGC has maintained production from its
brownfields like Mumbai High, with the help of aggressive
investments in various IOR (Improved Oil Recovery) and
EOR (Enhanced Oil Recovery) schemes. ONGC has many
matured fields with a current recovery factor of 25-33%.
[1]
Its Reserve Replacement Ratio for between 2005 and
2013, has been more than one.[1] During FY 2012-13,
ONGC had to share the highest ever under-recovery of
INR 494.2 million (an increase of INR 49.6 million over the
previous financial year) towards the under-recoveries of
Oil Marketing Companies. 2003, ONGC Videsh Limited
(OVL), the division of ONGC concerned with its foreign
assets, acquired Talisman Energy's 25% stake in the
Greater Nile Oil project.
In 2006, a commemorative coin set was issued to mark
the 50th anniversary of the founding of ONGC, making it
only the second Indian company (State Bank of
India being the first) to have such a coin issued in its
honor.

In 2011, ONGC applied to purchase 2000 acres of land

at Dahanu to process offshore gas. ONGC Videsh, along
with Statoil ASA (Norway) and Repsol SA (Spain), has
been engaged in deep-water drilling off the northern
coast of Cuba in 2012. On 11 August 2012, ONGC
announced that it had made a large oil discovery in the
D1 oilfield off the west coast of India, which will help it to
raise the output of the field from around 12,500 barrels
per day (bpd) to a peak output of 60,000 bpd.[12]
In November 2012, OVL agreed to acquire ConocoPhillips'
8.4% stake in the Kashagan oilfield in Kazakhstan for
around US$5 billion, in ONGC's largest acquisition to
date. The acquisition is subject to the approval of the
governments of Kazakhstan and India and also to other
partners in the Caspian Sea field waiving their preemption rights.
In January 2014, OVL and Oil India completed the
acquisition of Videocon Groups ten percent stake in a
Mozambican gas field for a total of $2.47 billion. ONGC's
operations include conventional exploration and
production, refining and progressive development of
alternate energy sources like coal-bed methane and shale
gas. The company's domestic operations are structured
around 11 assets (predominantly oil and gas producing
properties), 7 basins (exploratory properties), 2 plants (at
Hazira and Uran) and services (for necessary inputs and
support such as drilling, geo-physical, logging and well
services).