TALIKING BUSINESS ONGC Chairman and Managing Director Sudhir Vasudeva, known for his pioneering work in turning around the Bombay High offshore fields in the Arabian Sea, speaks about the company’s vision and mission
Oil and Natural Gas Corporation (ONGC) is not only country’s biggest oil and gas producer, it is also known for having set standards for the entire industry in performance and professionalism. Having faced with tough questions on not being able to live up to expectations despite having immense assets and resources in the oil and gas exploration and production business, ONGC is now poised for a big leap with its Prospective 2030 Plan.
This correspondent caught up with ONGC Chairman and Managing Director Sudhir Vasudeva, known for his pioneering work in turning around the Bombay High offshore fields in the Arabian Sea, to seek an insight into the company’s vision and mission.
There is view that ONGC is not performing to its potential. A large number of exploration projects are running behind schedule, leading to delays in monetising the assets. What is your view on that?
I can tell you that in the last 11 years, ever since New Exploration Licensing Policy (NELP) came in 1999, we have accreted 2.15 billion tonnes of reserves. In the first 44 years of our existence, we accreted 6 billion tones. How can anyone say we are tardy? Unfortunately, we were not able to get or discover big reserves say like what RIL got. Our reserves have been in deep waters, and marginal reserves in deep waters do not make viable proposition. As you know, discovery of oil reserves worldwide is coming down. We are moving in difficult terrains but getting gas reserves now. Unfortunately, 73 per cent of our production is coming from 15 fields. We are operating 110 fields. All these fields are old. Mumbai High was started in 1976. Therefore, production from these fields is falling. Through our efforts in IOR/EOR (improved oil recovery/enhanced oil recovery) we are able to recover 8.5 million tonnes, and against the drop of 4.5-5 per cent per annum globally, we have been able to arrest it to 1.5-2 per cent levels. This will mean 160 million tonnes of additional oil of which 70 million tonnes have already come in the last two years and the balance is yet to come. Every year, the contribution from these schemes is 8 million tonnes.
What is the plan for development of the Bombay High? How do you see its future?
On Bombay High, the company has implemented a proposal of Rs.600 crore for the first part of Phase-3 re-development plan. This is expected to yield 1.03 million tonnes of oil and 213 million cubic metres of gas. The company has also invested Rs.26,000 crore for developing 11 clusters, comprising 34 marginal fields and this will help ONGC yield 11 million tonnes of oil and oil equivalent. Oil and gas are going to be a dominant player for times to come. In Bombay High, we have taken the recovery to 33-34 per cent. The re-development of Bombay High North and South will come in December and January. It is becoming a law of diminishing returns. For producing one barrel of oil, I have to pump four barrels of water but we are not giving up.
When do we hope to see a big jump in production from ONGC?
There is going to be a big jump in production from next year — 2013-14. We have 13 ambitious projects. We are developing them through a cluster approach. We have created a cluster of around 5-6 fields, and are developing them. This development will come at a cost of around Rs.26,000 crore and yield about 110 million tonnes of oil, and these schemes will fructify next year. Hopefully, our oil production should take a jump of 40 million tonnes from thereon.
During the next five years, how do you see the oil and gas situation in ONGC?
We will be producing 303 million tonnes of oil and oil equivalent in the next five years, which is about 60 million tonnes more than what we produced during the XI Plan. We are looking for partners for our deep water blocks. We have, in fact, 36 such blocks in NELP and nominated blocks. We have given a flyer for 19 fields and invited expression of interest from all the big international companies. In the past, Petrobras and Statoil were collaborating with us and then they departed. Now we are talking to Conoco Phillips and other companies. For one of the blocks, we got approval from a Japanese consortium called Impex.
Is ONGC developing a strategy encompassing LNG sourcing, marketing and city-gas distribution business at the domestic and international level?
This is part of the comprehensive Perspective 2030 Plan we have drawn up for the next 18 years. We are keen to enter the LNG sourcing and marketing business as we believe there is a big demand for LNG in the Indian market. We have already associated ourselves with the Japan-based Mitsui Group, which will be handling the entire value-chain of the LNG business for us. We have signed an MoU with Sinopec of China for cooperation and collaboration in the oil and gas business. We have the backing of our board for these forays. On the city gas business, we are still working on the plans and need to deliberate whether we need to launch a new company for this business or form a special purpose vehicle (SPV).
Is ONGC looking to divest its stake from its CBM business and going in for international bidding?
We have four coal bed methane (CBM) blocks and spent nearly Rs.580 crore during the last one decade. There are many issues, including land acquisition and simultaneous production of coal and CBM from these fields. Therefore, we decided that somebody who can manage this kind of environment should take over from us. We started with the idea that people who are already operating should take over, including players like Essar. This was not seen in the right perspective by the Petroleum and Natural Gas Ministry which asked us to go in for global ICD. We will retain the majority share in the assets but we want to complement the efforts with that of our partners.
How comfortable are you with the price of gas now being offered in the country?
It is a politically very sensitive question. ONGC is getting two to three different prices. We are getting $4.2 mmBtu for APM gas. Non-APM price is varying between $4.2 and $5.2 per mmBtu. Today, we are not making loss but we are not making handsome margins also. We are still making good margins. But when it comes to deep water, $4.2 per mmBtu is not sufficient. We are hopeful that by the time when our fields come into production it will be post-April 2014 and by then the price of gas will stand revised as the present situation is not viable for gas production from the deep water blocks.
How does ONGC plan to ramp up the gas production? Could you share the investment and other plans with us in this regard?
ONGC plans to raise natural gas production by over 7.22 million standard cubic metres per day (mmscmd) in the next two years to meet the energy requirements. The incremental output in 2012-13 would be 1.45 mmscmd and a substantial 5.77 mmscmd would come in 2013-14.
ONGC at present produces about 55 mmscmd of gas. It is investing Rs.2,735.65 crore in developing the G-1 and GS-15 fields by December and will produce 0.982 million tonnes of oil and 5.92 billion cubic metres (bcm) of gas over 15 years. Another Rs.3,690.37 crore is being spent on developing C-Series fields by April 2013 to produce 10.771 bcm of gas. It is investing Rs.10,011.22 crore in B-Series fields by May next year to produce 16.953 bcm of gas over the next 15 years.
Tell us about the focus of OVL and its road map to secure energy assets for India?
Our vision is to have a dominat presence in India with global leadership. Around 20 per cent of the country’s consumption in oil and gas is coming from ONGC. If we have to retain this position, then we have to work hard. We have grown at 2 per cent in the past, and now we have to grow at 4 per cent if we have to maintain our dominating position. For 4 per cent growth, we will need to tap 130 million tonnes of new oil and gas resources. We can produce 70 million tonnes per year on the domestic front but 60 million tonnes has to come from abroad. Today, OVL is getting around 18 million tonnes per year into the country. We have to multiply OVL’s contribution by six times to achieve this goal of energy security.
Regarding Imperial Energy, the only problem is that reserves are there but there has been a fault on reading of the field. We have got it vetted a number of times, and ascertained that reserves are there. We are not getting the desired results. The field is very tight. The climate there is very bad, and we can only work in winters when the ice is hard as during summers there is lot of slush which does not allow any activity.
The progress has been tardy. We have sent a team to US Denver to work out a plan. We now plan to use the shale gas exploration technology for exploring Imperial reserves. We are improving our understanding of the asset and hope to get better results in future.