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    Ongc India

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    1. ONGC undertook a strategy of international expansion through strategic alliances and joint ventures to gain access to new resources and share risks and costs. It selected countries based on exploration opportunities and potential future relationships. 2. Domestically, ONGC pursued market penetration through acquiring stakes in other oil companies and increasing exploration. It also diversified into related industries like importing/exporting energy and minerals and providing knowledge transfer. 3. ONGC expanded its portfolio through foreign asset investments like buying stakes in global oil and gas companies and foreign coal and oil reserves. This balanced its reducing domestic production.

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    Ongc India

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    Samitla Subba
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    1. ONGC undertook a strategy of international expansion through strategic alliances and joint ventures to gain access to new resources and share risks and costs. It selected countries based on exploration opportunities and potential future relationships. 2. Domestically, ONGC pursued market penetration through acquiring stakes in other oil companies and increasing exploration. It also diversified into related industries like importing/exporting energy and minerals and providing knowledge transfer. 3. ONGC expanded its portfolio through foreign asset investments like buying stakes in global oil and gas companies and foreign coal and oil reserves. This balanced its reducing domestic production.

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    in search of new growth startegy

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    ongc india

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    1. ONGC undertook a strategy of international expansion through strategic alliances and joint ventures to gain access to new resources and share risks and costs. It selected countries based on exploration opportunities and potential future relationships. 2. Domestically, ONGC pursued market penetration through acquiring stakes in other oil companies and increasing exploration. It also diversified into related industries like importing/exporting energy and minerals and providing knowledge transfer. 3. ONGC expanded its portfolio through foreign asset investments like buying stakes in global oil and gas companies and foreign coal and oil reserves. This balanced its reducing domestic production.

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    Ongc India

    Uploaded by

    Samitla Subba
    1. ONGC undertook a strategy of international expansion through strategic alliances and joint ventures to gain access to new resources and share risks and costs. It selected countries based on exploration opportunities and potential future relationships. 2. Domestically, ONGC pursued market penetration through acquiring stakes in other oil companies and increasing exploration. It also diversified into related industries like importing/exporting energy and minerals and providing knowledge transfer. 3. ONGC expanded its portfolio through foreign asset investments like buying stakes in global oil and gas companies and foreign coal and oil reserves. This balanced its reducing domestic production.

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    of 23

    Presented By : Group 11 , Sec A

    INTRODUCTION
    CMD of ONGC
    Sudhir Vasudeva (2011- )

    Ranked 357 for Yr 2012

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


    P company

    R.S. Sharma (2006-2011)

    Subir Raha (2001-2006)

    Products: Petroleum,
    Natural gas & other petrochemicals Subsidiaries: MRPL, ONGC Videsh - Owns & operates 1000 km of pipeline; - Exploits 26 sedimentary basins of India

    Friction between ex-CMD & Government


    Focusing chiefly on exploring & exploiting Indian reserves

    Creating global assets portfolio in exploration & refining

    Exploration and Production - India


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

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

    Current Market Demand and Government Policies


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

    Current Condition of Refining and Marketing Industry in India


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

    The Indian Refining Industry as of FY2006

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

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

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

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

    Rise of RPL (Reliance Petroleum Limited)


    Had installed the worlds third largest refinery of 30 million tons per year capacity. Ability to process heavier, sour crudes that are traded at a discount compared to the light sweet variety It was expected that RPL would export 40% of its refined output developed markets, especially US.

    Highlights of the global downstream refining :


    1. U.S super majors reluctant to invest due to serious losses in 1980s-1990s 2. Environment regulations and Mandates in U.S 3. Particularly adept at debottlenecking and technology improvements to increase yield from the historical refining investments 4. Overcapacity in the Middle east and Singapore 6

    Government Intervention
    Indian Governments APM( Administered Price mechanism) : to insulate local prices from the vagaries of the international market fluctuations

    resulted in upstream exploration


    In 2002, the APM approach was dismantled In 2004, the government intervened to keep prices low, when the crude prices started to move upward quickly. For Example, 5% custom duty for imported crude 10% duty was charged for refined product imports By 2006, ONGC alone was subsidizing consumers to the tune of $ 1 billion annually, and marketing companies were losing $ 51 million a day.

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

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

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

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

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

    Current Status of production assets worldwide

    10

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

    11

    Vertical Integration Strategy


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

    12

    Reasons for poor record of ONGC


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

    13

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

    14

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

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

    15

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

    16

    Future Path: International Expansion


    Lack of new discoveries : balance out the diminishing products
    from the domestic wells

    Domestic competition

    Strategic alliances and joint ventures for its international expansion ventures rather than opting for complete ownership Gain Access to a Particular Resource Risk and Cost Sharing Learning Penetration into the market

    Country selection criteria: Opportunity in the area of oil exploration Future relationship with the countries Size of the other company or its growth

    17

    Future Path : Penetration


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

    Exploration in domestic area on the high scale


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

    18

    Future Path : Diversification


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

    Investment in foreign assets


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

    19

    What strategy did ONGC undertake?


    Combination of marketing entry strategy of:
    Joint venture with equity participation in producing oil/gas fields. Joint venture with equity participation for exploration and development blocks Consortium approach, pooling other Indian oil companies, such as IOC Ltd, GAIL, etc. Operator ship contracts (management contracts) Turkey engineering Contracts

    20

    ONGC at present
    2000 to present ONGC Videsh Limited (OVL) is the international arm of ONGC

    Producing assets of OVL


    Having 20 percent holding in Sakhalin(Russia) Having 45 percent stake in partnership with Britissh Petroleum In 2003 OVL acquired Talishmans 25% stake in the Greater Nile Oil project :Having 25 percent equity in the Greater Nile Oil Project in Sudan OVL along with Statoil ASA (Norway) and Repsol SA (Spain), has been engaged in deepwater drilling off the northern coast of Cuba in 2012

    OVL assets with discoveries & exploration


    Having 100 percent interest in Appraisal & Development in Qatar. Having 70 percent interest in Exploration & Appraisal in Egypt. 15 percent interest in Development Phase in Brazil. 20 percent participation interest in Myanmar.

    21

    ONGC at present..(contd)
    ONGC Tripura Power Company
    ONGC Tripura Power Company Ltd. (OTPC) is a joint venture which was formed in September 2008 between ONGC, Infrastructure Leasing and Financial Services Limited and the Government of Tripura It is developing a 726.6 MW CCGT thermal power generation project at Palatana in Tripura which will supply electricity to the power deficit areas of the north eastern states of the country

    22

    Questions

    23

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