Recently, international oil prices collapsed to a 12-year low and squeezed returns of global energy firms. Most of them have scaled down their exploration activities. But, India’s biggest explorer Oil & Natural Gas Corporation (ONGC) looks at it as an opportunity. Prices will bounce back to a reasonable level, hence this is the time to rationalise cost, increase efficiency and build assets says ONGC Chairman & Managing Director Dinesh Kumar Sarraf to Rajeev Jayaswal of Amar Ujala in an exclusive interview. Excerpts:
Q: The fall in global crude oil prices are likely to continue for a longer period. Goldman Sachs had said that prices might drop to even $20 per barrel. Are you a worried?
Ans: Because ONGC is a public sector company, therefore, we see it differently. We see it from the perspective of our country’s economy. We are heavily dependent on imported crude. Hence, it is good that crude oil prices are low. The situation is not worse even from ONGC perspective. The company does not have to bear subsidy burden at all because of low crude oil prices, which is an upside. Our net realisation of $45 (per barrel) has dropped to about $35, a loss of about $10 per barrel revenue. However, losses are high in value added products.
Q. Aren’t you worried?
Ans: Like any company, we are concerned, but not worried. It is better to take a contrarian view to win over it. In difficult time like this we become more innovative and cost conscious. We have reduced our expenses though optimisation and also due o falling cost of services, which is about 40-50% down. Prices will not remain at this level for ever. Meanwhile, we will imbibe the DNA of working with optimum resources so that when prices go up, this culture will remain with us.
Q: When do you think prices will bounce back and what will be the optimum price?
Ans: No one can predict oil prices in definite terms. Optimum is a relative term. For some $200 (per barrel) or even more could be optimum. Ideally, there should be a balance. It should be at the level were oil producers have incentive to produce more and the price should not pinch to consumers. In the Indian context and from the point of view of ONGC, a level between $60-70 per barrel is ideal.
Q: A fall in global crude oil prices would also present opportunities to acquire oil and gas assets abroad. Are you planning to announce some acquisitions in near future?
Ans: We are working in that direction. We are in talks in various countries including Russia. But, acquisitions do not take place on monthly basis. Acquisitions involve lengthy negotiations.
Q: ONGC had accused that Reliance Industries had drawn its gas from its Krishna-Godavari basin blocks. The expert report is also ready. Do you see any amicable solution to this problem?
Ans: The court has asked the government to resolve this matter. The government has appointed a committee. The matter is under its consideration. We will present our views in front of the committee and abide by its decision.
Q: What is the status of discoveries in the Krishna-Godavari basin block where gas has migrated from your field to Reliance’s field? Are these discoveries still viable?
Ans: Only one cluster of discoveries is affected. Other clusters are intact. Development plans have been submitted for cluster II-A, which is gas and II-B, which is oil. We expect approvals by next month. Yes, at the current gas price, these discoveries are not viable.
Q: Have you asked the government for raising gas price to make these discoveries feasible?
Ans: Yes. Without that it will be impossible to develop these discoveries. Gas prices are expected to be further below than the current price of $4.20 per unit when it will be revised in April 2016.
Q: Dehradun is the headquarters of ONGC. Do you plan to shift it to New Delhi?
Ans: Never. It is ONGC headquarters and will remain that way. In fact, we recently constructed a green building in Dehradun. We often have important conferences there. I’m visiting Dehradun on Jan 15-16 for an all India conference. It is a peaceful place that inspires our technical persons and scientists. It is the birth place of ONGC. We consider it as ‘Dev Bhumi’ and we are sentimentally attached with it.
(Also published in Amar Ujala http://epaper.amarujala.com/dl/20160111/11.html?format=pdf)
