Domestic exploration will increase to make up for drop in output: ONGC

Oil and Natural Gas Corp (ONGC) will intensify domestic exploration and aggressively pursue overseas acquisitions to offset the natural decline in output that has set in mature fields like Mumbai High fall, Chairman and Managing Director R S Sharma said today.     

Addressing the company's shareholders, he said that ONGC has charted out three 'strategic pursuits' including intensifying exploration, improving recovery factor from existing fields and aggressively pursuing for overseas projects.     

As part of intensified exploration that aims to create new oil and gas assets, ONGC in 2008-09 fiscal accreted 284.81 million tonnes of oil equivalent of inplace hydrocarbons reserves, the highest in the last two decades.     

"Ultimate reserve accretion of 68.90 million tonnes of oil equivalent from domestic operated fields is again the highest in 18 years," he said. ONGC, he said, has invested Rs 14,000 crore in Improved Oil Recovery (IOR) and Enhanced Oil Recovery (EOR) schemes in 15 major fields. "These schemes have helped in improving recovery factor in these fields from 28 per cent in 2000-01 to 33 per cent in 2008-09."     

"Seven schemes are under implementation with envisaged investment of over Rs 16,000 crore," he said.ONGC Videsh Ltd, the overseas arm of the state-run firm, will aggressively pursue overseas exploration and production projects, he said. OVL has 40 projects in 16 countries.

"During 2008-09, OVL acquired seven E&P projects in five countries, two being producing properties," Sharma said. "As a result, the ultimate reserves accretion of 135.08 million tonnes during the year has been the highest-ever."

ONGC's output of oil and gas from domestic and overseas assets was marginally lower at 61.23 million tonnes of oil equivalent in 2008-09 as against the highest ever production of 61.86 million tonnes of oil equivalent the previous fiscal.     

Of this, 8.78 million tonnes of oil and oil equivalent gas were from overseas projects.Stating that international crude oil prices had peaked to $147 per barrel in July 2008 before plummeting to $33 a barrel in December that year, Sharma said the prices crashed down not because of any supply glut but due to sudden slump in demand which increased the spare capacity.     

"However, we must realise that this spare capacity cushion is bound to erode once the economies recover which seems to be happening faster than expected," he said. "We apprehend this may again bring uncertainty and volatility in the markets."

The economic downturn has however not impacted the company's investment plans as reflected in highest ever capital expenditure of Rs 21,820 crore in 2008-09, he said adding 94 per cent of this was in the core activity of exploration and production.OVL invested Rs 16,105 crore.