Ratnas of Bharat Conference

R S Sharma
Chairman & Managing Director, ONGC
Chairman, OVL
Chairman, MRPL

ICICI Securities
Mumbai
8th September 2010
 Presentation overview

Economy

Industry scenario – Global

Industry scenario – Indian

ONGC – an introduction

ONGC‟s pursuits

Growth perspectives

2
Economy

3
Global Economy
 Dubai debacle
Global economy out of woods?  Greece Turmoil
 European Union in shambles
 US recovery sluggish
2009:
Economy Growth 2009; % YoY
 World output contracted by
8.7
0.6% in 2009; Advanced
6.6
economies declined by 3.2%. 5.7

 Developing Asia registers 6.6%

growth; China 8.7%; India
5.7%. -0.2
-0.6
-1.3
-2.4 -2.2 -2.6
-3.2
Outlook 2010 (July, 2010): -4.1
-5.0
-3.6
-4.9
-5.2
Economy growth forecast
-7.9
 World: 4.6%
World

Europe

Japan
Germany

UK
Italy

Spain

Devl. Asia

China

Brazil
Adv. Econ

USA

France

Canada

Russia

India
 India: 9.5%
 China: 10.5%
Caution: “Risks have risen sharply”, Europe to quickly resolve debt problems
Source : World Economic Outlook, April 2010 & July 2010; Indian Economic Survey 4
Indian Economy
India GDP grew by 7.4% in FY‟10 &
expected to grow by 8.5% in FY‟11

Real GDP Growth (%)

10.0

8.6 8.6
8.0
7.8 7.5

6.1 6.0 6.5

6.0

5.8
Picture source: The Economist
Estimated GDP at constant (2004-05) price
4.0
Q1, FY09 Q2, FY09 Q3, FY09 Q4, FY'09 Q1, FY10 Q2, FY10 Q3, FY10 Q4, FY'10

India sustained growth, even in face of weak recovery in advanced

economies. To sustain growth Public & Private consumption - key drivers

Source : Central Statistical Office (CSO) 5

Industry scenario

6
 100

40
60
70
80
90

50
25-May-09
8-Jun-09
22-Jun-09
6-Jul-09

Source : GlobalData
20-Jul-09
3-Aug-09
17-Aug-09
31-Aug-09
14-Sep-09
Crude oil prices

28-Sep-09
12-Oct-09
26-Oct-09
9-Nov-09
23-Nov-09
7-Dec-09
21-Dec-09
4-Jan-10
18-Jan-10
1-Feb-10
15-Feb-10
Dated Brent (US$/bbl)

1-Mar-10
15-Mar-10
29-Mar-10
12-Apr-10
Oil prices remain volatile

volatility as fundamentals have not changed.

26-Apr-10
10-May-10
Eurozone effect

24-May-10
7-Jun-10
21-Jun-10
5-Jul-10
19-Jul-10
2-Aug-10
16-Aug-10
 Oil prices in Goldilocks range (US$70-80/ bbl) due to negative
economic sentiments. Recovering economies may bring in more

7
 Fundamentals

Fundamentals have not changed

Demand destruction

Supply rationing

Oil field depletion

Declining investment

Changes in Gas business

The „Game changer‟

8
Demand destruction
Demand destruction just temporary
Demand destruction has been sharp during 3Q08 – 4Q08; however,
gradually started building up on signs of recovery
Petroleum Products supply (mb/d)
89.0
Projected 88.2
88.0
87.8

Demand projected to be 87.0 86.8

84-86 mb/d in 2010 & 86.0

85.7
85.0
86-88 mb/d in 2011
84.0
83.5
83.0 83.3

82.0

81.0

80.0
1Q05
2Q05
3Q05
4Q05
1Q06
2Q06
3Q06
4Q06
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
Source : PFC Energy 9
OPEC: Supply Rationing
Presently sufficient OPEC spare capacity

Demand destruction forces OPEC to cut supply by 4.2 mb/d in

late 2008 to prevent oil price collapse
8.0 $125
Spare capacity
7.0 $109

6.0 $94

5.0 $78
Present spare capacity
4.0 $62
Oil price 6-7 million barrels
3.0 $47

2.0 $31

1.0 $16

0.0 $0

OPEC Spare Capacity (million b/d) Brent Prices ($/barrel)

Source : PFC Energy 10

Oil Fields depletion
Most of the fields in Non-OPEC Countries declining

During 2000 to 2008 non-OPEC fields

(excluding FSU countries) declined by 6.5%
1800
Crude oil production (MMT)
1600

1400

1200

1000

800
Forecast

600

400
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Non-OPEC (Excluding FSUs) OECD

Source : BP Statistical Review 2010 11

Oil & gas investment
Oil & gas investment declines

Lack of Cash and Access to Capital Drive Capex Down by 18% in 2009

Oil & gas investment (billion US$)

306
In case low investment trend
233
243 continues, due to economic
203 turmoil, it will have adverse
154
effect on future supplies
558
445 479
368
274

2005 2006 2007 2008 2009

Upstream Sector Midstream & Ddownstream

Source : GlobalData 12
Changing gas market
Gas price also remains volatile
Shale gas revolution in USA & LNG glut in major markets
Brings permanent changes in natural gas business

Henry Hub (US$/mmBtu)

8

US$ 7.51/mmBtu (07.01.2010)

7

2
US$ 1.88/mmBtu (04.09.2009)
1

0
12-Oct-09
26-Oct-09

7-Dec-09
21-Dec-09
9-Nov-09
23-Nov-09

15-Feb-10

15-Mar-10
29-Mar-10
12-Apr-10
26-Apr-10

5-Jul-10
19-Jul-10
14-Sep-09
28-Sep-09

18-Jan-10

1-Mar-10

10-May-10
24-May-10
4-Jan-10

1-Feb-10

21-Jun-10
17-Aug-09
31-Aug-09

7-Jun-10

16-Aug-10
3-Aug-09

2-Aug-10
Source : GlobalData 13
Shale gas revolution
Shale gas revolution in USA:
a permanent change in global gas business

 Shale gale has more than doubled

the size of discovered gas
resource in North America
 Shale Gas supply increased to 20%
from 1% in 2000 (IHS-CERA);
expected to contribute 50% by
2035.

Shale gas renders US LNG imports nearly

unnecessary over the next five to 10 years
(Source : Industrial Fuels and Power, April 20,2010)

14
Big leap for E&P
First Ultra-deepwater production

 Shell operated Perdido subsea fields in Gulf of Mexico, at

water depth of 8,000 ft (2,450 m) commences production
in March‟10 – the first Oil & Gas from Ultra-deep waters

 A big leap for E&P industry.

15
The ‘Game changer’
BP‟s rig, Deepwater Horizon, blew up on 20th April in
deepwater of Gulf of Mexico, 64km off Louisiana coast

 Failed blowout preventer

 Explosion & fire caused rig on
Macondo well to sink
 Claimed 11 lives
 Oil from spill being collected
since 16th May’10
 Around 25,000 bopd of oil
collected daily '© BP p.l.c.'

 No oil flow since 15th July 2010

Macondo accident to have huge negative impact on

industry‟s offshore activities

Picture source: http:www.bp.com 16

Indian perspective

17
 Increasing consumption
Consumption of petroleum products increased
at CAGR of 5.1% (FY‟06 to FY‟10)

Consumption of all products increased except for Naphtha &

Fuel oil, partially substituted by new gas supplies

150 8 60
CAGR: 5.1%
FY'09
130 6 50
FY'10

40
(MMT) --->

Percentage
110 5

30
90 3
20

70 2
10

50 0 0
FY'06 FY'07 FY'08 FY'09 FY'10

% Growth YoY

18
 Oil & Gas production
Oil production levels maintained
Gas production upside for East Coast

Natural Gas production (BCM)

Crude oil production (MMT)
40 50
ONGC OIL PSC JVs ONGC OIL PSC JVs
35
40
30

25 30
20

15 20

10
10
5

0
0
FY'06 FY'07 FY'08 FY'09 FY'10
FY'06 FY'07 FY'08 FY'09 FY'10

RJ-ON-90/1 (ONGC‟s PI: 30%) D-6 on stream ~ 60 mmscmd

on stream ~ 1,05,000 bopd a big boost for country

19
 Import dependency
FY‟10: Import dependency > 77%

Petroleum products consumption

160 77.5

140 77.0
Crude oil import doubled in
120 76.5 last 10 years
100 76.0
(74 MMT in FY‟01 to 153 MMT in FY‟10)

% Import
102.4 106.7
80 96.6 75.5

60 75.0
Import value increased by
40 74.5 5.5 times in 10 years
(`659 billion in FY‟01 to `3,609 billion in FY‟10)
20 74.0
32.3 31.2 31.5

0 73.5
FY'08 FY'09 FY'10

Indigenous production Import % import

20
 Hydrocarbon reserves
India currently known to have with only
0.44% of world‟s oil & 0.58% of gas reserves

Balance Recoverable Reserves Proved Reserves

2000
East coast (MTOE) Crude oil
1800 discoveries
Rest of
1600 OPEC world
77.21% 22.35%
1400

1200
India
1000 0.44%

800
Natural gas Iran
15.79%
600
Russia Qatar
400 23.67% 13.53%

Rest of
200
world
15.21%
0
FSU
FY'01 FY'02 FY'03 FY'04 FY'05 FY'06 FY'07 FY'08 FY'09 31.22%
Crude oil Natural gas India
0.58%

Source : BP Statistical Review 2010 21

 Matured fields

 All major producing fields (except Mangala in Rajasthan & D-6, KG

Basin) are more than 30 years old
 Most of them have produced through their peaks
 80% of total crude oil indigenous production coming from such mature fields
 Pressure of almost all of these fields are depleting fast
 Cost-intensive IOR/ EOR processes required to keep them flowing

22
 Under-recoveries

Petroleum product prices revised on 25th June 2010;

under recoveries to stay

(` Crore) Upstream OMCs Government Total

FY‟04 3,123 6,151 9,274

FY‟05 5,947 14,199 20,146

FY‟06 14,000 14,500 11,500 40,000

FY‟07 20,507 4,759 24,121 49,387

FY‟08 25,708 16,125 35,290 77,123

FY‟09 32,943 (943) 71,292 103,292

FY’10 14,430 5,621 26,000 46,051

23
ONGC – an introduction

24
 ONGC is
an Indian State Enterprise,
and integrated Oil & Gas Corporate

with interests in
E&P, Refining, LNG, Power, Petrochemicals & New
sources of energy.

… a consistent, reliable, time tested energy solution provider for the

country

25
ONGC: Historical Profile

1955 Oil and Gas Directorate, GoI

1956 Oil & Natural Gas Commission

1959 Autonomous Statutory Body

1994 Public Limited Company

1997 A Navaratna PSU

2010 A Maharatna PSU

26
50+ Years of Exploration

ONGC discovered
6 out of the 7 producing Basins of India

1889: Assam Shelf *

1967: Rajasthan Basin

1973: A&AA FB

1958: Cambay Basin

1980: KG Basin

1974: Mumbai
Offshore
1985: Cauvery
Basin

* By AR & T Co. - Assam Railways and Trading Company Ltd. 27

 ONGC Group produces ~ 1.19 million barrels per day of

Oil plus Oil-equivalent Gas,

refine about 12.5 MMTPA (>250,000 bopd);

extracts about 3.4 MMTPA of LPG, Naphtha etc from Gas;

sells Crude Oil, Gas and Value added products

(LPG, Naphtha, Ethane-Propane, SKO, HSD etc.)

with a Turnover of `.108,579 Crore (2009-10).

28
 ONGC
has in-house capability
in all aspects of the Oil & Gas business

API*, Drilling, Workover & Well Testing

& Stimulation, Production, Processing,
Reservoir Management, Applied R&D,
Engineering & Construction,
Transportation, Refining, Training etc.

* API- Acquisition, Processing & Interpretation of Seismic Data

29
 Shareholding pattern*
IFI MF Pub
5.52% 2.44% 1.47%
Others
FIIs
0.24%
4.38%

PSUs
11.81%

Govt.
74.14%

No. of shareholders: Market cap (03.09.10):

No. of shares:
3,67,130 Rs. 2,86,181 Crore
2.139 billion (No. of FIIs : 484) (USD 61.32 billion)

* As on 03.09.2010
30
ONGC’s pursuits

31
Reserve accretion (3P): FY’10
Highest Ultimate Reserves accretion in last 2 decades
FY’10: 82.98 MTOE (ONGC operated fields)

83

67 66 69
66
64
57
47 52
49
MToE

45
44
41
34 34 34
25
16 16
17
12

MTOE: Million tonnes of oil equivalent 32

 RRR

FY‟10: (+)ve Reserve Replacement Ratio (RRR)

since last 5 years; highest in last 2 decades
2.00

1.80
RRR, 1.74
1.60

1.40

1.20
Percentage

1.00

0.80

0.60

0.40

0.20

0.00
91-92

92-93

93-94

94-95

95-96

96-97

97-98

98-99

99-00

00-01

01-02

02-03

03-04

04-05

05-06

06-07

07-08

08-09

09-10
33
 Reserve Position
As on 01.04.2010, Total Reserves (3P): 1,619.26 MTOE

Oil Gas Total

1P 2P 3P

1,619

1,175
ONGC 563.42 611.50 1,174.92 1,370

969
963
737
PSC JV 23.64 22.46 46.10 398
357
46
44
186
OVL 225.16 173.08 398.24 40

ONGC JV OVL Total

Total 812.22 807.04 1,619.26

34
O+OEG production: ONGC Group
Maintained production levels

57.45 60.74 61.76 61.23 60.93

MTOE

FY'06 FY'07 FY'08 FY'09 FY'10

ONGC (Oil) PSC-JV (Oil) OVL (Oil) ONGC (Gas) PSC-JV (Gas) OVL (Gas)

ONGC registered marginally lower production (0.1%) in FY‟10;

Aggregate production lower by 0.5%
MTOE: Million Tonnes of Oil Equivalent 35
 IOR/ EOR schemes
Natural decline arrested to great extent by
IOR/ EOR campaign & redevelopment projects
Investment more than ` 36,500 Crore since FY’01

14 Projects completed 7 under implementation

Cumulative investment `12,809 Crore Envisaged investment ` 23,700 Crore

1. MH North Ph-1 (Dec’2006)

2. MH South Ph-1 (May’2007) 1. Kalol
3. Neelam (Jul’2005)
2. Lakwa-Lakhmani
4. Heera Ph-1 (Dec’2003)
3. Geleki
5. Balol In-situ (Nov’2001)
6. Santhal In-situ (Dec’2001) 4. Rudrasagar
7. Santhal – IOR (Nov’2003) 5. MHS redevelopment Ph-2
8. Jotana (Oct’2004) 6. MHN redevelopment Ph-2
9. North Kadi-1 (Apr’2007) 7. Heera & South Heera
10. North Kadi-2 (Nov’2006) redevelopment
11. Sanand EOR (Sep’2002)
12. Gandhar IOR (Jun’2005) (Actual Expenditure up to 31.03.10
13. Sobhasan (Jun’2008)
14. Heera Ph-2 (Jan’2009)
` 8,135 Crore)

36
 Arresting Decline
IOR/ EOR Campaign yielding results
35
Incremental gain from IOR/EOR in FY‟10: 7.97 MMT
30

25
Cumulative Gain through
IOR/ EOR ~ 56 MMT
20

Offshore
15

10

5 Onshore

• 15 major fields operated by ONGC: Producing 60% of country‟s total oil for more than 30
years, put on IOR/ EOR. Natural decline of these fields @ about 7% per year arrested
• Recovery Factor of these 15 fields rises from 27.5% in 2000 to 33.5% in 2010
37
 E&P Global Footprint
7 Under
40* Projects in 15 Countries 23 Exploration
Development
9 Producing

Venezuela 1 1
2 Russia
Cuba 2
2 3 Myanmar
Colombia 5 1
1 2 Vietnam

Brazil 4 1

Libya 3
1 Iran
Nigeria 2

Nigeria JDZ 1
1 Iraq

1 1 Syria
Sudan 2
Egypt 2 * 40th Project is Sudan’s 741 km long completed Pipeline

38
OVL Production: O+OEG

Highest-ever production by OVL in FY’10

6.34 7.95 8.80 8.78 8.87

FY'06 FY'07 FY'08 FY'09 FY'10

Oil (MMT) Gas (BCM)

39
 MRPL

Nameplate capacity enhanced to 11.82 MMTPA from 9.69 MMTPA

Thruput (MMT)
12.53 12.55 12.59 12.50
 Capacity being raised to 15 MMTPA 12.12

 To be capable of handling low

grade, low price crude oils
(API: 24-43; High sulfur: up to 3%; High TAN: up to 1.5%)

 Investment `12,160 Crore

 Expected commissioning Dec’2011

FY'06 FY'07 FY'08 FY'09 FY'10

40
 ONGC Group Financials

(` Crore)

Turnover PAT Net worth

110,562 108,579
100,565
91,573

19,795 19,404

FY'09 FY'10

41
 ONGC: Under-recoveries

(` Crore) Discount on sales Impact on PAT

FY‟04 2,690 1,596

FY‟05 4,104 2,553

FY‟06 11,956 7,210

FY‟07 17,024 10,333
FY‟08 22,001 13,241
FY‟09 28,225 15,798

FY’10 11,554 6,551

Q1, FY’11 5,516 3,119

42
 ONGC: Q1 Financials

%
Details Q1 FY’11 Q1 FY’10
variation

Sales Revenue (` Crore) 13,710 14,922 (8.1)

Net Profit (` Crore) 3,661 4,848 (24.5)

Subsidy Discount (` Crore) 5,515 429 1,185.5

Gross Realization (US$/bbl) 80.80 60.58 33.4

Net Realization (US$/bbl) 48.04 58.25 (17.5)

Gross Realization (`/bbl) 3,690 2,948 25.2

Net Realization (`/bbl) 2,194 2,835 (22.6)

43
APM Gas price hiked* to US$ 4.2/mmbtu

 +ve impact on Revenue > ` 5,500 Crore p.a

 +ve impact on PAT > ` 3,500 Crore p.a.
 +ve impact on EPS > ` 17

Non-APM gas from nominated blocks at market prices

* With effect from 1st June 2010

44
Our Growth Perspective
 Major E&P projects

Major Projects ` Crore

1. B-22 Cluster development 2,323

2. B-193 Clusters development 3,249

3. Heera & South Heera redevelopment 2,305

4. Development of B-46, B-48, B-105 & B-188 1,284

5. MH South redevelopment Ph-II 6,339

6. MH North redevelopment Ph-II 7,133

7. Assam Renewal Project 2,230

8. Development of Mangala, Aishwariya, Raageshwari & 1,804

Saraswati (MARS)

9. Cluster-7 development 3,241

46
 East Coast Offshore Development
Development Plan for Oil Discoveries in the East Coast

Projects
G-4-6 1. G-1 & GS-15
G-4-6
GS-29-1
2. S-1 & Vashista
GS-29-1
3. KG-DWN-98/2
KG-DWN-98/2-KT-1
4. Manik (G-4-6, GS-29-1 & G-4-5)

Conceptualised in 3 phases

Production: by last Qtr. 2012-13

Volume: 30+ mmscmd in 2016

47
 Daman offshore development

 Fast track Development of prospects around

B-12 & C-24 areas C

-
2

Fields considered for development:

3
 C-24 to
DAMAN
C-39
Daman(Main), Daman (North),
102
C-24 Kms
C-24 & C-23

 In place Gas: 97.23 BCM C-26

B-12

 Recoverable gas Considered : 42 BCM

 Peak Gas Production: 10-15 MMSCMD

URAN

Land acquisition under way for new processing plant & facilities

48
 Envisaged growth

Crude oil production New major additional oil producers

2009-10 (Actual) : 24.86 MMT Cluster 7 WO Series B-193

2012-13 (Likely) : > 28 MMT D-1

B-22
Additional

Natural Gas production New major additional gas producers

WO
Cluster 7 B series
2009-10 (Actual) : 63 mmscmd Series

2012-13 (Likely) : > 72 mmscmd North

B-193 B-22
Tapti
2015-16 : > 100 mmscmd
(envisaged) Tripura Daman

49
New sources of energy

Coal Bed Methane (CBM)

 CBM production commenced from Jan’2010

 Vastan, Gujarat the first Pilot project

 Pilot project launched in Damodar valley

 Associating with GOI initiative

50
 Value-multiplier projects
All projects on track; likely to be completed in 2012 & 2013

ONGC Petro-additions Ltd.

 Scheduled completion 2013

ONGC Mangalore Petrochemicals Ltd.

 Scheduled completion 2012

ONGC Tripura Power Company Ltd.

 Scheduled completion FY’12

51
 Energy Centre
ONGC Energy Centre Trust
Holistic Research beyond Hydrocarbons

 Thermo-chemical reactor for

Hydrogen
 Geo-bio Reactors
 Project for Bio-synthesis of
Methanogens in collaboration
with reputed Institutes
 Fuel Cells
 Collaboration with world leader
in Proton Exchange Membrane
Hon’ble Prime Minister laid the foundation stone of Rajiv Gandhi Urja (PEM) Technology
Uranium
Bhavan- to house ONGC Energy Centre Trust

 Solar Power

52
 XI Plan outlay

Outlay for Group: ` 1,30,043 Crore

Overseas E&P,
45,333, 35%

Domestic E&P,
71,795, 55%
Integration,
4,189, 3%

MRPL, 8,726,
7%

Domestic E&P includes ONGC‟s investment for PSC JVs

53
 XI Plan outlay
ONGC, XI Plan outlay*: ` 75,984 Crore

BE

26,523

23,559 Capex in first three years of XI Plan

21,820
` 63,070 Crore
17,887 17,651
18,454 (83% of total outlay)
14,973

12,360 12,311

FY'08 FY'09 FY'10 FY'11 FY'12

Plan Actual * ONGC: domestic E&P + Integration projects

54
Likely upsides
Likely upsides

ONGC
 APM Gas price revision
 Equity in crude price discount
 Production enhancements through New field
developments & IOR/ EOR schemes
 Value-multiplier SPVs to come on stream within 2
years

MRPL
 Refinery up-gradation and capacity enhancement
 Integration with Value-multiplier SPVs

56
Likely upsides

OVL
 Production enhancement from new acquisitions
 Equity in Carabobo Mega Project in Venezuela
 To enhance 2P reserves of OVL by 45 MMT (stand
alone); 10% over 2009-10
 The current Balance Reserves at present
production levels have life of
 20 years on Proven Reserves
 40 years on Proven and Probable Reserves
 Oil & Gas Production to commence
 Carabobo in Venezuela: 2012-13
 Block A1 & A3 in Myanmar: mid 2013

57
Thank you