Oil and Natural Gas Corporation is not only the country’s biggest oil and gas producer, it is also one of the best-performing government companies. Though it is criticised for not doing enough in the field of exploration and production, its newly-appointed Chairman and Managing Director Sudhir Vasud va says sustaining production is itself a feat. In an interview with Ajay Modi and Jyoti Mukul, Vasudeva says he wants to put in place a Perspective Plan for the next 15 years. Edited Excerpts:
As the new chairman, what are the challenges that you have identified for the company?
Challenges are not new. There are matured fields from which we have to maintain and sustain production. Then we need to monetise new assets as well as focus on new exploration. Deepwater success has been less than satisfactory. Then we want to make more acquisitions aboard. Besides, there are challenges where we do not have any control like subsidy-sharing.
How do you plan to increase production?
We will revisit plans. We have started work on a Perspective Plan. We ideally wanted to start the exercise before the 12th Plan (2012-17). Somehow that did not happen. Whenever we do this exercise, we will take 12th Plan as the first building block. It will be a 15-year plan. It is high time we revisit — all our four areas of operation which includes E&P-domestic and overseas, alternatives, unconventional any other value multiplier projects. We will need to reallocate our portfolios across all these segments. We are in the process of doing the leg work for the Plan.
There is a view that the company is not performing aggressively and it has been static in its operations. Do you agree with this?
If we are maintaining production, it itself is a big feat. Bombay High is 35 years old. Ankleshwar and Rudrasagar, which were are first discoveries in the 1960s, are still producing. We have 21 IOR (increased oil recovery) and EOR (enhance oil recovery) schemes totalling to an investment of Rs 48,000 crore. Of this, Rs 33,000 crore has already been spent. About 62 mt oil has already produced and balance will come. This year out of 22.4 mt, 8.5 mt have been contributed by IOR and EOR schemes.
What is the strategy for the new discoveries which had been made some time back but development has not been completed?
The marginal fields we discovered in the past were not techno economical viable when oil price was $10 a barrel in the ’90s and gas price was in APM regime. These were kept in the back burner. Now, even post subsidy, we are getting $50-55 a barrel and gas price is $4.2. All these projects have become viable now. The process was started in 2007, but oil price went up to $147.
We had to retender them, since market reflection and cost estimate was at divergence. Now, most of these schemes have been awarded and are under fructification. North Tapti has been implemented. Oil from the first well has started coming. In B22, all platforms have been installed. One well has started contributing. They will peak by 2013-14. We will see a production jump of 4 mt. Today, in FY 11, we produced 24.42 mt from domestic efforts. It will go up to 28.2 mt in 2013-14.
When are the bigger discoveries going to start production?
The KG-98/2 is very much in focus. The 98/2 appraisal will work will start. Along with that we have nominated fields for which there will be cluster approach. We have started production from GS15. G1 will be put on production by the first quarter next year. That will give 2 mcm of gas. Then S1 and Vashistha for which tendering has started. They will be on schedule in 2014 when 6 mcm of gas will start coming. In western offshore, Daman production will start along with C-Series by 2013-14. Gas production will touch 100 mcm a day by 2016-17.
At what stage is your plan to take in partners?
In KG 98/2, Petrobras and Statoil have shown interest. We have opened our data room. The process is on. It will not really be bidding and auction. What we are checking on is competitive advantage. Money is not a constraint. We have cash and surplus reserves. The association, we are looking at is from technical viewpoint. It depends on what is on offer. We have to be open on this.
Are you selling stake in CBM blocks?
In CBM, there are issues relating to land acquisition. There again, we are trying to work out association with other. We are talking to all those who are there in this kind of business. We will be inviting bids there.
How good is the $4.2 gas price?
For offshore, the gas price is $5.25. For Rajamundhury (in Andhra Pradesh), it is $4.75 but the June 2010 order says that in case these fields are not viable to produce at that rate, we have to give techno details to DGH. They will consider if there is a case for revising price.
How did you perform in the second quarter?
Production performance has been good. If subsidy burden is less, then the performance should be good but there is no clarity whether it will be on pre-June customs and excise duty or post. We are not averse to giving subsidy because the government is in its right to take this since these are nominated fields and no profit petroleum is given to it. But the formula has to be given upfront.
What is your prescription for the subsidy-sharing burden?
If the problem was that simple, then it would have been solved long back. Two committees, under B K Chaturvedi and Kirit Parikh considered various models. I do not want to give my own idea. ONGC has already given a formula on record.
Refineries are seeking crude on credit. What is your view on this?
We have written back to IndianOil. We can understand their problems. Logically, we have to charge interest. It is within the house. The ministry has to take call. Contractually whatever is the credit period, it should be honoured. After all, we are dependent on internal resource generation. We are not getting any budgetary support. If it starts hurting us then there will be a problem.
What are your views on the disinvestment and the new models of crossholding and buyback which is being proposed by the government?
We have not heard anything on buyback or cross holding. These are market speculations. I am given to understand some discussions are taking place. Earlier, they felt ONGC will set the tone for the market. But the moment FPO is announced, market will start suppressing price artificially. It is purely a government call. Investors also understand compulsions of the government.
Have you started the recovery of royalty paid on Barmer crude?
Legal agreement has to be entered into. We have to sign a tripartied agreement involving Cairn India and Vedanta. All these conditions which the government have put and we have agreed to give NOC based on these, these companies have to be bound by that. We are discussing the nitty-gritty with these companies.
Would you be making more investment in the Barmer block now?
When this cost recoverability was not there, we were making investment. All this investment of $4 billion that JV has made, we put in 30 per cent even when there was no sign of cost recoverability. A Group of Ministers and committee of secretaries way back in 19997 said that ONGC will be reimbursed. On that basis, we kept pursuing and made all that investment.
Is the proposal for a refinery in Rajasthan still valid?
Some 670-km pipeline has already been laid. When this talk was going on pipeline was not around. Today a grassroot refinery, especially a small one is not very viable.
What is your vision for OVL?
Today, OVL is getting 9.45 mt of oil equivalent. Out of 33 projects, nine are producing, five are under development and balance are in exploration. We are actively pursuing. The strategic vision was to get 20 mt by 2020 but from the perspective of country’s requirement and that the existing production will go down, this vision has to be revisited. Lot of water has flown under the bridge since then. We have internally, set up the target that this 20 mt has to be reached before 2020.
