ONGC has invested more than a hundred billion rupees on Exploration and Production (E&P) in the last fiscal 2004-05.
Saying this while presenting the audited annual results of the ONGC Group for the fiscal, C&MD of ONGC Mr. Subir Raha said that out of a total CAPital EXpenditure (CAPEX) of Rs. 10,681 Crore (106.8 billion rupees) made by ONGC in FY-05, 94 per cent have been spent on E&P for Oil and Gas.
The balance 6 per cent has been invested in downstream, mainly to turn around the ailing refinery MRPL – to bring it to the portals of BSE-50 from the verge of being referred to BIFR in early 2003.
The Capital investment of Rs. 10,681 Crore in FY-05 is the highest-ever by any Indian corporate. The upward trend in its capital-budget-spend is a pretty consistent one. From a CAPEX utilization figure of Rs. 3,607 Crore in 2000-01, to the current figure – a healthy Cumulative Annual Growth Rate (CAGR) of 31.2 per cent has been achieved by ONGC.
This new trend reflects a changed approach - to business in general and financial management in particular - by ONGC in the last four years.
One of the reasons for this remarkable progress on the CAPEX front has been Mr. Raha’s focus on Assetizing Money, helped by his reforms in contracting practices in the public enterprise, since he took over the reins of the then beleaguered upstream major in May 2001.
Of the hundred billion rupee investment in the E&P basket, the lion’s share has gone to finance new Projects (43 per cent – mainly the Projects on Mumbai High Redevelopment and the Mumbai High-Uran-Trunk Pipeline), followed by Exploratory Drilling (21 per cent) and Development Drilling (13 per cent). Survey makes up 8 per cent of the mix.
With an attractive crude price environment, CAPEX budgets of E&P companies are under upward pressure globally – especially in the developed nations.
While Offshore exploration heads the table all over this blue planet, the quality of investment is not so homogeneous – more global firms are chasing Shallower Oil and Gas prospects – the Jack-up category – which allows faster monetization to benefit from the high-yet-volatile price environment.
The higher risk-reward standpoint in Deep-water prospects – Floater category – is not the current modal destination for investments. According to a Poll conducted by an international Oil portal, this year is expected to see a steadying of oil companies’ devotion to Deep-water, with only 19 per cent preparing to spend more in the 1000 metre-plus water-depths, down from 31 per cent the year before.
The quality of expansion in ONGC’s E&P investments – however – is ahead of the current global indicators. More investments are being floated on the Deep-waters, closer to the E&P model adopted by developing economies like Brazil.
Though the approach to business has changed in the last four years, the vision, fundamentally, remains long-term – keeping with the organization’s rich legacy, spanning fifty years over the country’s fifty-eight year independence.
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