Red Alert at ONGC: Singh

Vol 26, PW 18 (24 Aug 23) News in Brief

ONGC chairman Arun Singh has painted a sad picture of poor production and rising costs in a detailed three-page note to employees.

At around 11am on August 23 (2023), ONGC staff received a message from Singh on the company's internal bulletin board. Singh said production has dropped, operating expenses are increasing, and studies forecast a drop in crude and gas demand by 2028-30.

"Following our commitment to provide fairness, transparency and efficiency, here we are before you, giving our take and plans for our beloved organisation," wrote Singh. "We believe that people are responsible, provided they are aware of the state of affairs; standalone crude production decreased by 2.6%, and gas production dropped by 3.3% quarter-on-quarter (in Q1 results released on August 11)."

While onshore production remains "steadfast," western offshore production continues to fall. In 2015-16, western offshore crude oil sales registered 14.185m tonnes but fell to 11.106m tonnes in 2022-23; gas sales dropped from 13.774 BCM in 2018-19 to 11.354 BCM in 2022-23.

"Equally important is that operating expenses increased from Rs20,660 crore ($2.5bn) in 2017-18 to Rs24,922 crore ($3bn) in 2022-23, a 20% increase over five years," said Singh. "Sales losses of 3-4% each year over the last five to six years and operating expenses increasing at an average of 3-4% per year need to be acted upon; we all have to work wholeheartedly to reverse declining production and arrest upward operating costs."

Singh stressed that crude prices are spurring E&P companies to refocus their strategy on more development to increase production over the next two or three years. This has substantially pushed up new (mainly offshore) project costs.

"Increasing CAPEX is inevitable to grow," writes Singh. "But lowering operating expenditure (OPEX) is necessary in the long run."

In the message, Singh strikes a friendly note and addresses employees as "Dear Colleague" while wishing "my warm greetings to you and your family." He stresses that those in the field are ONGC's key performers while other staff support them "to succeed in their goals and targets."