ONGC over-achieves Reserve Accretion targets, brings down Insurance spend substantially

Oil & Natural Gas Corporation Ltd (ONGC) has announced that the Board of Directors of the Company at its meeting held on May 10, 2007, has noted the following recently achieved operational highlights:

"1.0 ONGC's Reserve Accretion and New Oil & Gas Finds

1.1 During the year 2006-07 ONGC made twenty two discoveries (nine by new prospects and thirteen by establishing new pools). The new prospects are: three in Cambay basin, one each in Mumbai Offshore, Assam shelf and Cauvery basin and three in East Coast Deep Water. In yet another milestone, one of these deepwater finds has put Mahanadi Basin on the hydrocarbon map of India. The ultra-deepwater discovery of KG offshore is the first ultra-deepwater discovery of the country.

1.2 During 2006-07 ONGC accreted reserve accretion to the tune of 65.56 million tones of Oil plus Oil equivalent Gas (mtoe) as against MoU target of 52.5 mtoe. The production during the period for the company is 48.28 mtoe, resulting in Reserve Replenishment ratio of 1.36:1.

1.3 Incidentally, the reserve accretion for the X plan (2002-07) target have also been over-achieved in terms of initial In-place as well as Ultimate Reserves.

mtoe (O+OEG)

----------------------------------------------
		Target		Actuals
----------------------------------------------
In-place	570.43		676.76
Ultimate	155.51		240.88
----------------------------------------------

2.0 ONGC brings down Offshore Insurance spend by 38%, despite 23% increase in Asset valuation

2.1 ONGC has been successful in bringing down insurance premium for its offshore assets by 38 per cent for fiscal 2007-08. The total premium payable for FY-08 is US Dollars 29.03 million, against US Dollars 46.83 million in respect of FY-07. This new Policy is effective from May 11, 2007 to May 10, 2008. The renewal programme was managed by United India Insurance Company Ltd. (UIIC), as the leader of the Consortium of Public Sector Insurance Companies, comprising UIIC, NIAC, OICL and NIC.

2.2 The Asset valuation of ONGC’s offshore installations (production platforms & complexes, pipelines, rigs, wells. etc.) has gone up by 23 per cent from USD 13 billion in 2006-07 to USD 16 billion in 2007-08.

2.3 The drop in insurance premium, notwithstanding the augmented asset valuation is mainly due to the various risk improvement (mitigation) measures adopted by ONGC and the recent initiatives in preventing accidents in offshore installations.

2.4 ONGC’s offshore Package Policy gets reinsured in the overseas market, with the risk retention with the Indian Insurers being in the range of 10-13 per cent.

2.5 It is noteworthy that the entire insurance claim against BHN fire of July 2005 has also been fully realized to the extent of US dollars 386 million. Under this background, the achievement in premium reduction becomes highly commendable.

3.0 OVL discovers Oil & Gas in Farsi Block in Iran

3.1 ONGC Videsh Ltd. (a wholly-owned subsidiary of ONGC), has successfully completed drilling of four wells in Farsi Offshore Block in Iran, where OVL is the Operator with 40 per cent Participating Interest, and IOC and OIL holds 40 per cent and 20 per cent as consortium partners.

3.2 These wells have resulted in discovery of both Oil and Gas and currently, G&G work is in progress to assess the reserves. Three are Oil wells and a Gas well. The Gas well was a high-pressure well requiring high operational efficiency to drill.

3.3 The success also highlights the drilling efficiency of OVL as an Operator, as ONGC’s rig Kedarnath was deployed to drill all the four wells.

4.0 ONGC completes major offshore engineering projects during April 2007, on schedule

ONGC has completed four (4) mega hi-tech engineering projects in the Arabian Sea (Mumbai offshore) recently. The combined expenditure on the projects is Rs 2750 Crore.

4.1 4 Well Platforms-I: The 4 Wells Platforms Project I - comprising of design and engineering of four offshore platforms, 3 in Mumbai High and 1 in Bassein & Satellite Asset of ONGC, has been completed in a record time of just 16 months. It involved 12,000 metric tonnes of structural materials and wide variety of equipment procured from all around the world and transported to fabrication yard in Hazira to achieve completion of the mega project. The expenditure involved in the project is Rs 1000.5 Crore.

4.2 4 Well Platforms-II: For the first time, the 4 Well Platforms Project II, designed as smart unmanned platforms in ONGC’s Neelam & Heera Asset, was completed at an expenditure of around Rs 865.2 Crore.

4.3 Pipeline Replacement Project (Phase-II): The 2nd Phase of the Pipeline Replacement Project (Rs 485 Crore), for replacing the infield pipelines of Mumbai high and Neelam & Heera Assets of ONGC, has been completed ahead of schedule. One of the significant achievements has been the reduction in shut-down requirement. In some jobs, the shut-down have been reduced from the normal of 13 days to just about 6 hours.

4.4 36" Uran Trombay Jawahar Dweep Pipeline Project: The most challenging of the projects, however, has been the 36" diameter Uran-Trombay-Jawahardweep Oil Pipeline Project (Rs 399.3 Crore), which has been successfully commissioned on April 01, 2007. The pipeline traverses through various terrains like land, marshy and marine sectors, falling in different jurisdictions of state authorities. The pipeline, en-route, crosses 6 Railway Crossings and 12 Road Crossings. The project implementation was achieved by obtaining clearances from all statutory authorities, for timely completion of the mega project.

During the last 5 years, ONGC has executed 18 such mega engineering projects, valued over USD 2 Billion (Rs 9400 Crore), to create offshore infrastructure for production of Crude Oil and Natural Gas."

Source : Equity Bulls

Keywords