By R. Sasankan

Oil and Natural Gas Corporation, the state-owned upstream giant, is at grave risk of becoming a prisoner of its own mandate. Or rather, a flawed interpretation of its mandate.

The corporation's vision statement is as broad as it is succinct: "To be a global leader in integrated energy business through sustainable growth, knowledge and exemplary governance practices."

The Mission statement spells out a laudable ambition: "Retain dominant position in Indian petroleum sector and enhance India's energy availability".

And how does it intend to achieve that lofty objective? The Mission statement dices the objective into three clear goals:

ONGC has been spudding wells for decades as it diligently pursues its resolve to extract oil and gas from the 26 sedimentary basins in the country. The corporation is proud of its record; two recent press statements make this evident.

The first says: "Oil and Natural Gas Corporation Limited (ONGC) has achieved a feat in the fiscal year 2024 by drilling a record-breaking 541 wells, marking the highest number in over three decades. Of this, 103 were exploratory wells."

And the second: "Oil and Natural Gas Corporation Ltd (ONGC) has drilled 503 wells in FY 2017-18, which is the highest number of wells drilled in last 27 years. Among the 503 wells, 119 are exploratory and 384 development wells."

I have reproduced these press statements to give an idea about the intensity of ONGC's involvement in drilling.

According to ONGC circles, the cost of drilling a single well is in the range of Rs 60-80 million. In some projects, this could potentially leap to Rs 6-8 billion per well depending on the complexity of the location and exploration risks involved. Drilling consumes 55 per cent of ONGC's capex.

Drilling is one of the basic requirements of oil and gas exploration and the task is quite expensive as it can be done only with drilling rigs and trained personnel. Rigs can either be owned or hired and the day-rate of rigs keeps changing in tune with the demand.

India's 26 sedimentary basins cover a total area of 3.4 million square kilometres. Of the total sedimentary area, 49% is located onland, 12% in shallow water and 39% in the deepwater area. There are 16 onland basins, 7 that straddle land and offshore, and 3 completely offshore.

Tectonically, these basins are divided into three categories based on maturity of hydrocarbon resources.

But ONGC also needs to confront some very unpleasant facts.

India has never been considered rich in hydrocarbon reserves. According to BP's Statistical Review of World Energy, India's hydrocarbon reserves are considered to be a relatively small portion of the global total, with its proven oil reserves accounting for around 0.3% of the world's total oil reserves. As per the latest Indian government's estimate, the country's crude oil reserves stood at 651.77 million tonnes as on April 1, 2022 against 591.92 million tonnes in the previous year.

ONGC has also earned a dubious reputation for drilling the most dud wells in the world.

This brings us to a troubling question that needs to be addressed: Should ONGC persist with the frenetic pace of drilling that it has pursued for so many years?

I do not blame ONGC for its failure to discover new oil and gas fields as the country's sedimentary basins are not known to be prolific in hydrocarbon reserves. Take the case of Bombay High, India's largest oil field that was discovered in early 1970s. The precise location for drilling was identified by Russian geologists who were associated with ONGC under the aegis of the Indo-Soviet collaboration in oil exploration at that time. The Russian geologists were the ones who recommended other well-known drilling sites like Panna, Mukta and Tapti.

After Bombay High became a huge commercial success, India dumped the Russians and opted for experts from other countries. Strangely, we have had no significant discovery since then. Every year, ONGC comes up with a list of discoveries. Most of these do not promise any significant quantities of oil or gas. This is precisely why these discoveries do not make much of a difference to the country's reserves.

Normally, the life of an oil field is estimated to be 20 years. The Bombay High field has been in operation since mid-1970s and is still in production. But this masks some terrible flaws in the production process which has led to a skewed gas-oil ratio. The rate of oil flow has slowed down considerably.

ONGC has another distinction among oil companies. It owns a large fleet of drilling rigs. It operates 110 drilling and work-over rigs. The company prefers to own rather than hire rigs. It is not clear why it took such a whimsical decision. But now that it is saddled with so many rigs, it cannot possibly afford to allow these rigs rust. So, it perforce puts them to use to gauge prospectivity in drilling locations.

This is how you get trapped in a cycle of mediocrity punctuated by poor outcomes - and run the risk of being a prisoner of your narrow interpretation of the mandate.

It is time for ONGC to wake up and take some hard decisions. Why should it not confine its drilling to most prospective areas in the sedimentary basins? The Indian geologists have failed to identify such locations. Based on our experience, the Russian geologists seem to have a better understanding of India's sedimentary basins. The present leadership of ONGC is perceived to be dynamic. It should be in a position to rope in a few competent Russian geologists who, along with geologists from ONGC and Oil India, can make a fresh assessment of the prospective areas in India's sedimentary basins. This will help limit the criminal wastage of resources spent on drilling in India's hydrocarbon sector.