Oil and Natural Gas Corporation may soon look very different from how it has all these years. Thanks to a host of policy measures India’s largest oil and gas producer and the most profitable company until a few years ago, is set to have fewer upstream assets, lesser control over those fields and significant revenue flowing from refining and fuel sales.
The oil ministry is finalising a policy that envisages offering control to private players in several producing fields that were given to ONGC in the past without an auction. Players promising higher production will get majority interest in the so-called nomination fields while ONGC will retain minority interest.
Nomination fields, which account for about 85 per cent of ONGC’s crude output, are already being supervised by the Directorate General of Hydrocarbons (DGH). A May order resulted in setting up of supervisory panels, comprising three nominees of DGH and two from ONGC, whose orders must be complied with.
Last year, the government auctioned ONGC’s 63 small discovered fields which it had not developed. It’s planning to take away another 20 idling fields this year for the next auction. A draft policy issued by DGH last month proposed an exit of ONGC from six fields where the company is not finding it viable to pay the full cess and royalty.
The draft proposes taking over of fields by private partners if they agree to bear government dues.
"At this rate, the incoming chairman will have nothing but this big box to look after," said a senior ONGC executive in half-jest, referring to the freshly built corporate office in the neighbourhood of South Delhi’s poshest shopping malls. ONGC is expecting a new chairman next month.
Several other ONGC executives, who did not want to be named, privately echoed similar views and said the government was probably acting in haste in taking away fields.
But the oil ministry officials said the measures were needed to raise national oil and gas output that has stagnated for years. "One must understand that these oil and gas fields are national resources and if ONGC is not able to do much with those, private players will have to step in," said an official.
Besides, the planned acquisition of Hindustan Petroleum would significantly change ONGC’s revenue mix and competence. This would also load ONGC with debt after it stayed nearly debt-free for two decades.
In 2016-17, ONGC reported a revenue of Rs 78,000 crore and profit of Rs 18,000 crore while HPCL posted a revenue of Rs 2,13,800 crore and profit of Rs 6,200 crore.
In three years, shares in ONGC, valued at Rs 2,15,000 crore, have lost 38 per cent as crude oil prices collapsed. HPCL shares have risen more than four times and are now valued at Rs 69,000 crore.