A Report

On
Analysis of Financial Statements of ONGC

By
AMIT RAWAT
10280003912
Gitarattan International Business School
Guru Gobind Singh Indraprastha University
(Oil and Natural Gas Corporation)


Report of Summer Training Conducted at ONGC LTD.
Submitted in partial fulfillment of the requirements
For the award of the degree of
Master of Business Administration (MBA)
To
ONGC, Scope Minar,
New Delhi
A Report
On
Analysis of Financial Statements of ONGC

Company Guide Faculty Guide
Mr. ARUP GUHARAJA Assistant Prof. Timcy Sachdeva
(Chief Manager, F&A) (Faculty)
ONGC, Delhi GIBS, IPU

Gitarattan International Business School
New Delhi 110085
Batch 2012-14


Certificate


I Amit Rawat, Roll No. 10280003912 certify that the Summer Training Report (Paper Code
MS-201 entitled Analysis of Financial Statements of ONGC. is done by me and it is an
authentic work carried out by me at OIL AND NATURAL GAS LIMITED (ONGC LTD.). The
matter embodied in this Report has not been submitted earlier for the award of any degree
or diploma to the best of my knowledge and belief.



Signature of the Student
Date:



Certified that the Summer Training Report (Paper Code MS-201) entitled Analysis of
Financial Statements of ONGC. done by Mr Amit Rawat Roll No. 10280003912 is
completed under my guidance.

Signature of the Guide
Date:
Name of the Guide:
Designation:
Countersigned

Director/Project Coordinator


AUTHORIZATION

This report is submitted as partial fulfillment of the requirement of MBA (2012-2014) of
Gitarattan International Business School (GIBS) affiliated from Guru Gobind Singh Indraprastha
University. I got authorization for preparation of this project report from Mr. Arup Guharaja
(Chief Manager, F&A), ONGC, New Delhi.




















ACKNOWLEDGEMENT


In this highly complex society no work can be accomplished by a single individual but needs
inspiration and sincere guidance of intellectuals.

With an overwhelming sense of obligations, I emphatically express my profound thanks and
heartfelt gratitude to my guide Mr. Arup Guharaja for his valuable guidance, timely
suggestions and constant encouragement during the entire course of my training.

It is my privilege to express my profound thanks and gratitude to Asst. Prof. Timcy Sachdeva
faculty of GIBS IP University for their kind encouragement and benevolent guidance at every
step during the course of my training.

Finally, I thank all those who helped me directly and indirectly during the course of my summer
training.












CONTENTS




S No. TOPIC Page No.
1 Certificate(s)
-
2 Acknowledgement
-
3 List of Tables
-
4 List of Figures
-
5 List of Symbols
-
6 List of Abbreviations
-
7 Executive Summary
-
8 Chapter-1 : Profile of the Company

9 Chapter-2 : SWOT Analysis of the Company

10 Chapter-3 : Data Collection & Presentation

11 Chapter-4 : Functional Analysis of the Company

12 Chapter-5 : Summary & Conclusions

13 References/Bibliography

14 Appendices



Executive Summary

I, Amit Rawat, a student of Gitarattan International Business School Rohini, got an opportunity
to carry out my internship project in ONGC, Delhi as a part of the curriculum. This prestigious
organization is one of the nine Navratnas recognized by the Indian Govt.

During my internship tenure at ONGC, I had a vast exposure to the oil industry, its working and
was assigned with a small part i.e. Analysis of Financial Statement of ONGC. The objective of
my project is to analyse the accounts and the all financial statement of ONGC and to compare
the current year data with the previous data.
In order to achieve this objective, I started with the study and analysis of annual report of
ONGC. And comparing its financial statements that is cash flow statement, profit and loss
accounts and balance sheet for the year 2013 with the year 2012.















Chapter-1
Profile of the Company:
1. History

The Indian Petroleum industry is one of the oldest in the world, with oil being struck at Makum
near Margherita in Assam in 1867 nine years after Col. Drake's discovery in Titusville. The
industry has come a long way since then. The Industrial Policy Resolution, 1954, laid the
foundation of the Oil & Gas Industry in India and Petroleum was given the status of the core
sector industry. Until 1955, private oil companies mainly carried out exploration of hydrocarbon
resources of India. In Assam, the Assam Oil Company was producing oil at Digboi (discovered
in 1889) and the Oil India Ltd. (a 50% joint venture between Government of India and Burmah
Oil Company) was engaged in developing two newly discovered large fields Naharkatiya and
Moran in Assam. In West Bengal, the Indo-Stanvac Petroleum project (a joint venture between
Government of India and Standard Vacuum Oil Company of USA) was engaged in exploration
work. Then ONGC was founded on 14 August 1956 by the Indian state, which currently holds a
74.14% equity stake. Later in 1964, Indian Refineries Ltd merged with Indian Oil Company Ltd.
to form Indian Oil Corporation Ltd.

The grand discovery of oil in significant quantities in Bombay High in February, 1974 started
new era of oil exploration in offshore areas. Bombay High is an offshore oilfield 160 kilometers
(99 mi) off the coast of Mumbai (Bombay), India. The oil operations are run by India's Oil and
Natural Gas Corporation (ONGC). As of 2004, it supplied 14% of India's oil requirement and
accounted for about 38% of all domestic production.

During 1970s and till mid 1980s a number of Oil & Gas bearing structures in Bassein, Tapti,
Krishna-Godavari-Cauvery basins, Cachar (Assam), Nagaland, and Tripura were discovered by
ONGC & OIL . By mid 80s India achieved a self-sufficiency level of 70% in petroleum
products. In order to look after transportation, processing and marketing of natural gas and
natural gas liquids, the government set up Gas Authority of India Ltd. (GAIL) in the year 1984.
GAIL has been instrumental in the laying of a gas pipelines (HBJ pipeline) from Hazira in
Gujarat to Jagdishpur in Uttar Pradesh, passing through Rajasthan and Madhya Pradesh

To meet the growing demand of petroleum products, the refining capacity in the country has
gradually increased over the years by setting up of new refineries in the country as well as by
expanding the refining capacity of the existing refineries. As of June, 2011 there are a total of 21
refineries in the country comprising 17 (seventeen) in the Public Sector, 3 (three) in the Private
Sector and 1 (one) as a joint venture of BPCL & Oman Oil Company. . The Public sector

refineries are located at Guwahati, Barauni, Koyali, Haldia, Mathura, Digboi, Panipat,
Vishakapatnam, Chennai, Nagapatinam, Kochi, Bongaigaon, Numaligarh, Mangalore, Tatipaka,
and two refineries in Mumbai. The private sector refinery in Jamnagar ,built by Reliance
Petroleum Ltd. is the biggest oil refinery in Asia. By the end of 1980s, Oil production had begun
to decline while there was a steady increase in domestic consumption. National oil production
was able to meet only about 35% of the domestic requirement. The resource crunch in early
1990s aggravated the problems. Some of the then newly discovered fields (Gandhar, Heera
Phase-II and III, Neelam, Ravva, Panna, Mukta, Tapti, Lakwa Phase-II, Geleki, Bombay High
Final Development schemes etc. suffered due to lack of money at Governments disposal for
investment in developmental activities. The Government was hence forced to go for the
petroleum sector reforms which had become necessary to attract funds and technology from
abroad into the domestic petroleum sector.

The government in order to increase exploration activity, approved the New Exploration
Licensing Policy (NELP) in March 1997 which would level the playing field in the upstrem
sector between private and public sector companies in all fiscal, financial and contractual
matters. Since then licenses for exploration are being awarded only through a competitive
bidding system and National Oil Companies (NOCs) are required to compete on an equal
footing with Indian and foreign companies to secure Petroleum Exploration Licences
(PELs). Five rounds of bids have so far been invited under NELP, in which, Production Sharing
Contracts (PSCs) for 110 exploration blocks have been signed. In addition, 28 exploration blocks
were signed prior to NELP. Under NELP, 37 discoveries have already been made in Cambay
onland, North East Coast and Krishna-Godaveri deepwater areas, for which, development plans
by the operators, viz., Cairn, RIL and Niko are in progress.


ONGC Represents India's Energy Security through its Pioneering Efforts

ONGC is the only fullyintegrated petroleum company in India, operating along the entire
hydrocarbon value chain. It has single-handedly scripted India's hydrocarbon saga. Some key
pointers:
ONGC has discovered 6 out of the 7 producing basins in India:
It has 7.59 billion tonnes of In-place hydrocarbon reserves. It has to its credit more than
320 discoveries of oil and gas with Ultimate Reserves of 2.69 Billion Metric tonnes
(BMT) of Oil Plus Oil Equivalent Gas (O+OEG) from domestic acreages.

It has cumulatively produced 851 Million Metric Tonnes (MMT) of crude and 532
Billion Cubic Meters (BCM) of Natural Gas, from 111 fields.
ONGC has won 121 out of a total 235 Blocks (more than 50%) in the 8 rounds of
bidding, under the New Exploration Licensing Policy (NELP) of the Indian Government.
ONGC's wholly-owned subsidiary ONGC Videsh Ltd. (OVL) is the biggest Indian
multinational, with 30 Oil & Gas projects (9 of them producing) in 15 countries.
Produces over 1.24 million barrels of oil equivalent per day, contributing over 64% of
India's domestic production. Of this, over 75% of crude oil produced is Light & Sweet.
The Company holds the largest share of hydrocarbon acreages in India (51% in PEL
Areas & 67% in ML Areas).
ONGC possesses about one tenth of the total Indian refining capacity.
ONGC has a well-integrated Hydrocarbon Value Chain structure with interests in LNG
and product transportation business as well.
A unique organization in world to have all operative offshore and onshore installations
(403) accredited with globally recognized certifications.















ONGC OFFICES ALL OVER INDIA







1.1 Basic Information. (Full Address of the Following Locations)
Head Quarters:
Frontier Basin
Dr. D N Singh, GM (Geol) - Basin Manager
ONGC, IDT Campus, Kaulagarh Road, Dehradun-248195
Telephone: 0135-2758778 (Office), 0135-2753639 (Fax)
Registered Office:
Mr. SSC Parthiban, GM-Head Coordination
ONGC, Jeevan Bharti, Tower-II, 124-Indira Chowk, New Delhi 110001
Telephone: 011-23317213 (Office), 011-23310729 (Fax)











1.2. Nature of Organization:
Production of crude oil in India
India is not among the major producers of crude oil, as it doesnt have much oil reserves. That is
why it generally depends on imports of crude oil from other countries. However, the production
of oil and as a result the production of its by-products in India has increased in the recent past
due to exploration and findings of new oil reserves. India currently has an estimated quantity of
5.4 billion barrels of oil reserves out of which it produces around 0.8 million barrels per day. At
this production level, the oil reserves in India would last for around 29 years. The major oil
reserves of the country are situated at
Mumbai high (Mumbai)
Upper Assam (Assam)
Cambay (Gujarat)
Krishna-Godavari basin (Andhara Pradesh)
Cauvery basin (Tamil Nadu)
Nagaland
Arunachal Pradesh
The largest crude oil producing oilfield is the Mumbai high field that produces around 260000
barrels per day. Among these production centers, major share of production i.e. 2/3rd share is
bagged by the offshore reserves as compared to onshore reserves. The refining capacity of crude
oil in India is over 2.1 million barrels per day. The refining sector in India is held by both public
and private sector, public sector being the dominating one.
Indian Crude Oil Market
India is one of the non-OPEC countries much dependent on its imports to fulfill the domestic
consumption demand as it has a much lower level of production. India is a developing country
and the requirement for the oil as a primary energy constituent from the industries in the country
is at its peak. The country has much depended on coal to satisfy its energy needs in the earlier
times but the use of crude oil and gas is taking over the dominance of coal with the change in
time. Oil and gas contribute to around 45% of the countrys total energy consumption.
India has around 5.4 billion barrels of oil reserves with it and the domestic production has
increased in the recent past to reach the 0.8 million barrels per day mark. Mumbai high is the
largest oil-producing oilfield in India with a production of 2.6 lakh barrels per day. The refining

capacity of crude oil in India is estimated at around 2.1 million barrels per day. Regarding the
consumption pattern of oil in India, it is the 6th largest consumer country in the world having a
consumption of 2.2 million barrels per day. This leaves the country with a huge deficit in the
demand-supply scenario and thus 70% of the consumption is met through imports.
India generally imports Oman-Dubai sour grade crude, Brent dated sweet crude and Bonny light
crude. The country imports over 1.5 million barrels per day that place it at the 9th position
among the largest importers of the world. Though the Indian production has increased in the
recent times, the imports were raised by 5% making due to the raised Indian demand of around
4.2%. The countries from which India imports crude oil are
Saudi Arabia
Iran
Nigeria
Sudan
Iran
Kuwait
United Arab Emirates
The Indian oil-refining sector has been regulated by the government historically and is still
dominated. A new private sector has emerged after the loosening of control by the government.
The major units pertaining to the oil sector in India are
Indian Oil Corporation (Public sector)
Oil and Natural Gas Corporation (Public sector)
Reliance India Ltd (Private sector)
Essar Oil Refinery (Private sector)
Bharat Petroleum Corporation Ltd (Public sector)
Hindustan Petroleum Corporation Ltd (Public sector)
Manglore Refineries and Petrochemicals Ltd (Public sector)
Position of India with regard to Crude Oil?
India ranks among the top 10 largest oil-consuming countries.
Oil accounts for about 30 per cent of India's total energy consumption. The country's total
oil consumption is about 2.2 million barrels per day. India imports about 70 per cent of its
total oil consumption and it makes no exports.
India faces a large supply deficit, as domestic oil production is unlikely to keep pace with
demand. India's rough production was only 0.8 million barrels per day.
The oil reserves of the country (about 5.4 billion barrels) are located primarily in Mumbai
High, Upper Assam, Cambay, Krishna-Godavari and Cauvery basins.

Balance recoverable reserve was about 733 million tonnes (in 2003) of which offshore
was 394 million tones and on shore was 339 million tonnes.
India had a total of 2.1 million barrels per day in refining capacity.
1 US barrel = 158.98 litres.

SUBSIDIARIES

1. ONGC Videsh Limited (OVL)
ONGC Videsh Ltd. Is the wholly subsidiary of ONGC. OVL is the first Indian company to
produce oil & gas overseas.
OVL today is the Second largest E&P Company in India, second only to ONGC in terms of
OIL & Gas reserves. It has 12 overseas assets and is actively seeking more opportunities. OVLs
efforts have been supported wholeheartedly by the Govt. of India, which has allowed OVL single
window clearance for overseas upstream projects irrespective of investments involved.
OVL has been designated as the Indian Nodal Agency for overseas petroleum business and is
maintained as a permanent participant in all concerned bilateral interaction and joint working
groups of government of India. The strategic of parent company ONGC and the govt. of India
provides the basis for strategic direction of OVL. Taking into account the industrial environment
and other influencing factors, both internal and external, strategic direction has been formulated,
which is re-evaluated on a continuous basis given the rapidly changing nature of global
petroleum industry to better adapt to the scenario.
The functional directors of ONGC served as the directors on the OVL board as well, thus
including cohesion of the corporate objectives and goal congruence in both organizations.
OVL follows meritocracy and draws human resource from parent company, where the functional
directors are consulted for selection. The finance for the operations is provided by ONGC in
form of loans, interest free advances and equity.

2. Mangalore Refinery & Petrochemical Limited (MRPL)
MRPL, a subsidiary of ONGC has turned back to a profit making company just in t he 3
rd

quarter after ONGC management control. ONGCs shareholding has increased from51% to
71.62% in June July 2003 through the buy-back of lenders equity at par, under the mutually
agreed Debt Restructuring Package.

MRPL has showed excellent performance in the very first year of its operation as a subsidiary of
ONGC. The performance in 2003-04 under all parameters was better than the projection made at
the time of the acquisition. It earned net profit of Rs. 4594.15 million as against a net loss of
Rs.4118.06 million in previous year. MRPL is no longer a potentially sick company as its
accumulated losses have gone down below 50% of the net worth on 31
st
March 2004. MRPL was
awarded highest Five Star rating the British Safety Council. It is the third refinery in India to
get this prestigious certification.
Equity shares of MRPL are now traded under A category of Mumbai Stock Exchange (BSE)
from 1st March 2004. The Market capitalization of MRPL on t he BSE touched Rs.100
billion mark on 7
th
January, 2004.
MRPL exported products (Motor Spirit, Naphtha, Reformate, HSD, ATF, FO, LSHS) worth
Rs.44720 million during the year (up 133.77% from Rs.19130 million) and has emerged as the
second largest export of petroleum products.
MRPL has entered into MOU with ONGC for purchase of Mumbai High Crude at arms length
price.

















3. Companys Vision & Mission.
Vision
To be world class Oil & Gas Company integrated in energy business with dominant leadership
and global presence.

Mission
World Class
Dedication towards leveraging competitive advantages in R&D and technology with
involved people.
Imbibing high standards of business ethics and organizational values.
Abiding commitment to health, safety and environment to enrich quality of community
life.
Fostering a culture of trust, openness and mutual concern to make working astimulating
& challenging experience for our people.
Striving for customer delight through quality products and services


INTEGRATED IN ENERGY BUSINESS
Focus on domestic and international oil & gas exploration and production business
opportunities.
Provide value linkages in other sectors of energy business.
Create growth opportunities and maximize shareholder value.
Dominant Indian Leadership
Retain dominant position in Indian Petroleum sector and enhance India's energy
availability.





4. Product Range of the Company

Crude Oil
Crude oil is a surprisingly abundant commodity. The world has produced some 650
billion barrels of oil, but another trillion barrels of proved reserves have yet to be
produced. An additional 10 trillion barrels of oil resources await development, assuming
the price of oil someday justifies production. These resources include bitumen, shale oil
and oil in existing fields that might be produced through enhanced recovery.

Natural Gas-
Natural gas is a naturally occurring hydrocarbon gas mixture consisting primarily
of methane, with up to 20 %

of other hydrocarbons as well as impurities in varying
amounts such as carbon dioxide. Natural gas is widely used as an important energy
source in many applications including heating buildings, generating electricity, providing
heat and power to industry, as fuel for vehicles and as a chemical feedstock in the
manufacture of products such as plastics and other commercially important organic
chemicals.

LPG-
Liquefied petroleum gas, also called LPG, GPL, LP Gas, liquid petroleum gas or
simply propane, is a flammable mixture of hydrocarbon gases used as a fuel in heating
appliances and vehicles. It is increasingly used as an aerosol propellant and a refrigerant,
replacing chlorofluorocarbons in an effort to reduce damage to the ozone layer. When
specifically used as a vehicle fuel it is often referred to as auto gas.
LPG evaporates quickly at normal temperatures and pressures and is usually supplied in
pressurised steel gas cylinders. They are typically filled to between 80% and 85% of their
capacity to allow for thermal expansion of the contained liquid. The ratio between the

volumes of the vaporized gas and the liquefied gas varies depending on composition,
pressure, and temperature, but is typically around 250:1.

NGL/ Naphtha-
Recovery of natural gas liquids (NGL) from gas field can bring significant additional
value to operations. Depending on the available market distribution routes and the actual
concentration of hydrocarbons in the feed, may face a wide range of processing options.
Naphtha is a group of various volatile flammable liquid hydrocarbon mixtures used
primarily as feedstock in refineries for the reforming process and in the petrochemical
industry for the production of olefins in the steam crackers. It is also used in solvent
applications in the chemical industry.

Ethane/ Propane-
Ethane is a chemical component with chemical formula C2H6. It is the only two-carbon
alkane, that is, an aliphatic hydrocarbon. At standard temperature and pressure, ethane is
a colourless, odourless gas.
Ethane is isolated on an industrial scale from natural gas, and as a by-product of
petroleum refining. Its chief use is as petrochemical feedstock for ethylene production.

Propane is a three-carbon alkane, normally a gas, but compressible to a liquid with
inexpensive containers. It is derived from other petroleum products during oil or natural
gas processing. It is commonly used as a heat source for engines, barbecues, and homes.
Its name was derived from propionic acid.
When commonly sold as fuel it is also known as LPG and can be a mixture of propane
with smaller amounts of propylene, butane and butylenes, plus an odorant to allow the
normally odourless propane to be smelled.






5. Size (in terms of manpower & Turnover) of organization:
Financials (2011-12)

ONGC group's turnover during 2011-12 has been Rs. 150,185 Crore with net profit of Rs. 28,144
Crore. ONGC paid the highest-ever dividend of Rs. 8,342 Crore. The Net Worth of ONGC
Group of companies is Rs. 135,266 Crore.

During 2011-12, the turnover of ONGC (on standalone basis) has been Rs. 76,887 Crore with
net profit of Rs.25,123 Crore; the highest-ever despite sharing under-recovery of Rs.44,466
Crore to the Oil Marketing Companies (OMCs) as per the instructions of the Government of
India. Net worth of ONGC (on standalone basis) has been Rs.1,11,784 Crore.
OVL's consolidated gross revenue increased by 21% from Rs. 18,671 Crore during 2010-11 to
Rs.22,637 Crore during 2011-12 and consolidated net profit increased by 1% from Rs. 2,621
Crore during 2010-11 to Rs. 2,721 Crore during 2011-12.
The turnover of MRPL has been Rs.52,207 Crore, up 19% from Rs.43,800 Crore and net profit
has been Rs.909 Crore during 2011-12.

ONGC in Fortune's Most Admired List 2012








Highlights:
i. Highest reserve accretion of 84.13 million tonnes of oil and oil equivalent gas
(MMtoe) in last two decades
ii. Reserve replacement ratio of 1.79; 7th consecutive year with RRR more than one.
iii. The highest-ever Gross Revenue of 76,887 Crore
iv. The highest-ever Profit After Tax of 25,123 Crore.
v. The highest-ever Dividend payment of 8,342 Crore (excluding tax on Dividend).
vi. Standalone ONGCs Net worth crossed 1,00,000 Crore benchmark ( 1,11,784
Crore)
vii. The highest-ever thru put of 12.82 MMTPA recorded by MRPL.
viii. The highest-ever Turnover of 57,207 Crore recorded by MRPL.
ix. The highest-ever total revenue of 22,637 Crore achieved by ONGC Videsh Ltd.
(OVL).

Performance 2011-12
Company maintained its production levels from domestic as well as overseas fields through
innovative solutions. The total oil and gas production during FY12 has been 61.18 MMtoe;
marginally lower than FY11 (62.05 MMtoe); mainly on account of lower production from
Sudan, South Sudan and Syria fields due to geo-political reasons. Company, on standalone basis,
made 23 discoveries in domestic acreages and accreted 84.13 MMToe of ultimate reserves.




Financial Appraisal
a) ONGC
During FY12, Company recorded the highest-ever Gross Revenue of 76,887 Crore; 12% more
than the previous year. Net Profit of 25,123 Crore has also been the highest-ever and 33% more
than the previous year despite sharing highest-ever under-recoveries of OMCs.

b) ONGC Videsh Limited (OVL)
OVL registered the highest-ever gross revenue of 22,637 Crore during FY12; 21% higher than
the previous year. Net Profit of OVL has been 2,721 Crore; 1% more than the previous year.

c) Mangalore Refinery & Petrochemicals Limited (MRPL)
MRPL registered highest-ever gross revenue of 57,207 Crore; 31% higher than previous year.
Net Profit of 908 Crore has been 23% less compared to the previous year mainly due to
volatility in oil prices and depreciation of Rupee against dollar.

d) ONGC Consolidated
Total revenue from operations of ONGC Group of Companies, in FY12, has been 151,121
Crore; 21% more than the previous year. Consolidated Net Profit of the Group has been 25%
higher at 28,144 Crore.





Dividend
Company had paid an interim dividend of 7.75 per share of 5 each (155%) in two phases (6.25
and 1.50) in January and March 2012 respectively. Total dividend payout will be 8,342 Crore,
besides 1,329 Crore payable as tax on dividend; the highest-ever dividend payout by any Indian
Company.
Disinvestment
One of the major highlights of the concluding fiscal year was that the Government of India
divested 420,416,170 number of equity shares (4.91%) of ONGC on 1st March, 2012 using the
Offer For Sale through Stock Exchange mechanism. With this the Governments holding of
ONGC has come down from 74.14% to 69.23%. In the process Govt. has raised a sum of 12,767
Crore resulting in an average price of 303.67 per share against the floor price of 290 per share.

Strategy & Pursuits: mid-term
Companys strategic pursuits focus on emerging priorities with renewed vigor. True to long-term
strategy, your Company remains focused on strengthening its core activities i.e., Exploration and
Production (E&P) of oil & gas. At the same time, it has prioritized opening up new growth
avenues through exploration of new sources of energy and meaningful integration in the entire
hydrocarbon value chain. Five priority areas for the mid-term.

a) Conversion of PELs into MLs
Presently exploratory efforts of Company focus on expeditious conversion of Petroleum
Exploration Licenses (PEL) to Mining Lease (ML). As on 01.06.2012 Companys exploration

activities are spread in 28 nomination blocks and 77 NELP blocks. Besides that Company holds
participative interest in 13 blocks awarded in consortium during various NELP rounds.


b) Expeditious development of discoveries
Company has taken up 12 major projects for development of 36 new fields and one project for
additional development of D-1 field with an estimated investment of more than 30,000 Crore.
Cumulatively, these projects will be monetizing more than 280 MMtoe of reserves. Out of these
development projects, GS-15, in the East Coast is already on stream since 31st August 2011.
During the course of D-1 field development, in Western Offshore, a significant discovery has
been made which will substantially improve the potential of the field.
As far as the discoveries made in the deep water blocks are concerned, document of
commerciality in respect of discoveries made in blocks KG-DWN-98/2, MN-OSN-2000/2
(MDW-2A) & MN-DWN-98/3 (MDW-4, 5) have been submitted. As per the request of
Company the Government of India has extended the timelines for appraisal of these discoveries
to November, 2013 and December, 2013 respectively.

c) Prudent reservoir management
Enhancing the field life through prudent reservoir management has always been a constant
Endeavour of Company. The Improved Oil Recovery (IOR) and Enhanced Oil Recovery (EOR)
schemes implemented in 15 major fields have helped in sustaining production levels from the
major brown fields.
The major fields undergoing IOR/EOR programmes have witnessed continuous growth in In-
place volumes and all efforts are made to translate the same to reserves. Out of 22 IOR/EOR and
redevelopment schemes, 16 schemes have already been completed and six are under
implementation.





d) Intensifying exploration for new sources of energy
Company has prioritized suitable actions for exploration and exploitation of unconventional and
alternate sources of energy.
I. Coal Bed Methane (CBM)
Company is presently operating in four CBM blocks viz., Jharia, Bokaro, North Karanpura and
Raniganj. Field Development Plan (FDP) for all the blocks has been submitted. Company has
established more than 75,000 MMm3 of CIIP and 124 MMm3 of Ultimate Reserves (ONGC
share).
II. Underground Coal Gasification (UCG)
All the ground work and inputs for construction have been finalized for implementation of UCG
pilot at Vastan, Gujarat. On receiving approval for Mining Lease from the Ministry of Coal, the
project shall be taken up. Company along with the Neyveli Lignite Corporation Limited (NLC)
has also identified Tadkeshwar in Gujarat and Hodu-Sindhari and East Kurla in Rajasthan for
UCG exploration. One more site Surkha in Gujarat has been identified in association with
Gujarat Mineral Development Corporation Ltd (GMDC).

III. Shale Gas Exploration
Company had taken up a pilot project for Shale gas in exploration in Raniganj, West Bengal and
North Karanpura in Jharkhand. All the seven phases of the project have already been completed.
In the Raniganj sub-basin the Gas in Place (GIP) is estimated to be 48 trillion cubic feet (TCF).
Company is planning to explore Cambay, Krishna-Godavari, Cauvery and Vindhyan

sedimentary basins for shale gas in alliance with ConocoPhillips, US oil major and one of the
industry leaders in the area of shale gas deepwater exploration.



IV. Alternate sources of energy
A special Trust set up by Company, ONGC Energy Centre (OEC), has partnered with
Talboom, a Belgium engineering group, for a power project in the geothermal energy domain.
Further, OEC has signed a collaborative agreement with M/s Natural Power Concepts (Hawaii,
USA) for Kinetic Hydro Power generation from small rivers, rivulets and tail races of dams.
OEC is also focusing on exploitation of rich database of ONGC drilled wells for locating
commercial deposits of Uranium.

e) Commissioning of ongoing integration projects
I. Refining
MRPL commissioned its 3 MMTPA Crude Distillation & Vacuum Distillation Units
(CDU/CPU) and required offsite facilities in March, 2012, which enhanced its nameplate
capacity from 11.83 MMTPA to 15 MMTPA. The balance units are expected to be progressively
commissioned by October, 2012. MRPL is further considering upgrading capacity to 18
MMTPA.

II. Petrochemicals
The two petrochemical plants ONGC Petro-additions Limited (OPaL) and ONGC Mangalore
Petrochemicals Limited (OMPL) promoted by Company are progressing well and are expected
to become operational in FY14. These projects have basically been promoted for value-

multiplication of in-house feedstock (Naphtha at Uran, Hazira, and Mangalore and C2-C3
components of C2-C3 extraction plant at Dahej).

III. Gas based power plant
726.6 MW (363.3 x 2) gas based Combined Cycle Power Plant (CCPP) is being set up by ONGC
Tripura Power Company Ltd. (OTPC), an SPV promoted by Company, at Palatana, Tripura. The
generation project is in advanced stage of implementation and the first unit is expected to be
commissioned by end September/ early October, 2012.

IV. Nuclear power plant
Company in association with Nuclear Power Corporation of India Limited (NPCIL) is studying
the feasibility for setting up nuclear power plants.

V. CGD Project
Company is evaluating the feasibility to venture into City Gas Distribution (CGD) projects in
collaboration with reputed companies.

Strategy & Pursuits: Long-term (Perspective Plan 2030)
Keeping in view sustained growth and factoring emerging business scenario, Company has
prepared Perspective Plan 2030. The plan envisages doubling its production over the next 18
years at 4-5 per cent annual production growth rate. It also focuses on building sustainable
portfolio to transform ONGC to a major global energy company with selective participation in
the energy value chain beyond E&P.
The mapped aspirations under PP2030 are:

1. Two fold production growth in E&P.
2. Three fold growth in revenue and EBITDA.
3. Four fold growth in Market Capitalization.
4. Five shaping moves to achieve PP2030 aspirations and
5. Six fold growth in international E&P production.


Company has chalked out the following five shaping moves to meet the PP2030 aspirations:
1. Grow overseas E&P to source 60 mmtoe/year by 2030
ONGC decided to invest and explore opportunities in 4-5 international hubs where OVL can
attain growth of sufficient scale. Potential growth hubs include heavy oil, conventional plays,
shale and deepwater.
2. Secure alliances to develop new resource types
Company plans to forge alliances for development of new resources like - shale gas, CBM,
deeper plays and HP/HT (High Pressure & High Temperature) reservoirs.
Company signed a MoU with ConocoPhillips, a US oil major and pioneers in shale gas and
deepwater exploration, in March, 2012 for cooperation in the areas of shale gas exploration in
India, USA and elsewhere in the world; and also Deepwater in India.
Further, signed a MoU with Colombia's national oil company Ecopetrol SA in May, 2012 for
jointly studying the fan-belt traps of the Cachar Region in India and for cooperation in
developing EOR/IOR technologies.
Company also signed a MoU with China National Petroleum Corporation (CNPC), a world-
leading integrated international energy company, in June, 2012 to have cooperation in
hydrocarbon sector including midstream and downstream.
3. Unlock more than 400 mmtoe from domestic YTF (yet-to-find) reserves

Considerable potential exist in Indian basins. Much of the remaining potential is expected to be
in new resource types. To bring together necessary expertise, ONGC is launching four Centers of
Delivery (COD) for shale gas, CBM, deeper plays and HP/HT.
4. Accelerate (re)development of discovered domestic reserves
ONGCs existing portfolio contains yet-to-develop discoveries that can add more than 300
mmtoe of production by 2030. A number of fields have been identified for priority accelerated
development. To ensure on-budget and on-time delivery Company has started a programme to
install a rigorous Stage Gate Process for project evaluation, implementation and monitoring.
5. Grow non-E&P business to 30 per cent of revenue by 2030
Company has plans to selectively invest in the non-E&P sector, leveraging integration benefits
from its existing portfolio. These investments will include expansion and further petrochemical
integration at the MRPL refinery, additional LNG re-gasification, commercialization of stranded
gas and capacity in alternative energy generation including solar, wind and potentially nuclear.
We have signed a MoU with Mitsui & Co Limited, a large Japanese conglomerate, in August,
2012 for cooperation in gas/ LNG ventures the world over.
Commitment towards sustainable development
On 1st August 2012 Company submitted request to the United Nations Framework Convention
on Climate Change (UNFCCC) for registration of OTPCs gas based power plant at Palatana,
Tripura as Clean Development Mechanism (CDM) project. Once approved, this will generate an
annual CER (Certified Emission Reduction) of 1,605,006. On registration, this will be one of the
largest CDM projects globally.
Sustainability Report
Company is in the process of publishing ONGCs third successive Sustainability Report for
FY12. This report covers our organizational performance across the triple bottom-line of
Economic, Environmental and Community dimensions.
Corporate Social Responsibility (CSR)

Company ONGC has always been committed towards inclusive growth of the society. It
earmark two percent of our profit towards CSR activities. It focus on 12 identified focus areas
education, health care, entrepreneurship development, environment protection, ecological
conservation, protection of heritage sites, promotion of artisans, craftsman, musicians, artists,
etc.



People - our strength
Organization has always valued its human resources as the most important resource. Company
has prioritized induction of new talent and further competence building of its employees. This
year ONGC has been bestowed with Most Attractive Employer Award instituted by Ma Foi
Randstad, a globally renowned HR service provider.


Financial Performance of ONGC
PAT, Dividend, net worth during the last five years

Year
Net
Profit
Dividend
Net worth Turnover

Rs. in
crore
%
Rs. in
crore
Rs. in crore Rs. in crore


2006-07 15,643 310 6,631 61,410 56,904
2007-08 16,702 320 6,844 69,943 60,137
2008-09 16,126 320 6,844 78,085 63,950
2009-10 16,768 330 7,058 86,441 60,206

2010-11 18,924 350 7,486 96,708 66,152



Annual net profit of ONGC increases 13%, from Rs. 16,768 Crore in 2009-10 to Rs. 18,924
Crore in 2010-11.

Net worth increases 12% from 86,441 Crore in 2009-10 to 96,708 Crore in 2010-11.

Turnover increases 10% from Rs. 60,206 Crore in 2009-10 to Rs. 66,152 Crore in 2010-
11.



1. NET PROFIT



2. DIVIDENDS

15643
16702
16126
16768
18924
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
FY'07 FY'08 FY'09 FY'10 FY'11
Net Profit (in crore)
Net Profit (in crore)






3. NET WORTH



6. Organization Structure of the Company.
6631
6844 6844
7058
7486
6200
6400
6600
6800
7000
7200
7400
7600
FY'07 FY'08 FY'09 FY'10 FY'11
Dividends (in crore)
Dividends (in crore)
61410
69943
78085
86441
96708
0
20000
40000
60000
80000
100000
120000
FY'07 FY'08 FY'09 FY'10 FY'11
Net Worth (in crore)
Net Worth (in crore)
















Structure of Oil and Gas Sector

The oil and petroleum sector was given the status of Core sector Industry with the Industrial
Policy Resolution, 1954. The Indian oil sector has historically been a regulated one dominated by
Government undertakings. However, with the Government loosening its control, new private
sector players are now gaining presence. The Indian oil sector has companies operating in three
distinct sub-segments:


Oil & Gas Exploration and Production (E&P),

Oil Refining and marketing of refined products (R&M) and,

Distribution of Natural Gas.

Exploration and Production (E&P)
The growing demand for crude oil and gas in the country and policy initiative of Government of
India towards increased E&P activity, have given a great impetus to the Indian E&P industry
raising hopes of increased exploration. Exploration and production (E&P) companies focus on
finding hydrocarbon reservoirs, drilling oil and gas wells and producing and selling these
materials to be later refined into products such as gasoline. This activity is usually referred to
as upstream oil and gas activity. Exploration and production companies measure oil production
in terms of barrels.
Oil and Natural Gas Corporation Limited (ONGC) and Oil India Ltd. (OIL), the two National Oil
Companies (NOCs) and private and joint-venture companies are engaged in the exploration and
production (E&P) of oil and natural gas in the country.





Petroleum Industry
The oil and gas industry is usually divided into three major components: Upstream, midstream
and downstream.
1. UPSTREAM
The upstream oil sector is a term commonly used to refer to the searching for and the recovery
and production of crude oil and natural gas. The upstream oil sector is also known as
the exploration and production (E&P) sector.
The upstream sector includes the searching for potential underground or underwater oil and gas
fields, drilling of exploratory wells, and subsequently drilling and operating the wells that
recover and bring the crude oil and/or raw natural gas to the surface.

2. MIDSTREAM
The midstream gas business starts at the gathering system. The gathering system is collecting
wet natural gas from the well heads and transports it to a gas processing plant. A gathering
system can range from a small system where gas is processed close to the well head, to a system
that consists of thousands of miles of small-diameter, low pressure pipes collecting from many
hundred wells. At the gas processing plant methane (a.k.a. dry natural gas) is separated from the
wet natural gas, leaving natural gas liquids as a by-product.

3. DOWNSTREAM
The downstream oil sector is a term commonly used to refer to the refining of crude oil and the
selling and distribution of natural gas and products derived from crude oil. Such products
include liquified petroleum gas (LPG), gasoline or petrol, jet fuel, diesel oil, other fuel oils,
asphalt and petroleum coke.
The downstream sector includes oil refineries, petrochemical plants, petroleum product
distribution, retail outlets and natural gas distribution companies. The downstream industry

touches consumers through thousands of products such as petrol, diesel, jet fuel, heating oil,
asphalt, lubricants, synthetic rubber, plastics, fertilizers, antifreeze, pesticides, pharmaceuticals,
natural gas, and propane.



1.6.1 Activities Involved In Production Process:

Desk study: Identifies area with favourable

Aerial survey: If favourable features revealed, then

Seismic survey: provides detailed information on geology with the help of various
instruments if its feasible

Exploratory drilling: verifies the presence or absence of Access for drilling unit and
supply units a hydrocarbon reservoir and quantifies the reserves
.
Appraisal: determines if the reservoir is economically.

Development and production: produces oil and gas from improved access, storage and
waste disposal facilities the reservoir through formation pressure, artificial lift, Wellheads
and possibly advanced recovery techniques, until Flow lines economically feasible
reserves are depleted.














7. Market Share & Position of the Company in the Industry:

Global Ranking

Only Indian energy major in Fortune's Most Admired List 2012 under 'Mining, Crude Oil
Production' category.
It is ranked 171th in Forbes Global 2000 list of the World's biggest companies for 2012
based on Sales (US$ 26.3 billion), Profits (US$ 5 billion), Assets (US$ 51 billion) and
Market Capitalization (US$ 46.6 billion).
ONGC has been ranked 39th among the world's 105 largest listed companies in
'transparency in corporate reporting' by Transparency International making it the most
transparent company in India.



























Role Of Corporate Accounts
1) As per the listing requirement of SEBI, listed companies have to publish quarterly
result. For this, the accounts for various units are accumulated at Corporate Accounts
section for final consolidation. Similarly annual accounts are also finalised at Corporate
Accounts section.
2) At the end of the year annual accounts of group companies are also consolidated with the
accounts of ONGC.
3) MIS reporting at various levels of management is also supported.
4) While finalising the accounts corporate accounts has also to look for all the guidance
notes issued by the ICAI in regards to oil extraction companies.
5) To make and amend accounting policies for formation of final result.
6) To help the units (working officers) in solving accounting issues.
7) To interact with auditors and assist them in finalise annual and quarter accounts.
ONGC

MUMBAI DEHRADUN

DELHI
COMMERCIAL

INTERNAL
AUDIT


CORPORATE
ACCOUNTS

INDIRECT
TAXES

TREASURY

DELHI
FINANCE

BUDGET

OTHERS


8) Integration of ERP system with information module like BI and BPC. Making efforts in
putting info on online system with real time updating.



8. PRESENT LEADERSHIP.
NAME DESIGNATION LEVEL
ALOK SAHA GM(F&A)-HEAD CORPORATE ACCOUNTS E-7
B BISWAS DGM(F&A) E-6
ARUP GUHARAJA CM(F&A) E-5
SOHAIL KHALID M(F&A) E-4
JASBINDER SINGH M(F&A) E-4
ANANDARUP
CHAKRABORTY
M(F&A) E-4
ALOK NAUTIYAL M(F&A) E-4
NIRAJ NAYAN KUMAR DM(F&A) E-3
GURMEET SINGH DM(F&A) E-3
HARJEET S SAPPAL SR (F&A) E-2
ASHOK K NONIA SR (F&A) E-2
VIKASH C SINGH SR (F&A) E-2
RAKESH K GUPTA SR (F&A) E-2
MS JYOTI PRASAD SR (F&A) E-2
BHASKAR PUROHIT (F&A) E-1
VERAL AGARWAL (F&A) E-1


















CHAPTER-2:
SWOT ANALYSIS















McKinsey 7S framework Model.

2.1 Strengths
Structure: ONGC is a well establish organization with a good track record endowed with a large
pool of highly qualified and experience technical personnel. Its Structure is flexible to future
demand. One of the biggest advantages & strength of the company is that it is state owned.
This led the company have great infrastructure with the governments support. The policy
making also becomes easier due to the same reason. Moreover any undue and sustained
pressure creates due impact on the government as well.

Staff: ONGC believes that in order to sustain its edge, it needs to win the war of talent
continuously as it cannot afford to lose its rare talent pool to competition. Accordingly, various
measures pertaining to compensation and welfare of employees are undertaken and the same

are revised / modified periodically according to changing circumstances and requirements.
Needless to mention that all statutory benefits are duly provided.

Skills: ONGC implement personality development programs:
To explore the current managerial situation for women and develop a strategic
Perspective for the demands of the working environment.
To enhance managerial skills in them to perform skilfully.
To enhance managerial skills for effective performance
To develop communication skills
To reflect, discuss and overcome shortcomings, if any, in personal development.

Shared value: ONGC has very good aspect of shared value such as, Technical expertise,
specialized domain knowledge and strong financial position.
Strong Infrastructure: The Company implemented some well needed improvements to the
infrastructure and created strength for the company.

Top Technology: ONGC is the technological advancements that were implemented over the last
few years. The advancements were substantial and improved the company's ability to extract
the greatest amount of oil and gas.


2.1 Weakness

System: ONGC System is dependable to government approval; Dependence on government and
PSU clients, limitation in recruiting desired competencies strains the performance and
development of business.
Skills: Limiting skills or experience in managing mega-projects is another area that requires
strengthening.
Structure: ONGC structure is dependent of government regulation; any change in the
government policy may result in to consequential change in its business.
State owned: regulatory environment, government determines the retail pricing.








2.2 Opportunities
System: ONGC has an opportunity for growth in overseas market through subsidiary ONGC
Videsh Ltd. (OVL). The company has entered into strategic alliance with IOC to form a national
oil entity for domestic and global operations.
Strategy: It is capital intensive calls for huge investment for drill equipment. And Collaboration
with UCIL for exploration of uranium will leverage ONGCs expertise.
Shared value: Major investment expected to be made in retail outlets marketing and
distribution of petrol, direct supply to the industries and retail distribution of fuel.

Structure: Geographical Advantage- to emerge as a refinery hub of the world. Off the 26
sedimentary segments only 6 have been explored and the deep water basin area of the east
and west coast has been unexplored.

2.2 Threats
Staff: Security of personnel & property especially crude oil continues to be a cause of concern
in certain area.
System: Some exploration Campaign Company involves high technology, high investment and
high risks.
Structure: The intrusion of fishing boats near the oil field development areas could pose threat
to safety of field installations.
Shared value: The Company is a favoured company by the GOI and in the decontrolled
scenario; it could face greater challenges from private player.

Exploration of new resources by the private sector participant would raise a threat of
exploitation of such resources for their profit making motives.

Threat of Alternative Fuels: The Company may be facing some real threat from alternative fuels
in the next decade or so uranium mining and wind energy are the substitutes.



2.3 Best Practices / USPs of ONGC
Best practices of ONGC can be differentiated with respect to its functional area such as
HR.
Finance.
Inventory management.
Use of ITs.
Marketing.

2.31 BEST PRACTICES OF ONGC IN HUMAN RESOURCE MANAGEMENT.

A Motivated Team
HR policies at ONGC revolve around the basic tenet of creating a highly motivated, vibrant &
self-driven team. The Company cares for each & every employee and has in-built systems to
recognise & reward them periodically. Motivation plays an important role in HR Development.
In order to keep its employees motivated the company has incorporated schemes such
as Reward and Recognition Scheme, Grievance Handling Scheme and Suggestion Scheme.

Incentive Schemes to Enhance Productivity
Productivity Honorarium Scheme
Job Incentive
Quarterly Incentive
Reserve Establishment Honorarium
Roll out of Succession Planning Model for identified key positions
Group Incentives for cohesive team working, with a view to enhance productivity






Training & Development
An integral part of ONGCs employee-centred policies is its thrust on their knowledge
upgradation and development. ONGC Academy, previously known as Institute of Management
Development (IMD), which has an ISO 9001 certification, along with 7 other training institutes,
play a key role in keeping our workforce at pace with global standards.
ONGC Academy is the premier nodal agency responsible for developing the human resource of
ONGC. It also focuses on marketing its HRD expertise in the field of Exploration & Production of
Hydrocarbons. ONGCs Sports Promotion Board, the Apex body, has a Comprehensive Sports
Policy through which top honours in sports at national and international levels have been
achieved.

Transforming the Organization
ONGC has undertaken an organization transformation exercise in which HR has taken a lead
role as a change agent by evolving a communication strategy to ensure involvement and
participation among employees in various work centers. Exclusive workshops and
interactions/brainstorming sessions are organized to facilitate involvement of employees in this
project.

Participative Culture
Policies and policy makers at ONGC have always had the interests of the large and multi-
disciplined workforce at heart and have been aware of the nuances and significance of cordial
Industrial Relations. By enabling workers to participate in management, they are provided with
an Informative, Consultative, Associative and Administrative forum for interactive participation
and for fostering an innovative culture.
In fact, ONGC has been one of the few organizations where this method has been
implemented. It has had a positive impact on the overall operations since it has led to enhanced
efficiency and productivity and reduced wastages and costs.




2.32 BEST PRACTICES BY ONGC IN FINANCE:

Maintain the associations funds, including the replacement fund (commonly called
reserves) and operating fund, in separate accounts in the associations name and ensure
that the board has direct access to the account.

Maintain an operating cash balance of approximately two months expenses.


Reconcile the associations bank statements and investments monthly (or at least
quarterly) with the statements going directly to the board member reviewing them. The
board member charged with reviewing the bank statements should not be responsible
for payment of bills and/or signing checks.

Require the full board to review copies of bank statements and investments on a
quarterly basis.


Require at least two board members signatures to gain access to reserves.

Require at least two authorized signatures on all checks over a predetermined amount
as established by the board of directors.


Establish a long-term financial plan for the associations assets (cash, accounts
receivable, replacement fund, investments, etc.) that is reviewed and revised annually.

Develop written, board-approved investment policies and procedures.


Commission a reserve study and/or update current reserve study at least every three
years and review the report annually.

Prepare a long-term operating budget covering the next three to five years. Include
reasonable reserves for future major repairs and replacement of common facilities in
assessments as determined by the associations most recent reserve study.

Develop a written, board-approved collection policy for enforcing owners assessment
obligations. Be sure to follow applicable state statutes regarding development and
enforcement of the policy.

Establish that the board must approve all write-offs of delinquencies in a timely manner.


Solicit competitive bids for services and require board authorization for all expenditures
over a predetermined amount.


Request timely updates and reports from the associations manager and accountant.

Require approval of invoices, by a board member other than the check signers, prior to
payment.

Require board approval for checks in payment of non-budgeted, non-recurring expenses
in excess of an established limit.


2.33 BEST PRACTICES BY ONGC IN INVENTORY MANAGEMENT.

ONGC fixes stock levels for different categories of stores and spares taking in to account
consumption pattern, lead time, storage space, market trends, carrying cost, ordering
cost etc.

ONGC takes steps expeditiously to dispose the nonmoving/ surplus stores and spares.

ONGC adhere to the norms fixed for holding the inventory.

ONGC applies appropriate marketing strategy to reduce the finished goods inventory
holding.

Company takes appropriate action expeditiously to investigate the reasons for shortages
and prevent such shortages.






2.34 BEST PRACTICES BY ONGC IN INFORMATION SYSTEM.
ENTERPRISE RESOURCE PLANNING
Enterprise Resource Planning. An integrated software solution used to manage a companys
resources. Integrates all business functions, of the organization including HR, Finance, P&A,
purchasing, IT, Business functions of SBUs (BD, Contract securing and signing, project planning,
resource management, hiring of consultants/ sub-consultants, execution of project
milestones, approvals, deliverables, invoicing, receipts, client interactions, financial and physical
closure etc) and management of data. Integrates all departments and functions across a
company onto a single computer system that can serve all those different departments'
particular needs.
ERP combines the various processes and functions all together into a single, integrated
software program that runs off a single database so that the various departments can more
easily share information and communicate with each other
BENEFITS OF AN ERP SYSTEM
A single integrated system
Reduce redundant data entry and processes
Establish uniform processes that are based on recognized best business practices
Information sharing across departments
Improved access to information
Improved efficiency due to streamlining of processes
Improved customer satisfaction based on improved on-time delivery, increased quality,
shortened delivery times
Reduced inventory costs resulting from better planning, tracking and forecasting of
requirements
Better tracking of vendor performance
Track actual costs of activities and perform activity based costing
Provide a consolidated picture of sales, inventory and receivables

SAP

SAP AG corporation founded in 1972, One of the most important software companies in
the world.
A collection of software for nearly all business applications in middle and large sized
companies.
Systems, Applications and Products.
Can literally run an entire enterprise.
Companies can run SAP's transactions to support their Order to Cash, Procure to Pay,
Plan to Produce, Hire to retire business processes.
Latest version of SAP is ECC or Enterprise Core Component, and the most recent release:
ECC 6.0.

Objective of implementation of SAP ERP Systems in ONGC

Enable streamlining and automation of business processes
Seamless integration between business functions on real time basis
Ensure one-time data entry ensuring data consistency and reliability.
Eliminate errors by improved checks and validations.
Implementing SAP enabled Best business practices & processes
MIS Reports on Real Time Basis.





2.35 BEST PRACTICES FOLLOWED BY ONGC IN MARKETING.
Corporate Social Responsibility in ONGC
As a public sector enterprise, ONGC has a long and cherished tradition of commendable
initiatives, institutionalized programmes and practices of Corporate Social Responsibility which
have played a laudable role in the development of several underdeveloped regions of the
country. The vision of sustainable growth drives both business decisions as well as our
Corporate Social Responsibility works. Our CSR activities are essentially guided by project based
approach in line with the guidelines issued by the Department of Public Enterprises and
Ministry of Corporate Affairs of the Government of India. The CSR initiatives of ONGC were
marked by unrelenting commitment to several large scale key projects as well as initiation of
several new projects identified under the 12 focus areas of ONGC i.e.
Education including vocational courses,
Health Care,
Entrepreneurship (self-help & livelihood generation) schemes,
Infrastructure support near ONGC operational areas,
Environment protection, ecological conservation, promotion,
Protection of heritage sites, UNESCO heritage monuments etc.
Promotion of artisans, craftsman, musicians, artists etc. for preservation of heritage, Art
& Culture,
Womens Empowerment, Girl Child Development, Gender sensitive projects,
Water Management including ground water recharge,
Initiatives for Physically and Mentally challenged,
Sponsorship of seminars, conferences, workshops etc.
Promoting Sports/sports persons; supporting agencies promoting sports / sports
persons.



ONGC, in its quest for oil and gas, charters remote rural locations and is in a constant interface
with underprivileged local communities which results in better understanding of the
community and consequently an enhanced sense of responsibility and accountability to the
communities whose lives we touch.A well-defined set of objectives, clearly delineated
beneficiaries, strategy and project activities characterize CSR projects undertaken to yield
discernible, long-term, sustainable benefits for the communities in question Major CSR projects
undertaken during the year are enlisted below.

1.VaristhajanaSwasthyaSewaAbhiyan: ONGC along with Help Age India continues its efforts to
take healthcare to the doorsteps of the elderly through Mobile Medicare Units. In 2011-12, all
the 20 MMUs were launched and almost 1.9 lakh treatments were provided across the eight
States and one Union Territory.
2. ONGC-GICEIT Computer Centre: Under this initiative, implementing partner
BharatiyaVidyaBhavan operates five computer centres providing employment-related
computer training to underprivileged youth across different operational areas of ONGC. In
2011-12, more than 1400 students have received free employability training through these
centres.
3. Project Utkarsh- Livelihood Project in Sibasagar: Initiated in 2011-12, this project seeks to
expand livelihood opportunities for 400 households in one year through training of women in
skills like tailoring, soft toy making etc. with linkages for income generation as well as training
the elderly in vocations like goatery, piggery, mushroom cultivation etc. while establishing
adequate forward and backward linkages.
4. Harit Moksha: This unique CSR venture with Mokshda ParyavaranEvam Van Suraksha Samiti
(Mokshda PEVSS) has led to the development of an energy-efficient and environment friendly
wood based crematorium with a system called Mokshda Green Cremation System (MGCS)
which is capable of reducing wood consumption by 60% besides minimizing air and water

pollution in a significant manner. Now, there are 10 such MGCS units across the cities of
Vadodara, Cambay, Ahmedabad and Delhi.
5. ONGC-NSTFDC HathkarghaPrashikshan: The CSR project was aimed at economically
empowering the women tribal handloom artisans in Assam to facilitate cluster development for
economically marginalized tribal populations. In 2011-12, around 100 tribal handloom artisans
were provided on-the-job training in the improvised looms by master craftsmen that included
training in intricate designs for catering to wider markets.
6. ONGC-Eastern Swamp Deer Conservation Project in Kaziranga National Park: The project
aims at successfully conserving the species of the Eastern Swamp Deer. Understanding the
species and the habitat, developing stringent conservation action initiatives that could prevent
extinction and examining the possibility of translocation of the species to additional areas to
conserve species and habitat will be important project activities. The project is in the first phase
which consists of gathering information on the species.
7. ONGC Hospitals: ONGC will be setting up multispecialty hospitals at Sibsagar, Assam and
Ankleshwar, Gujarat and a Community Hospital at Lakhimpur-Kheri, Uttar Pradesh.


2.4 Variations/Deviations in practice followed by ONGC & Concepts taught in Classroom.
a) ONGC follow more procedure oriented approach than Hire and Fire policy. For everything
there is system & procedure.
b) No gorilla strategy is followed in marketing.
c) As per Company Act all rules are followed. The Financial Statement are prepared and
audited accordingly with following all Accounting Standards and Notes to Accounts and
timeline guidelines of Institute of Chartered Accounts of India (ICAI).
d) For Cost Auditing all guidelines of Institute of Cost Accounts (ICWAI) are followed.
e) Internal control system compared to taught in class is totally different form internal control

system of ONGC. ONGC control system includes followings:
Book of delegated power form board of directors.
Well established material and works manual.
Material management system.
Disposal procedure.
Marketing procedure.
f) Direct tax and Indirect tax is more followed and implemented in ONGC reason being they
need to comply with all rules and regulation of law.
g) ONGC use well established highly appreciated Human Resource manual which includes CDA
rules i.e. Conduct Discipline Rules.
h) As compare to other product ONGCs products are highly flammable and hazardous which
require proper authorization from ministry of oil and natural gas and the petroleum and
natural gas regulatory board.
i) As we have learnt that product can be sold or marketed without any proper infrastructure
also but ONGC products are highly flammable and have a unique property which requires
proper infrastructure to deliver product to the end user.
j) ONGC has separate budgeting system it maintain budget according to that system where
many aspects considered such as RE,BE,CPE and as taught in class it is not only calculation
of Govt. expenditure and Revenues it consider all aspects such proper utilization of budget
etc.




















CHAPTER 3:
DATA COLLECTION AND PRESENTATION









CASH FLOW STATEMENT
In financial accounting, a cash flow statement, also known as statement of cash flow. I t is a financial statement that
shows how changes imbalance accounts and income affect cash and cash equivalents, and breaks the analysis down
to operating, investing, and financing activities. Essentially, the cash flow statement is concerned with the flow of
cash in and out of the business. The statement captures both the current operating results and the accompanying
changes in the balance sheet. As an analytical tool, the statement of cash flows is useful in determining the short-
term viability of a company, particularly its ability to pay bills. International Accounting Standard 7 (IAS 7), is
the Standard that deals with cash flow statements.
The cash flow statement organizes and reports the cash generated and used in the following categories:
1. Operating
activities
Converts the items reported on the income statement from the accrual
basis of accounting to cash.
2. Investing
activities
Reports the purchase and sale of long-term investments and property,
plant and equipment.
3. Financing
activities
Reports the issuance and repurchase of the company's own bonds and
stock and the payment of dividends.
Its main advantages are as follows:
1. Planning and Co-ordination of Financial Operations. Cash Flow Statement is useful is
evaluating Financial policies and current cash position. Since cash is the basis for carrying on
operations, the Cash Flow Statement prepared on an estimated basis for the next accounting period
will enable the management to plan and co-ordinate the financial operations probably. The
management comes to know how much cash is needed in the future and at what time and how can it
be arranged-how much internally and how much from outside. It is especially useful in preparing cash
budgets.
2. A Control Device. Cash Flow statement is also a control device for the management. A comparison
of cash flow statement of previous year with the budget for that year would indicate to what extent
the resources of the enterprise were raised an applied according to the plan. Thus a comparison of
original forecast with actual results may highlights trends of movement that might otherwise go
undetected.
3. Profit and Cash Positions. It enables the management to account for situation when business has
earned huge profits yet run without money or when it has suffered a loss and still has plenty of money
at the bank.
4. Short-term Financial Decisions. Cash Flow Statement helps the management in taking short-
term financial decisions. Suppose, if firm wants to know its state of solvency after one month from to
date, it is possible only from Cash Flow analysis and not from Fund Flow Statement. Shorter the
period, greater is the importance of Cash Flow Statement.
Limitations of cash Flow Statement:
1) Ignore Accounting Concept of Accrual Basis: As CFS is based on cash basis of accounting, it ignores
the basic accounting concept of accrual basis.
(2) Not Suitable for judging the profitability: CFS is not suitable for judging the profitability of a firm as
non-cash charges are ignored while calculating cash flows from operating activities.

(3) Based on Secondary Data: CFS is based on secondary data. It merely rearranges the primary data
already appearing in other statements i.e., Balance Sheet and Income Statement.







(Rupees in million)
Year Ended Year Ended
31st March, 2013 31st March, 2012
A. CASH FLOW FROM OPERATING ACTIVITIES:
Net Profit before tax and extraordinary items 3,05,443.33 3,66,425.67
Adjustments For:
- Prior Period Items 531.49 -95.48
- Depreciation, Depletion, Amortisation & Impairment 83,735.71 74,959.15
-Exploratory Well Costs Written off 84,763.24 80,924.97
-Interest on Borrowings 276.36 348.30
- Unrealized Foreign Exchange Loss/(Gain) (103.02) 1,070.59
-Provision for Leave Encashment 1,998.87 1,661.05
-Provision for other Employee benefits 7,509.95 2,801.10
-Other Provision and Write offs (Net) 13,539.63 2,739.57
-Interest Income (31,428.20) (31,115.56)
-Excess Liability written Back (5,522.81) (1,961.63)
-Amortization of Government Grant (3.28) (3.92)
-Dividend Income (4,614.75) 1,50,683.19 (5,265.84) 1,26,062.30
Operating Profit before Working Capital Changes 4,56,126.52 4,92,487.97
Adjustments for:-
-Receivables (18,667.58) (23,933.68)
-Loans and Advances (12,007.98) (6,598.19)
-Other Current Assets (3,709.17) (3,759.23)
-Inventories (6,336.33) (10,603.96)
-Trade Payable and Other Liabilities 1,711.89 (39,009.17) 1,755.48 (43,139.58)
Cash generated from Operations 4,17,117.35 4,49,348.39
Direct Taxes Paid (Net of tax refund) (94,677.46) (98,937.37)
Cash Flow before prior period 3,22,439.89 3,50,411.02
Prior period items (Cash items) (522.50) 102.06
Net Cash Flow from Operating Activities 'A' 3,21,917.39 3,50,513.08
OIL AND NATURAL GAS CORPORATION LIMITED
CASH FLOW STATEMENT FOR YEAR ENDED 31ST MARCH, 2013








B. CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of Fixed Assets (1,15,789.59) (1,37,088.73)
Sale of Fixed Assets 140.00 1,212.53
Exploratory and Development Drilling (1,66,340.67) (1,21,159.97)
Sale of Investments 8,519.07 0.50
Advance/Investment in Joint Controlled Entities (40,103.32) (230.00)
Loan to Associates 263.07 (533.52)
Loan and advances to Subsidiary 45,566.41 (18,399.70)
Loans to Public Sector Undertakings and Other Bodies Corporate 83.03 360.94
Deposit in Site Restoration Fund (9,505.49) (10,670.66)
Dividend Received from Subsidiary 1,255.35 1,506.43
Dividend Received from Others 3,359.40 3,759.41
Interest Received 36,053.05 26,752.91
Net Cash Flow from Investing Activities 'B' (2,36,499.69) (2,54,489.86)
C. CASH FLOW FROM FINANCING ACTIVITIES:
Short Term Borrowings - 45,000.00
Repayment of Short Term Borrowings (45,000.00) -
Dividend Paid (94,140.71) (72,688.85)
Tax on Dividend (15,060.43) (11,551.31)
Interest Paid (276.36) (348.30)
Net Cash Flow from Financing Activities 'C' (1,54,477.50) (39,588.46)
Net increase/(decrease) in Cash and -69,059.80 56,434.76
Cash Equivalents (A+B+C)
Cash and Cash Equivalents as at 1st April, 2012 2,01,245.65 1,44,810.89
(Opening Balance)
Cash and Cash Equivalents as at 31st March, 2013* Note 24 1,32,185.86 2,01,245.65
(Closing Balance)
(69,059.79) 56,434.76
Notes:
1. The above Cash Flow Statement has been prepared under the 'Indirect Method' as set out in the Accounting Standard (AS) 3 on Cash Flow
Statements issued by The Institute of Chartered Accountants of India.
2. * Includes Fixed deposits of ` nil million (Previous year ` 52,380.00 million) pledged to Banks against Short term loan taken from Banks.
Also, includes restricted amount of ` 225.42 million (Previous year ` 255.75 million) earmarked for payment of unclaimed dividend.
3. Brackets indicate cash outflow/ deduction.
4 Previous year figures have been re-grouped/re-classified wherever necessary to confirm to the current years prsentation.



BALANCE SHEET:
A balance sheet is a list of assets and liabilities and claims of a business at some specific point of
time and is prepared from an adjusted Trial Balance. It shows the financial position of a business
by detailing the source of funds and utilization of these funds. Balance Sheet shows the assets
and liabilities grouped, properly classified and arranged in a specific manner.
USES OF BALANCE SHEET:
It enables us to ascertain the proprietary interest of a person or business organization.
It enables us to calculate the actual capital employed in the business.
The lender can ascertain the financial position of the business.
It may serve as the basis for determining purchase consideration of the business.
Different ratio can be calculated from the Balance Sheet and these ratios can be utilized for better
management of the business.
LIMITATION OF BALANCE SHEET:
1. Fixed assets are shown in the Balance Sheet as historical costless depreciation up-to-date.
A conventional Balance Sheet cannot reflect the true value of these assets. Again
intangible assets are shown in the Balance Sheet at book values which may bear no
relationship to the market values.
2. Sometimes, balance sheet contains some assets which command no market value such as
expense, debenture discount etc. the inclusion of these assets unduly inflate the total
value of assets.
3. The balance sheet cannot reflect the value of certain factors such as skill and loyalty of
staff.








INTERPRETATION OF BALANCE SHEET:-
The balance sheet is the statement showing the increase or decrease in the assets and liabilities.
This indicates the change in capital structure as well as increase or decrease in assets.
Owners fund increases by 2138.87 Crore in 2011 as compared to base year 2007. The reserves
& surplus is also get increase in last four years very rapidly. It increases by 33441.63 Crore in
2011 as compared to base year 2007.
Proportion of the debt in capital structure is decrease that is in 2007 borrowing debt is 15,109.07
Crore and in 2008 debt is 12,482.71 Crore. So, it is decrease by 96.43.after next three year
continues increase.
The balance sheet also shows the balance of assets and other investment made by the company.
The gross fixed assets are increased in 2008 by 1678.90 Crore as compared to previous year
2007.
The investment is also increase in 2008 by 197.45 Crore as compared to previous year. After the
investment is also decreases in 2009 by 800.18 crore as compared to previous year. And in 2010
it is increase than 2009 after than it is a decrease in 2011 by439.19 crore. The overall inventory
turnover ratio shows the good position of the company is good.
We also conclude that the liquid position of the company is good because Current Assets are
increase year by year.


(` in million)
As at As at
31st March, 31st March,
2013 2012
I.
1
(a) 3 42,777.60 42,777.60
(b) 4 12,01,754.64 10,86,789.71
2
(a) 5 1,28,879.81 1,11,978.68
(b) 6 11,241.67 5,619.93
(c) 7 2,21,874.45 2,13,130.60
3
(a) 8 - 45,000.00
(b) 9 53,410.06 47,599.33
(c) 10 1,12,226.56 1,41,954.28
(d) 11 9,101.88 22,425.93
17,81,266.67 17,17,276.06
II.
1
(a)
(i) 12 2,74,036.80 2,15,678.15
(ii) 13 5,24,407.11 4,63,768.28
(iii) 14 797.95 1,123.28
(iv) 15 1,44,153.69 1,82,980.56
(v) 16 1,04,758.75 85,812.34
(b) 17 91,730.54 43,643.37
(c) 18 2,19,984.17 2,54,498.08
(d) 1,01,331.21 91,825.72
(e) 20 14,053.53 12,102.14
2
(a) 21 - 8,519.07
(b) 22 57,043.94 51,654.35
(c) 23 68,637.21 61,948.16
(d) 24 1,32,185.86 2,01,245.65
(e) 25 38,765.53 31,237.09
(f) 26 9,380.38 11,239.82
17,81,266.67 17,17,276.06
Notes to Finacial Statements 1 to 53
TOTAL
Cash and Cash Equivalents
Short-term loans and advances
Other current assets
Current investments
Inventories
Trade receivables
Deposit under Site Restoration Fund Scheme
Other non-current assets
Current assets
Exploratory/Development Wells in Progress
Non-current investments
Long-term loans and advances
Producing Properties
Intangible assets
Capital work-in-progress
Non-current assets
Fixed assets
Tangible assets
Short-term provisions
TOTAL
ASSETS
Short-term borrowings
Trade payables
Other current liabilities
Other Long term liabilities
Long-term provisions
Current liabilities
Reserves and surplus
Non-current liabilities
Deferred tax liabilities (Net)
EQUITY AND LIABILITIES
Shareholders funds
Share capital
OIL AND NATURAL GAS CORPORATION LIMITED
BALANCE SHEET AS AT 31ST MARCH, 2013
Particulars
Note
No.



PROFIT AND LOSS ACCOUNT:
The Profit & Loss account is also known as the income statement. It can be defined as a report that summaries the
revenues and expenses of an accounting period to reflect the changes in various critical areas of firms operation. It
is of greatest interest and import and importance to end-users of accounting statements because it enables them to
ascertain whether the business operations have been profitable or not during that particular period.
The important destination between the balance sheet and income statement is for a period of one year. The two
broad categories of item shown in the income statement are revenue and expenses. Revenues derived from a
companys operation say manufacturing and selling products. During transaction business has also incurred
revenues other than main business operation. Expenses are occurred in day-to-day transactions.
Here, expenses regarding manufacturing activities, office and administrative expenses are considered. By deducting
total expenses from total revenue we get profit and by deducting total revenue from total expenses we get total loss.
Income tax amount is also decided by profit that incurred in business with help of this statement.
Uses of Profit And Loss Account:
1. Profit and loss account is the base of analysing the performance of company.
2. We can find net profit or net loss from profit and loss account. This will be useful for taking the
decision of payment of dividend.
3. Employees may demand reward on the basis good performance in profit and loss account.
4. Bank can take decision for providing more loan to company, if bank sees good net profit in profit
and loss account.
5. Company can calculate different profitability ratio on the basis of items of profit and loss account.
6. Current year profit and loss account is the base of comparing its figure with past year profit and
loss account.
7. Current year profit and loss account is the base of comparing its figure with other competitor's
profit and loss account.
8. After making profit and loss account, company can create its relationship with company's balance
sheet for deep insight. Company can calculate return on investment, return on total assets and
inventory turnover ratio.
Limitations of Profit And Loss Account:
A. Cost allocations are based on estimates which makes the data subjective.
B. The various choices of accounting methods (for inventory valuation, depreciation methods, etc.) make
evaluation and comparison of different companies difficult.
C. Different companies may have different fiscal year ends also making comparisons difficult.
D. Financial data is not adjusted for price changes, replacement cost values, inflation/deflation issues,
etc.


INTERPRETATION OF PROFIT AND LOSS ACCOUNT:-
The profit and loss account of the company shows the overall income and expenditure, made by the company in a
particular time period. The difference between the debit and credit side of the P&L account, shows the net profit or
net loss.
Here, the profit and loss account of the company shows the satisfactory level but as compared to previous year the
expenses of the company is increases. Here the sales turnover is increase year by year. The operating income in
2010 is 60,470.18 and now it is increase by 6017.01 Crore Rs. in 2011. So, by this way the net profit of the company
is increase by 2156.44 in 2011 as compared to previous year.
While on the other side the expenditure shows the expenses meet by the company in a particular period. The
expenditure met by the company is highest in 2009, while in other year the expenditure of the company are
increases. The overall analysis of the expenditure side of the company shows the average increase in expenses of the
company.
After analyzing the income and expenditure side of the company, there is difference between both sides which is
known as the net profit / loss. The net profit of the company shows an overall increase year by year. In 2007 it is
15,642.92Crore Rs. and now its increasing and in 2011 it is 18,924.00 Cr.

(` in million)
Particulars
Note
No.
2012-13 2011-12
I INCOME
Revenue from operations (Gross) 27 8,33,089.58 7,68,870.59
Less: Excise Duty 3,036.25 3,719.65
Revenue from operations (Net) 8,30,053.33 7,65,150.94
Other Income 28 54,367.42 44,529.77
Total Revenue 8,84,420.75 8,09,680.71
II EXPENDITURE
(Increase)/ Decrease in inventories 29 (230.22) (913.44)
Purchases of Stock-in-Trade 31.04 24.82
Production, Transportation, Selling and Distribution Expenditure 30 3,75,338.89 3,03,906.04
Exploration Costs written off
-Survey Costs 15,667.71 12,409.39
-Exploratory well Costs 84,763.24 80,924.97
Depreciation, Depletion, Amortisation and Impairment 31 83,735.71 74,959.15
Financing Costs 32 276.36 348.30
Provisions and Write-offs 33 18,863.20 3,096.76
Adjustments relating to Prior Period (Net) 34 531.49 (95.48)
Total Expenses 5,78,977.42 4,74,660.51
Profit before Exceptional, Extraordinary items and Tax 3,05,443.33 3,35,020.20
Exceptional items - 31,405.47
Profit before Extraordinary items and Tax 3,05,443.33 3,66,425.67
Extraordinary items - -
Profit before Tax 3,05,443.33 3,66,425.67
Tax Expense
- Current Tax 86,300.00 1,08,950.00
- Earlier years (7,014.76) (6,174.20)
- Deferred Tax 16,901.13 12,474.74
- Fringe Benefit Tax - (54.09)
Profit after Tax 2,09,256.96 2,51,229.22
Earnings per Equity Share - Basic and Diluted (`)
35 24.46 29.36
(Face Value ` 5/-Per Share)
OIL AND NATURAL GAS CORPORATION LIMITED
STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED 31ST MARCH, 2013


































CHAPTER-4:

FUNCTIONAL ANALYSIS OF THE COMPANY













Notes to Financial Statements for the year ended 31
st
March 2013

1. Corporate information

Oil and Natural Gas Corporation Limited (ONGC or the Company) is a public limited company
domiciled in India and incorporated under the provisions of Companies Act, 1956. Its Shares are listed
and traded on Stock exchanges in India. The Company is engaged in exploration, development and
production of crude oil and natural gas.
2. Significant Accounting Policies
a. Basis of preparation

The financial statements are prepared under the historical cost convention on accrual basis in
accordance with Generally Accepted Accounting Principles (GAAP), applying the Successful
Efforts Method as per the Guidance Note on Accounting for Oil and Gas Producing Activities
issued by the Institute of Chartered Accountants of India and Accounting Standards notified
under the Companies (Accounting Standards) Rules, 2006 and provisions of the Companies Act,
1956. The financial statements are presented in Indian Rupees and all values are rounded to the
nearest million except when otherwise indicated. Since the Operating cycle cannot be identified
in normal course due to the special nature of industry, the same has been assumed to have
duration of 12 months.
b. Use of Estimates
The preparation of financial statements requires estimates and assumptions which affect the
reported amount of assets, liabilities, revenues and expenses of the reporting period. The
difference between the actual results and estimates are recognized in the period in which the
results are known or materialized.
c. Government Grant
Government Grant related to acquisition of Fixed Assets is treated as deferred income under
Deferred Government Grant and an amount equal to proportionate depreciation of such
assets is credited to Statement of Profit & Loss.
d. Fixed Assets
d.1 Tangible Assets
d.1.1 Fixed assets are stated at historical cost less accumulated depreciation and impairment. Fixed
assets received as donations/gifts are capitalized at assessed values with corresponding credit
taken to Capital Reserve.


d.1.2 All costs, net of applicable tax credits, relating to acquisition of fixed assets till the time of
bringing the assets to working condition for intended use are capitalised.
d.2 Intangible Assets
Intangible assets are stated at cost of acquisition, net of applicable tax credits, less accumulated
amortization and impairment.
e. Exploration, Development and Production Costs
e.1






Acquisition Cost
Acquisition cost of an oil and gas property in exploration and development stage is taken to
acquisition cost under the respective category. Such costs are capitalized by transferring to
Producing Property when it is ready to commence commercial production. In case of
abandonment, such costs are expensed. Acquisition cost of a producing oil and gas property is
capitalized as Producing Property.

e.2 Survey Cost
Cost of Survey and prospecting activities conducted in the search of oil and gas are expensed as
exploration cost in the year in which these are incurred.

e.3 Exploratory/ Development Wells in Progress
e.3.1 All acquisition costs, exploration costs incurred in drilling and equipping exploratory and
appraisal wells, cost of drilling exploratory type stratigraphic test wells are initially capitalised as
Exploratory Wells in Progress till the time these are either transferred to Producing Properties
on completion as per Note no. 2.f.4.1 or expensed as exploration cost (including allocated
depreciation) as and when determined to be dry or of no further use, as the case may be.
e.3.2 All wells under Exploratory Wells in Progress which are more than two years old from the date
of completion of drilling are expensed as exploration cost (including allocated depreciation)
except those wells where it could be reasonably demonstrated that the well has proved
reserves and the development of the field in which the wells are located has been planned.

e.3.3 All costs relating to Development Wells are initially capitalized as Development Wells in
Progress and transferred to Producing Properties on completion as per Note no. 2.f.4.1 and
2.f.4.2.

f. Producing Properties
f.4.1 Producing Properties are created in respect of an area/field having proved developed oil and
gas reserves, when the well in the area/field is ready to commence commercial production.

f.4.2
Cost of temporary occupation of land, successful exploratory wells which are used for production of oil &
gas, all development wells, depreciation on related equipment, facilities and estimated future
abandonment costs are capitalised and reflected as Producing Properties.

g. Depletion of Producing Properties
Producing Properties are depleted using the Unit of Production Method. The rate of
depletion is computed with reference to an area covered by individual
lease/license/asset/amortization base by considering the proved developed reserves and
related capital costs incurred including estimated future abandonment costs. In case of
acquisition, cost of Producing Properties is depleted by considering the proved reserves. These
reserves are estimated annually by the Reserve Estimates Committee of the Company, which
follows the International Reservoir Engineering Procedures.

h. Production Costs
Production costs include pre-well head and post-well head expenses including
depreciation and applicable operating costs of support equipment and facilities.


i. Side tracking
i.1 The cost of abandoned portion of side tracked exploratory wells is expensed as
Exploratory Well Cost.
i.2 The cost of abandoned portion of side tracked development wells is considered
as part of cost of development wells.
i.3 The cost of sidetracking in respect of existing producing wells is capitalized if it
increases the proved developed reserves otherwise, expensed as Work over
Expenditure
j. Impairment
Producing Properties, Development Wells in Progress (DWIP) and Fixed Assets



(including Capital Works in Progress) of a Cash Generating Unit (CGU) are
reviewed for impairment at each Balance Sheet date. In case, events and
circumstances indicate any impairment, recoverable amount of these assets is
determined. An impairment loss is recognized, whenever the carrying amount of
such assets exceeds the recoverable amount. The recoverable amount is its
value in use or net selling price (if determinable) whichever is higher. In
assessing value in use, the estimated future cash flows from the use of assets
and from its disposal at the end of its useful life are discounted to their present
value at appropriate rate.
An impairment loss is reversed if there is change in the recoverable amount and
such loss either no longer exists or has decreased. Impairment loss / reversal
thereof is adjusted to the carrying value of the respective assets, which in case
of CGU, is allocated to its assets on a pro-rata basis. Subsequent to impairment,
depreciation is provided on the revised carrying value of the assets over the
remaining useful life.
k. Abandonment Cost
k.1 The full eventual estimated liability towards costs relating to dismantling,
abandoning and restoring offshore well sites and allied facilities are recognized
in respective assets when the well is complete / facilities are installed.
k.2 The full eventual estimated liability towards costs relating to dismantling,
abandoning and restoring onshore well sites are recognized when the well is
complete. Cost relating to dismantling, abandoning and restoring its allied
facilities are accounted for in the year in which such costs are incurred as the
salvage value is expected to take care of the abandonment costs. The
abandonment cost on dry well is expensed as exploratory well cost.
k.3 Provision for abandonment cost is updated based on the technical assessment
at current costs.

l.



l.1
Joint Ventures

The Company has Joint Ventures in the nature of Production Sharing Contracts (PSC) with the
Government of India and various bodies corporate for exploration, development and
production activities.

The companys share in the assets and liabilities along with attributable income and
expenditure of the Jointly Controlled Assets is merged on line by line basis with the similar
items in the Financial Statements of the Company and adjusted for depreciation, depletion,
survey, dry wells, abandonment, impairment and side-tracking in accordance with the
accounting policies of the Company.


l.2 Consideration for the right to participate in operations recoverable from new Joint Venture
Partners are :
i) Reduced from respective capitalized cost wherever applicable
ii) Reduced from current expenditure to the extent it relates to current year.
iii) Balance is considered as miscellaneous receipts.

l.3 The hydrocarbon reserves in such areas are taken in proportion to the participating interest of
the Company.

m. Investments
Long-term investments are valued at cost. Provision is made for any diminution, other than
temporary, in the value of such investments.
Current Investments are valued at lower of cost and fair value.

n. Inventories
n.1 Finished goods (other than Sulphur) and stock in pipelines/tanks and carbon credits are valued
at Cost or net realizable value whichever is lower. Cost of Finished goods is determined on
absorption costing method. Sulphur is valued at net realizable value. The value of inventories
includes excise duty, royalty (wherever applicable) but excludes Cess.
n.2 Crude oil in unfinished condition in flow lines up to Group Gathering Stations/platform and
Natural Gas in Pipelines are not valued.
n.3 Inventory of stores and spare parts is valued at Weighted Average Cost or net realisable value,
whichever is lower. Provisions are made for obsolete and non-moving inventories.
n.4 Unserviceable and scrap items, when determined, are valued at estimated net realizable value.

o. Revenue Recognition
o.1 Revenue from sale of products is recognized on transfer of custody to customers.
o.2 Sale of crude oil and gas (net of levies) produced from Exploratory Wells in Progress is deducted
from expenditure on such wells.

o.3 Sales are inclusive of all statutory levies except Value Added Tax (VAT). Any
retrospective revision in prices is accounted for in the year of such revision.

o.4 Revenue in respect of the following is recognized when there is reasonable
certainty regarding ultimate collection:
a. Short lifted quantity of gas
b. Gas pipeline transportation charges
c. Reimbursable subsidies and grants
d. Surplus from Gas Pool Account
e. Interest on delayed realization from customers
f. Liquidated damages from contractors/suppliers

p. Depreciation and Amortization
p.1 Depreciation on fixed assets is provided for under the written down value method in
accordance with the rates specified in Schedule XIV to the Companies Act, 1956.

p.2 Depreciation on additions/deletions during the year is provided on pro rata basis with reference
to the date of additions/deletions except items of Plant and Machinery used in wells with 100%
rate of depreciation and low value items not exceeding ` 5,000/- which are fully depreciated at
the time of addition.

p.3 Depreciation on subsequent expenditure on fixed assets arising on account of
capital improvement or other factors is provided for prospectively.
Depreciation on refurbished/revamped assets which are capitalized separately is
provided for over the reassessed useful life at rates which are not less than the
rates specified in Schedule XIV to the Companies Act, 1956.
p.4 Depreciation on fixed assets (including support equipment and facilities) used for
exploratory/ development drilling and on production facilities is initially capitalised
as part of drilling cost or producing properties and expensed/depleted as stated
in Note no. 2.f and 2.g above. Depreciation on equipment/ assets deployed for
survey activities is charged to Statement of Profit and Loss.
p.5 Leasehold land is amortized over the lease period except perpetual leases.
p.6 Intangible assets are amortized on Straight Line Method (SLM) over the useful
life not exceeding five years from the date of capitalization.

q. Foreign Exchange Transactions
Transactions in foreign currencies are accounted for at the exchange rate
prevailing on the date of the transaction. Foreign currency monetary assets and
liabilities at the year-end are translated using mean exchange rate prevailing on
the last day of the financial year. The loss or gain thereon and also the exchange
differences on settlement of the foreign currency transactions during the year are
recognized as income or expense and adjusted to the Statement of Profit & Loss
except where such liabilities and /or transactions relate to fixed assets/ projects

and these were incurred/ entered into before 1.4.2004 in which case, these are
adjusted to the cost of respective fixed assets.
r. Employee Benefits
r.1 All short term employee benefits are recognized at their undiscounted amount in the
accounting period in which they are incurred.
r.2 Employee Benefit under defined contribution plans comprising provident fund etc. is recognized
based on the undiscounted amount of obligations of the company to contribute to the plan. The
same is paid to a fund administered through a separate trust.
r.3 Employee benefits under defined benefit plans comprising of gratuity, leave encashment,
compensated absences, post-retirement medical benefits and other terminal benefits are
recognized based on the present value of defined benefit obligation, which is computed on the
basis of actuarial valuation using the Projected Unit Credit Method. Actuarial Liability in excess
of respective plan assets is recognized during the year. Actuarial gains and losses in respect of
post-employment and other long-term benefits are recognized during the year.

s. Voluntary Retirement Scheme
Expenditure on Voluntary Retirement Scheme (VRS) is charged to Statement of Profit & Loss
when incurred.

t. General Administrative Expenses
General administrative expenses of Assets, Basins & Services which are
identifiable are allocated to activities and the balance is charged to Statement of
Profit & Loss. Such expenses relating to Headquarter is charged to Statement of
Profit & Loss.

u.

Insurance claims

The company accounts for insurance claims as under :-
u.1

In case of total loss of asset, by transferring either the carrying cost of the relevant asset or
insurance value (subject to deductibles), whichever is lower under the head Claims
Recoverable-Insurance on intimation to Insurer. In case insurance claim is less than carrying
cost, the difference is charged to Statement of Profit & Loss.


u.2

In case of partial or other losses, expenditure incurred/payments made to put such assets back
into use, to meet third party or other liabilities (less policy deductibles) if any, are accounted for
as Claims Recoverable-Insurance. Insurance Policy deductibles are expensed in the year the
corresponding expenditure is incurred.

u.3 As and when claims are finally received from insurer, the difference, if any, between Claims
Recoverable-Insurance and claims received is adjusted to Statement of Profit & Loss.

v. Research Expenditure

Revenue expenses on Research are charged to Statement of Profit & Loss, when incurred.

w. Taxes on Income
Provision for current tax is made as per the provisions of the Income Tax Act,
1961. Deferred Tax Liability / Asset resulting from timing difference between
book profit and taxable profit is accounted for considering the tax rate and laws
that have been enacted or substantively enacted as on the Balance Sheet date.
Deferred Tax Asset is recognized and carried forward only to the extent that
there is reasonable certainty that the asset will be realized in future.
x. Borrowing Costs

Borrowing Cost specifically identified to the acquisition or construction of qualifying assets is
capitalized as part of such assets. A qualifying asset is one that necessarily takes substantial
period of time to get ready for intended use. All other borrowing costs are charged to
Statement of Profit & Loss.

y. Rig Days Costs

Rig movement costs are booked to the next location drilled/planned for drilling. Abnormal Rig
days costs are considered as unallocable and charged to Statement of Profit & Loss.


z. Unamortized Expenditure

Dry docking charges of Rigs/ Multipurpose Supply Vessels (MSVs), Geo Technical Vessels (GTVs),
Well Stimulation Vessels, Offshore Supply Vessels (OSVs), Rig/equipment mobilization expenses
and other related expenditure amortized over the period of use not exceeding five years and
the balance is carried under head Unamortized Expenditure" in the balance sheet.

Za. Provisions, Contingent Liabilities and Contingent Assets