Sunteți pe pagina 1din 19

1

INTRODUCTION
Ranked 357 for Yr 2012 CMD of ONGC
Sudhir Vasudeva (2011- )

Founded: 14 Aug 1956 Industry: Oil & gas E &


P company

R.S. Sharma (2006-2011) Subir Raha (2001-2006)

Products: Petroleum,
Natural gas & other petrochemicals Subsidiaries: MRPL, ONGC Videsh

Friction between ex-CMD & Government


Focusing chiefly on exploring & exploiting Indian reserves

- Owns & operates 1000 km of pipeline; - Exploits 26 sedimentary basins of India

Creating global assets portfolio in exploration & refining

Exploration and Production - India


India is forth largest consumer of petroleum and currently imports 70% of its oil needs India's total oil production is 8,83,510 barrels per day. The total oil reserves amount to 5.625 billion barrels. Economy projected growth rate is around 7-8% and soon demand will outstrip supply. Thus E&P of oil and gas is critical for India's energy security and economic growth. ONGC accounts for 57% of the petroleum licenses which accounts for 80% of both Indias domestic petroleum and natural gas reserves Some of the major players in E&P segment in India are:
Govt. Owned - Oil India(OIL), Indian Oil Corporation (IOCL) Private Players - Reliance, Cairn Energy, BG Exploration

These players have been pursuing exploration & production activities both within and outside the country in collaboration with consortium partners.

Current Market Demand and Government Policies


Governments Plans: 1. Increase Refining Capacity to 4.84 million bpd from 2.6 million bpd and already had a small excess of capacity since only 2.2 million bpd consumed 2. State owned companies entered into JVs with overseas competitors to commission the capacity expansion 3. This underscored Indias potential as an exporter of refined products

Current Condition of Refining and Marketing Industry in India


The Indian Refining Industry consisted of 3 major players. They are 1. Indian Oil Corporation Limited (IOCL) 2. Hindustan Petroleum Corporation Limited (HPCL) 3. Bharat Petroleum Corporation Limited (BPCL)

The Indian Refining Industry as of FY2006

No. of Refineries Annual Turnover IOCL HPCL BPCL 10 2 2 $ 51 billion $ 19.56 billion $ 18.21 billion

Retail Gasoline Outlets (in Km) 11739 N/A 2123

Downside of the State-controlled refiners was that it Did not have the ability to handle complex crude

Major challenges
1. Expand Capacity 2. Explore New Horizons in Upstream and Downstream operations

Rise of RPL (Reliance Petroleum Limited)


Had installed the worlds third largest refinery of 30 million tons per year capacity. Ability to process heavier, sour crudes that are traded at a discount compared to the light sweet variety It was expected that RPL would export 40% of its refined output developed markets, especially US. Highlights of the global downstream refining : 1. U.S super majors reluctant to invest due to serious losses in 1980s-1990s 2. Environment regulations and Mandates in U.S 3. Particularly adept at debottlenecking and technology improvements to increase yield from the historical refining investments 4. Overcapacity in the Middle east and Singapore 6

Government Intervention
Indian Governments APM( Administered Price mechanism) : to insulate local prices from the vagaries of the international market fluctuations resulted in upstream exploration In 2002, the APM approach was dismantled In 2004, the government intervened to keep prices low, when the crude prices started to move upward quickly. For Example, 5% custom duty for imported crude 10% duty was charged for refined product imports

By 2006, ONGC alone was subsidizing consumers to the tune of $ 1 billion annually, and marketing companies were losing $ 51 million a day.

Winds of change
Challenges (1999) Crippling systems of governmental Initiatives

control over strategy Low employee motivation due to sense of entitlement rather than performance based mentality Overstaffing Skewed production portfolio of assets Highly bureaucratic decision making mechanism Lagging on technology front

New Vision : To ensure Indias energy security by locating reserves worldwide Voluntary retirement plan to reduce 10% workforce Revamp of decision-making structure by eliminating bureaucratic layers of staff approvals Revamp of organizational structure ensuring flatter structure Performance oriented appraisal mechanism Maximise use of idle cash IPO to infuse more capital for expansion

International Foray
Reasons for internationalization 15% world population but only 0.5% of energy reserves Role of ONGC Videsh Ltd Given greater power as Indias nodal agency to negotiate energy related issues Given flexibility to recruit quality talent By 2006, $4 billion investment acquiring 25 properties in 18 countries Able to develop relationship with global industry leaders like Exxon Mobil, Petronas and BP for various projects worldwide Challenges Stiff competition from Chinese national oil companies

Foreign Market entry strategy Joint Venture route Strategic alliance with Mittal group to use their business relationship built over time Bilateral relationship agreement with Chinese oil companies (CNPC & Sinopec) for joint bidding of global projects Managed to win bids jointly with Chinese companies in Syria and Columbia

Current Status of production assets worldwide

10

International Strategy
Import oriented rather than Export oriented: Sourcing to meet local country energy requirements Shift from confrontational attitude to mutually beneficial Strategic alliance

11

Vertical Integration Strategy


Vertical Integration strategy Downstream segment Magalore Refinery and Petrochemicals Ltd (MRPL)
Entrance into Refining and Retailing ONGC acquired 71.6% stake in MRPL, a privately held refining complex Move into retail end through petrol pumps when the govt. opened fuel marketing activities to new entrants Vertical integration offered ONGC a wider flexibility in monetizing its assets ONGC diversified and became part of Crude cycle, Refining cycle and the product cycle. Unlike Cairn India, it gained control over the entire hydrocarbon chain. Disadvantages of the strategy: ONGC entering areas where it had no expertise- Coal bed methane, underground gasification of coal, power generation Lost focus on exploration which was its primary goal ONGC was lagging behind on the discoveries following liberalization

12

Reasons for poor record of ONGC


Quality of ONGCs geoscientists Management framework of ONGC- several layers of checks were missing as compared to the multilayered system of evaluation, appraisal and decision making of the other oil majors Exploration ratio averaged 1:4 or 1:5 as compared to 1:2 as a benchmark of the industry to drilling performance Inefficient data analysis structure: Done in a piecemeal manner, reducing the flexibility and speed As the expense of hiring drilling rigs were high, ONGC did not take much time to evaluate data methodically and focused on maximizing rig utilization Competitors like Reliance signed contracts on a job charter basis Leadership: Raha did not believe in the potential for oil and gas, however the others in the industry believed India to be hugely unexplored

13

Internal analysis
Operations: ONGCs core business is E&R. The company produces more than 1 Million barrels a day, contributing to 80% of all India gas and oil production. It also engages in exploiting .The acquisition of MRPL,ONGC became a truly integrated oil and gas corporation. MRPL was undergoing loss when it was acquired it but was turned around to make a profit making company within a year. Through OVL, ONGC has equity participation of 26 E&P companies across 15 companies which is beneficial in 2 ways: 1. Diversification will keep financial portfolio profitable 2. A global presence makes the company known and gives the company alternatives in terms of growth

14

Marketing and Sales: Lacks in this field, does not have much of presence in marketing and fuel retail, dependent on companies to distribute its refined products. To be truly integrated global actor, it must develop this section in future

Human resource management Problem: Lost more than 200 engineers, geologists and geoscientists to Reliance and is the attrition rate is expected to increase Improve productivity and financial performance, ONGC should concentrate on human resources development

15

Core Competencies
Experience in technology with the awareness about importance of technology Experience in oil exploration and available assets MRPL : a subsidiary of ONGC has the most efficient refineries Diversification on international platform

16

Future Path : Penetration


Acquire HPCL and BPCL or stakes in them
Will results in strong presence in retail and distribution

Exploration in domestic area on the high scale


ONGC has oil and gas exploration as its core competency , this option will utilize the same

Exploration on international level


ONGC will be able to balance out the diminishing products from the domestic wells

17

Future Path : Diversification


Entrance into related industries
Import of Energy Import / export of minerals Knowledge transfer

Investment in foreign assets


Buying Stakes in foreign and domestic oil & gas companies Buying Shares of foreign Coal and Oil reserves

18

Thank You

19

S-ar putea să vă placă și