Case Study ONGC

• Oil and Natural Gas Corporation Limited (ONGC), the largest oil exploration and production (E&P) company in India. ONGC has near monopoly in India's oil E&P industry producing nearly 90 percent of the country's crude oil and natural gas. Till the late 1990s, the company was mainly confined to upstream activities of E&P. In order to reduce risks inherent in confining to one activity and to achieve financial stability and steady growth, ONGC acquired a major equity stake in Mangalore Refinery and Petrochemicals Limited so as to enter the down stream activities of refining. With this, ONGC became the first integrated oil company in India

• Examine the growth strategy of a public sector oil exploration and production company

Study the internal and external factors that contributed to the growth of ONGC

Critically analyze the vertical integration strategy of ONGC by entering into refining and retailing businesses

Examine the diversification plans of ONGC to enter insurance, power generation and shipping businesses and identify synergies, if any, with its core businesses

Chalk out a future growth strategy for ONGC

Abstract

In May 2008, Reliance Industries Limited (RIL), one of the largest private sector companies in India, announced that it was shutting down all its petroleum retail outlets in India after incurring losses. The move took not only the dealers and the industry by surprise but also the Indian government.

• Introduction

In May 2008, Reliance Industries Limited (RIL), one of the largest private sector companies in India, owned by Mukesh Ambani, announced that it was shutting down all its petroleum retail outlets (RO) after incurring a loss of Rs. 8 billion in 2007-08.

• Government of India, announced, "Reliance has informed that sales at their retail outlets was negligible due to selling price differential between private and public sector ROs, leading to the closure of all their 1,432 pumps in the country with effect from March 15." RIL had accounted for around 3% of the total petrol pumps operated in the country.

• Nine hundred of the pumps were operated by the company and the remaining were dealer owned. RIL invested about Rs. 40 billion in setting up these retail outlets, which were spread across various states of India...

• Gas Monetization in Bangladesh

• In Bangladesh, about 70% of total commercial energy consumption is met by natural gas and the remainder is met by oil, coal and hydropower.

• Bangladesh has substantial high quality natural gas reserves at the eastern part of the country.

• Only two out of the twelve fields are operated by private companies, the rest are operated by different subsidiaries of Petrobangla.

• The average daily production is about 1 bcf/d.• According to the production capacity and

development program, the national production will increase substantially

• But the domestic demand is not expected to increase. • The international oil companies, development

partners, US Chamber of Commerce along with some other vested quarters, are raising the issue of exporting gas to India, which is not supported in Bangladesh.

• Should Bangladesh export its gas to India? • What are the alternatives? How viable are the

alternatives?• What does the current situation imply for

investors (existing and potential)?• What lessons does the Bangladesh experience

offer to countries with similar supply demand discrepancy?

• Fossil Fuel Reserves, Production and Consumption in Bangladesh (2000)

• Proved Reserves Production Consumption• Oil 7.8 million t. (57 million b.)• Production• 2.3 MT/yr (4,581 b/d) 3.3 MT/yr (65,000• b/d)• consumption• 3.3 MT/yr (65,000 b/d)

• Natural Gas Reserve-0.30 tcm (10.6 tcf) Production-10 bcm/yr (1 bcf/d) 10 bcm/yr (1

bcf/d)Consumption-10 bcm/yr (1 bcf/d)• Coal None None 200,000 tons