India's state-owned Oil& Natural Gas Corp. (ONGC) is making a major bid at both the domestic and overseas levels to increase its oil and gas market capitalization equity and become a global player.
In the 20 months that he has headed ONGC and its overseas arm, ONGC Videsh Ltd. (OVL), Subir Raha, the corporation's chairman and managing director, has logged long hours preparing India's biggest state-owned petroleum firm to cope with life after the liberalization of the Indian economy and the mainly upstream company's impending privatisation.
Today, ONGC has a market capitalization of over $10 billion, and has been ranked the No.1 company in India in the ET-500 (top 500 Indian companies in the Economic Times). It has net assets valued at $7 billion, and its fiscal year 2001-02 net profit of $1.27 billion was the highest among Indian corporations, public or private.
Need to grow
"Our thrust to procure more oil and gas equity at a global level was made possible by the deregulation of the oil sector in India last year," said Raha. "Now we have reached a stage where we cannot afford to stagnate; we either have to grow or fall by the wayside.
"We have therefore drawn up expansion plans that envisage doubling our reserves, from 5.77 billion tonnes of oil and oil-equivalent gas, to 12 billion tonnes, and sourcing 20 million tonnes/year of oil and gas from equity assets abroad during the period of the 10th 5-Year Plan (2002-07)."
Cairn assets bid
ONGC has made a nonbinding bid for Cairn Energy PLC's assets in India, while OVL has made an offer to buy Cairn's assets in Bangladesh (OGJ Online, Sept. 16, 2002).
"Our nonbinding bid is for all the oil properties of Cairn Energy, except the producing Ravva field," said Raha. "Cairn, which has made 10 oil and gas discoveries in India, has offered to sell all of them, except the Saraswati exploration block in Rajasthan."
Four of those discoveries, all named after Indian goddessesGauri, Ambe, Parvati, and Lakshmiwere made in shallow water on Block CB/OS-2 in the Cambay basin off Gujarat state. A fifth, Saraswati, was made onshore on Rajasthan Block RJ-ON-90/1.
The remaining discoveries were made in deep water off Andhra Pradesh state on the Krishna-Godavari basin Block KG-DWN-98/2.
Not all of ONGC's efforts at expansion have been applauded.
Raha bristled at criticism of his company's acquisition of Canadian firm Talisman Energy Inc.'s 25% equity stake in the Greater Nile oil project in Sudan at a cost of $720 million. Noting that state oil firms Petronas of Malaysia and China National Petroleum Corp. (CNPC) have been willing to raise their stake in the project, he said, "All this talk about the inadvisability of investing in a country with a poor human rights record is a sham. The fact that two other state-run companies have shown interest in increasing their stake in the project is itself testimony that it is a good deal."
The company is in the process of incorporating a special purpose vehicle, Sudan Nile-Ganga BV, to take over Talisman's equity stake in the project, which has oil reserves of 150 million tonnes, with prospects of more within the block.
This venture would be similar to the structure of Sakhalin India Inc., which was set up to control the $1.7 billion investment that OVL has made in Sakhalin, the largest single investment out of India and the biggest single foreign direct investment deal in Russia.
Having thus gained respectability in the international market after sealing these two major deals, OVL has either closed, or is in the process of closing, as many as seven other global oil equity deals: in Myanmar, Iran, Iraq (pending lifting of sanctions), Kazakhstan, South Korea, Libya, and the US.
The ONGC chairman refused to divulge further details of the deals, but he noted that his firm is also looking at equity in gas blocks off Tasmania.
At the domestic level, ONGC plans to invest 5 billion rupees ($104 million) for developing three new fields in India that collectively are expected to yield production of 1.3 million tonnes/year of oil and oil-equivalent gas.
"We are taking up the development of the G-1 offshore field in the Krishna-Godavari basin, the D-1 exploration block offshore Mumbai, and the recently found oil and gas field east of the gigantic Vasai gas field, near Mumbai," Raha said.
Vasai East, which lies east of one of India's largest known gas fields, Vasai, is estimated to hold 100 million tonnes of oil and oil-equivalent gas. The three fields are expected to go into production within 30 months.
"We have put in place a 37 well deepwater drilling campaign during this fiscal year," Raha said. "We have floated tenders for deepwater drilling rigs and hope to begin drilling in the deep waters of Krishna-Godavari, Mahanadi basin, and adjoining areas before the monsoons set in this year."
Crude supply deals
Raha noted his company's success in turning around a decline in oil production and its growing prospects for exporting crude oil.
ONGC forecast a 1 million tonne rise in production this fiscal year over levels registered last fiscal year.
"The Mumbai High (formerly Bombay High) redevelopment and improved oil recovery schemes have been giving us good results," Raha said. "Already, crude oil production is up 13%, while gas production has risen 11%."
Production growth has spurred new crude supply agreements with India's three main refiners.
Raha said that 2-year contracts, for fiscal years 2002-03 and 2003-04, are being negotiated with Indian Oil Corp., Bharat Petroleum Corp., and Hindustan Petroleum Corp. for supply of a combined 25 million tonnes of crude.
"The agreement in force is for the quantities produced by us in fiscal 2001-02," said Raha. "We are free to sell any incremental quantities to anyone who pays us the best price."
Meanwhile, the corporation has sought a lifting of the ban on the export of indigenous crude on the grounds that such a move has no negative security implications.
"Crude oil is strictly a tradable commodity, and not a strategic resource," Raha noted. "There would not be any security implication if the export ban were to be lifted. In case of contingency situations, we ourselves would desist from exporting crude."
The 54-year-old Subir Raha was named chairman and managing director of Oil & Natural Gas Corp., India's largest state-owned company, in May 2001.
Raha joined state-owned refiner-marketer Indian Oil Corp. in 1970 as a management trainee. Following several field and staff assignments, he served a stint with India's government as head of the Oil Coordination Committee in the Ministry of Petroleum and Natural Gas. He later joined the IOC board as director-human resources. Concurrently, he had responsibilities for IOC business development, information technology, and corporate communications.
Raha also created and chaired several of IOC's joint ventures with other firms.
Raha graduated in 1969 from Jadavpur University with Electronics & Telecommunications Engineering as his electives and won the Rector's Medal for the best all-round graduate.
Later, as a working manager, Raha received an MBA from the University of Leeds in 1985. He also is an alumnus of the Administrative Staff College at Henley, UK.
Raha was named Top CEO by the Institute of Marketing & Management, New Delhi. Recently, he was named CEO/Leader of the Year at the India Leadership Summit.