MAKING TOMORROW BRIGHTER
By Subir Raha, Chairman & Managing Director,Oil & Natural Gas Corporation Limited
 

SECURING SUSTAINED GROWTH 
To achieve sustained growth of the business, we must create wealth. ONGC is the first Indian corporate to have achieved the landmark of registering net profit exceeding Rs.5,000 crore. The proposed dividend of Rs.1728 crore @ 110% is nearly one third of the net profit of Rs. 5,229 crore. To sustain the profitability trend, we have repaid loans worth Rs. 2765 crore, taking the debt-equity ratio of the company to an all-time low of 0.14:1. 

In the endeavour to secure sustained growth, the company established 66.67 million tonnes of new reserve of oil and gas, including 12 new finds, during 2000-01. This is a turning point, after the decade-long decline in the reserve base. Equally important is the achievement by the wholly owned subsidiary, ONGC-Videsh Ltd., in concluding the deal of 20% firm-in, and another 20% carried interest, in Sakhalin-I Project. Estimated at USD 1.7 billion, this is the largest single foreign investment ever made by any Indian corporate, guaranteed by the company. To add to this list of successes, the company has won 16 out of the 23 blocks offered under the NELP-II bidding round. In January, 2001, crossed another milestone when the Mumbai High North Redevelopment Scheme, at an estimated cost of Rs.2929 crore, was launched. These remarkable advance in the areas of reserve accretion, acquisition of equity oil and gas and enhanced recovery, mark the beginning of a new chapter in the chequered history of the company.

ONGC has achieved, if not surpassed, the targets in almost all operational activities. In the context of the MOU signed with the Government of India in the Ministry of Petroleum & Natural Gas, the company has qualified for "Excellent" rating. 

FIRST, THE PEOPLE 
Now, the future. ONGC, like other corporates in the Hydro-carbon Industry in India, is at the threshold of unprecedented challenges and opportunities. Phased dismantling of the Administered Pricing Mechanism, announced by the Government of India in Nov. 97, is to come to an end on March 31, 2002. The Oil & Gas business is to become truly liberalised and globalised. In this context, a series of strategic initiatives have been taken, not only to secure sustained growth of the company but also to promote the company to the ranks of the world's best.

First, the People. The Corporate Rejuvenation Campaign was crystallised during the first-ever Strategy Meet of the Navratna Board in July, 2001. After formal ratification by the Board, we obtained the approval of the Government for restructuring the Board and re-assignment of the Directors' portfolios. With this the campaign was launched on August 20, 2001. Assignments of the key executives - Asset Managers, Basin Managers, Chiefs of Services, Heads of Institutes, Chiefs of Corporate Functions and Heads of Regions – were allocated on the next day.

Simultaneously, empowerment of the Directors and the Key Executives was enhanced through revision of the Delegation of Powers, with the approval of the Board. The process of restructuring of the organisation, and reassignment of the personnel should be completed.

The Corporate Rejuvenation Campaign is designed to focus on results, rather than activities. The functions have been regrouped, to bring focus on one-stop accountability for results and contribution at each level. Commensurate authorities are being delegated down the hierarchy.

The other key component of the campaign is thorough review of the decision-making process, to create the desired improvements in responses and ethics.

Best-in-Class Standards
An Exploration and Production strategy, the key to our core business, has been formulated in the first Strategy Meet, with participation of the Director General, Hydrocarbons. The strategy has been formally approved by the Board in July 2001. The strategy consists of two challenging targets. In 45 years of operation of the company, six billion tonnes oil and oil equivalent reserves have been accreted; the target is to double the accretion in the next 20 years. Secondly, the prevailing global Recovery Factor in the company is of the order of 28%, the target is to raise this to the level of 40%, over the same 20 years. You will surely appreciate the indomitable spirit of the people who have set themselves such tremendous tasks. 

Many decisions and actions will have to be taken to achieve these targets. Among these, technology and skills are issues of highest priority. Actions have been initiated to achieve 'best-in-class' standards everywhere and every time in the company. Equipment and facilities have to be refurbished or replaced with latest technology, systems and procedures are to be streamlined and skills and attitudes are to be honed to excellence. 

It is traditionally held that a Manager's task is to utilise four resources men, money, materials and time to achieve the desired outputs of goods and services. A fifth resource is now recognised knowledge. The company is not in the knowledge business, but the business of the company is knowledge. With knowledge, we find oil and gas. With knowledge, we generate wealth. With knowledge, we create satisfactions. 

You would be pleased to know of project PROMISE (Professional Review of Major Info-com Systems & Equipments), designed to integrate all our Infotech resources and communication systems, so that acquisition, collation, dissemination and storage data are done with maximum efficiency, security and cost-effectiveness throughout the company. Simultaneously, Project ICE (Information Consolidation for Efficiency) has been initiated to create an integrated, company-wide ERP-based Management Information System. 

Coming back to the Exploration strategy of the 6 BTOE reserve accretion targeted over the next 20 years, 4 BTOE is expected from off shore/deep waters. This will call for significant increase in investments, coupled with consequential increased risk. The company has no choice but to accept this challenge.

To meet the requirement of funds for accommodating these investments and risks on the Balance Sheet of the company, revision of pricing for oil and gas produced by the company is essential. Several representations have been made to the Government to remove the prevailing cap on pricing of crude oil, and to revise the pricing of natural gas, both in line with declared policies for the 1998-2002 period. Request has also been made to the Government for confirmation that once the APM is brought to a close on March 31, 2002. The company will not be restricted from charging fair market price for crude and gas, as well as the (price-controlled) products.

Glob al Benchmarks, in Dollar Terms
Simultaneously, steps are being taken to augment internal generation of surplus. To check the trend of increase in operating expenses, the budget process is being revamped. Project "IMPETUS" (Implementing Maintenance & Procurement Efforts Through Upgraded Systems) has already been launched, for detailed scrutiny of the processes and costs incurred in inspection, maintenance and repair of equipment and facilities. Engineering designs are being audited for cost optimization. Avoidable costs are being cut through detailed examination of the administrative processes and practices. The Internal Audit function is being restructured and the vigilance function is being strengthened.

Yet another major decision taken in the first Strategy Meet of the Board was to strengthen the wholly-owned subsidiary, ONGC-Videsh Ltd. through infusion of additional equity of Rs.2 crore. This has been approved by the Board. The Vietnam Offshore Gas Project, where 45% interest is held by OVL, is progressing on schedule, with deliveries targeted from October, 2002.

Project work has begun at Dahej for  the re-gasification facility of Petronet LNG Ltd., a JV promoted by the company along with GAIL, IOCL and BPCL. 

ONGIO International Ltd., a 50:50 Joint-venture between the company and the Indian Oil Corporation Ltd. has been incorporated to provide training, consultancy and services from drilling to dispensing, in India and abroad. The company has drawn up an aggressive business plan, targeting a turnover of Rs. 100 crore in three years of operation.

The management of the company is focused on corporate governance and ethics. Several sub-committees of the Board have been created or reorganised for detailed review of prospects and processes. The critical importance of safety, occupational health and environmental concern has been recognised through formation of integrated SHE function. Corporate Planning function has been integrated with capital budgeting process. Equipment Management, Technical Audit and Quality Assurance functions have been combined for focused attention on operational efficiency and quality. Besides Internal Audit, a new function of Performance Management and Benchmarking has been set up in the Finance Group, to continuously assess the gaps between the performance of the company against the global bench-marks, in rupee/dollar terms. Security Management is being strengthened. In the process of restructuring of the Directors' portfolios as a part of the Corporate Rejuvenation Campaign, whole-time Directors have been assigned change of the Institutes, the repository of knowledge in the company.

Paradigm of a PSU-MNC
ONGC has been recognised as a "Flagship" public sector enterprise by the Government of India. Within this context of facilities and limitations of being a public sector entity, the company needs to operate with the alacrity and agility of the MNCs in the same business in the global market-place. This paradigm of a PSU-MNC, however improbable it may appear, has to be adopted to secure sustained growth of the company. All the successes of the company have been achieved through the competence and commitment of all the employees, who deserve sincere appreciation.