Tarun Kapoor brainstorms on ONGC break-up
Under PMO direction, oil secretary Tarun Kapoor has begun meeting industry representatives over the past few weeks to discuss how to get ONGC back on track.
This report learns Narendra Modi's office is seriously considering splitting up ONGC to reverse falling domestic oil and gas production. Well-placed sources tell us Modi is "annoyed" with ONGC's inability to meet production targets or make major discoveries since Mumbai High and Bassein in 1976, despite holding the country's most prospective acreage.
"Informal brainstorming has begun," we hear. "One idea is to privatise some large ONGC fields."
Disappointing ONGC oil and gas production data from the oil ministry's Petroleum Planning and Analysis Cell (PPAC) explains the PMO's frustration. In the year to March 31 (2019), ONGC produced 383,600 b/d (19.6m tonnes) of oil, falling to 375,700 b/d (19.2m tonnes) by March 31 (2020).
January (2020) saw ONGC oil production at 33,300 b/d (1.7m tonnes), falling to 31,300 b/d (1.6m tonnes) by January 2021. Gas production fares no better.
For 2018-19, it stood at 68m cm/d (24.677bn cubic metres in total), falling to 65m cm/d (23.746bn cubic metres) in 2019-20. In January (2020) gas production was 56m cm/d (2.052bn cubic metres) falling to 51m cm/d (1.866bn cubic metres) in January 2021.
A former ONGC director blames this on ONGC's business structure overhaul in 2001, under the McKinsey-inspired Organisational Transformation Project (OTP), commissioned by former chairman Bikash Bora, and executed by his successor Subir Raha, now deceased. He argues OTP stripped directors of integrated responsibility and separated their roles, leading to "a lack of synergy among directors only bothered about their own targets."
For instance, the director exploration focuses only on increasing reserves figures but not production, which is left to the directors onshore and offshore. "What's the point in showing more and more (underground) reserves on paper every year when you can't verify it through production?" he asks.