ONGC's exploration record raises questions

The numbers are damning. Even though the empowered committee of secretaries today overruled the Director General of Hydrocarbons' (DGH) recommendations withholding exploration blocks from upstream major Oil and Natural gas Corporation (ONGC) under the recently concluded round of auctions dubbed NELP VI, the questions continue to fly thick and fast.

Why the company which spent Rs 11,421 crore on its core exploration and production (E & P) business last year has such an abysmal record of oil and gas discoveries?

A report by the DGH says that of the 47 blocks awarded to the company so far, it has no discoveries, while Reliance Industries has reported 18 discoveries, Cairn Energy 21, and the much smaller Gujarat State Petroleum Corporation, four.

But the answers are hard to come by, with ONGC disputing the DGH's claims. Said a top ONGC official, "These remarks by the DHG are very damaging and subjective. Our criteria for recording a discovery is different from that of the DGH."

The company reported 10 new discoveries in 2005-06 at the time of announcing its annual results but these have not been approved by the DGH.

The first to raise the bogey officially was former petroleum minister Mani Shankar Aiyar who at a Energy Coordination Committee Meeting (ECC) last year spent eight minutes running down the company's record.

Then came the DGH's report card which gave a blow-by-blow account of the company's discoveries and compared them with the spectacular successes of Reliance Industries and Cairn Energy, among others.

A DGH report points out that in the last four years, private companies and JVs have made 32 "significant" discoveries in five major basins: Mahanadi offshore, Krishna-Godavari offshore, the Gulf of Cambay and onland on Rajasthan and Cambay basins.

The report points out that RIL's eight wells in KG-DWN-98/3 were drilled in merely 20 per cent of the block and "have already established gas reserves of about 12-14 TCF".

In the Cambay basin, the report says that Niko Resources struck natural gas in Well Bheema-1 in a "short span of 15 months from the signing of the production sharing contract" Compare this with ONGC's record.

Crude production fell to 24.4 million tonnes in 2005-06, from 26.68 million tonnes in 2004-05, and its deepsea exploration project has not come up with a single find despite investing close to $900,000 a day on three deep sea drilling ships as part of its Sagar Samruddhi project.

While an exploration ratio of 1:2 is considered decent by industry standards, ONGC's ratio stands between 1:4 and 1:5 for onshore, and over 1:10 for off-shore.

At 42 per cent, ONGC's discovery-to-exploration record on oil wells is no match for Reliance's 71 per cent and Cairn's 80 per cent.