General Information Name : Oil and Natural Gas Corporation Limited CIN : L74899DL1993GOI054155 Registered Office: Plot No
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General Information Name : Oil and Natural Gas Corporation Limited CIN : L74899DL1993GOI054155 Registered Office: Plot No. 5A- 5B, Nelson Mandela Road, Vasant Kunj, New Delhi, South West Delhi-110070 Website: www.ongcindia.com Email: [email protected] Phone: 011-26754073 / 79, Fax: 011-26129091 Board of Directors Functional Directors Government Nominee Directors Independent Directors 1. Shri Shashi Shanker 6. Shri Rajiv Bansal 8. Shri Ajai Malhotra Chairman & Managing Director 7. Shri Amar Nath 9. Prof. Shireesh B. Kedare 2. Shri A. K. Dwivedi 10. Shri K.M. Padmanabhan Director (Exploration) 11. Shri Deepak Sethi 3. Shri Subhash Kumar 12. Shri Vivek Mallya Director (Finance) 13. Shri Sumit Bose 4. Shri Rajesh Kakkar 14. Dr. Santrupt B. Misra Director (Offshore) 15. Smt. Ganga Murthy 5. Shri Sanjay Kumar Moitra 16. Dr. Sambit Patra Director (Onshore) Company Secretary Shri M E V Selvamm Auditors Cost Auditors Secretarial Auditors 1. M/s Lodha & Co., Kolkata 1. M/s Chandra Wadhwa & Co., 1. M/s P P Agarwal & Co., 2. M/s PKF Sridhar & Santhanam, New Delhi New Delhi LLP, Chennai 2. M/s Dhananjay V. Joshi & 3. M/s Khandelwal Jain & Co., Associates, Pune Mumbai 3. M/s M. Krishnaswamy & 4. M/s Dass Gupta & Associates, Associates, Chennai New Delhi 4. M/s Musib & Co., Mumbai 5. M/s K.C. Mehta & Co., Vadodara 5. M/s Rohit & Associates, Mumbai 6. M/s MKPS & Associates, Mumbai 6. M/s Shome & Banerjee, Kolkata Registrar & Share Transfer Agent Banker Alankit Assignment Ltd. State Bank of India Alankit Heights, 1E/13, Jhandewalan Extension, New Delhi-110055 Listed on Phone : 91-11-4254 1234/1960, Fax : 91-11-42541201/23552001 1. BSE Ltd. Website : www.alankit.com 2. National Stock Exchange of India Ltd. Email : [email protected] Contents Vision and Mission Statements 01 Chairman’s message 02 Boards’ Report 08 Annexures to Boards’ Report 44 Comments of C&AG 80 Management Discussion and Analysis Reports 83 Corporate Governance Report 101 Auditors’ Certificate on Corporate Governance 120 Secretarial Audit Report 122 Business Responsibility Report 125 Independent Auditors’ Report on Standalone Financial Statements 151 Standalone Financial Statements 161 Statement pursuant to Section 129 (AOC-1) 255 Independent Auditors’ Report on Consolidated Financial Statements 259 Consolidated Financial Statements 269 Vision To be global leader in integrated energy business through sustainable growth, knowledge excellence and exemplary governance practices. Mission World Class • Dedicated to excellence by leveraging competitive advantages in R&D and technology with involved people. • Imbibe high standards of business ethics and organizational values. • Abiding commitment to safety, health and environment to enrich quality of community life. • Foster a culture of trust, openness and mutual concern to make working a stimulating and challenging experience for our people. • Strive for customer delight through quality products and services. Integrated In Energy Business • Focus on domestic and international oil and 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. Carbon Neutrality • ONGC will continually strive to reduce CO2 emissions across its activity chain with the objective of achieving carbon neutrality. 1 Withdrawal of US from the nuclear deal with Iran and subsequent re-imposition of sanctions on the latter CHAIRMAN’S demonstrated the significant influence of geopolitics on oil and gas markets. Climate change concerns, the MESSAGE remarkable growth of renewables and anticipated energy transitions have added to the complexity of the industry landscape. It is important to note that, while energy mix projections vary by the source agency, Oil and Natural Gas are expected to remain one of the most important sources of energy over the foreseeable future. Keeping in view the long term focus, your Company has continued to maintain good investment level in its core area of Exploration and Production (E&P) despite the high volatility in the Crude prices. I, on behalf of the Board of Directors as well as 32,265 dedicated energy soldiers of Oil & Natural Gas Corporation Ltd (ONGC), present to you the Company’s Annual Report for the financial year 2017-18. FY’18 was another year of continued success story for your Company’s businesses. We made as many as 12 hydrocarbon discoveries out of which two discoveries one each in Cambay and Cauvery Onshore, have already been put on production. Reserve accretion (2P) for the year stood at 67.83 MMtoe. With a Reserve Replacement Ratio (RRR) of 1.48, we expanded our hydrocarbon resource base for the twelfth consecutive year. Our crude production volumes remained steady with a marked improvement in gas output; capital outlays remained robust; profit edged higher and dividend payout was impressive. Beyond E&P, acquisition of HPCL added further strength to our already respectable downstream portfolio. E&P, the mainstay of our energy business, will continue Dear Members, to be the principal focus area of the management strategy Your participation in our business is one of the and investments in the years to come. fundamental drivers of ONGC’s sustained growth and It is widely recognized that the era of ‘easy oil’ is over. its contribution to the energy landscape of the country. Hydrocarbon exploration is getting tougher with Protecting shareholder interests through sustained value associated costs expected to face upward pressures. creation is top priority for the Company. I thank you Extended period of low oil prices has necessitated the heartily for your continued support. adoption of a more cost-effective and operationally- Though the year 2017-18 (FY’18) witnessed a lot of efficient approach. We have done well in this regard. At uncertainties, the market movement during the year just over USD6 per barrel of oil equivalent, our finding was in contrast to the previous year. Global crude prices costs are among the most competitive globally. We are recorded a strong recovery and more than doubled from continuously working towards optimising the same early-2016 levels. This is a positive indicator for the health further. We are focussing on greater integration of the and growth outlook of the Oil & Gas sector. ‘right technology’ into our campaign and more focused 2 exploratory inputs through better seismic API. As you are years and also achieved the highest cycle and commercial aware, your Company is also associated as an integral part speed. With 37 rigs operating in the offshore, the of National Seismic Programme. Company remains focused on expanding its presence and expertise in a terrain that has historically been its strong Production performance remained on track and our suite. Deepwater drilling is an exciting new arena within contribution to domestic hydrocarbon supplies increased this domain and the Company plans to drill 24 deep year-on-year, largely on the back of higher gas output. water wells in FY’19. A majority of our future oil and gas Standalone crude oil production recorded increase to supplies are offshore-based which makes offshore drilling 22.31 MMT in FY’18 as compared to 22.25 MMT in critical to the Company’s success in the medium term. FY’17. Natural gas production registered an impressive Considering the capital-intensive offshore operations, growth of over 6% as production for FY’18 rose to cost optimisation is key to mitigating the inherent risks of 23.48 BCM as compared to 22.09 BCM in FY’17. Our any offshore upstream project. ONGC’s Offshore drilling cumulative domestic hydrocarbon volumes (inclusive of costs have come down by 7% in FY’18 which in absolute our share in JV-operated properties), also recorded an terms is significant. The Company is constantly striving increase; 50.05 MMtoe vis-a-vis 48.81 MMtoe in FY’17. to further bring down the drilling costs. Production of Value Added Products increased for the fourth consecutive year – VAP output in FY’18 stood at Your Company’s upstream capital program is growing 3.39 MMT, with an increase of 4.6% over FY’17 volumes. steadily unlike that of most oil and gas operators over the past 4 years - a period that witnessed widespread The fact that we have continued to achieve production and extensive budget reductions in reaction to low growth with a largely mature portfolio makes the feat crude prices. The committed capex of `320,770 even more rewarding. Despite the maturity of our key Million for FY’19 is directed towards E&P activity. fields, our IOR/EOR schemes are aimed at maximizing While strong domestic oil demand and the country’s hydrocarbon recovery from these ageing brownfields. high degree of reliance on imports are drivers for In FY’18, incremental oil gain from these projects sustaining robust investments in domestic upstream totalled 7.5 MMT, almost one-third of our total oil activity, it is also a derivative of our positive outlook output for the year. on the domestic hydrocarbon potential. The recently A legacy-dependent portfolio, however, does present its concluded Hydrocarbon resource reassessment project own set of challenges especially in a cash-constrained only confirms the view - prognosticated hydrocarbon operating environment. However, with more projects resource base of the country today stands at 42 Billion coming online in the next few years, we are confident of tonnes of oil equivalent, up by 50% from past estimates. reducing our reliance on ageing fields. We expect a steady The Company has also put in place firm plans to deliver step-up in our domestic hydrocarbon output, primarily on its targets to support the 10% Import Reduction led by ramp-up in gas output from key projects such as mission, as envisioned by the Hon’ble Prime Minister.