ONGC has been in the news recently over its plans to buy stake
in the Indian downstream major, Indian Oil Corporation. The
E&P major is also facing uncertainty over its share of subsidy
to offset losses incurred by oil marketing companies. Talking to
Neeraj Dhankher, ONGC’s Director (Finance), AK Banerjee
outlines various facets of the company’s future plans. Excerpts:
Have you finally decided on
how much stake will ONGC
purchase in IOC? It is learnt
that ONGC may be looking at
buying anything between 5
and 10 per cent.
IOC is not a bad buy at this point
of time as per the market. I cannot
comment on the government’s
decision, but if it is offered to us,
then it is not a bad buy. IOC’s
fundamentals are strong. They have
huge assets. At that price if you can
get a portion of their equity, it is
not bad at all. But there has been
no official communication from the
government so far. Everything is
based on what we have read in the
media. We will take a view once we
get an official communication. The
plan will be made as per the offer.
Only thing is that we do not want any
lock-in period.
This year we are expecting to
close with around `4,000 to `5,000
crore cash. Part of this shall be used
for acquiring a stake in IOC, if and
when it materializes. In addition, we
will also have an upside due to the
proposed gas price revision from
April 2014.
What is your capex for 2014-15?
It is expected to be around
`36,000 crore.
There has been a lot of
development for ONGC as
far as drilling
in Krishna
Godavari
basin is
considered.
As per
reports, the
company
has lined up
investments
worth $9 billion to
drill more wells in block KGDWN-
98/2. What is the update
on that?
Investment plans will take some
time to materialize. Only recently
have we submitted the declaration
of commerciality (DoC). A field
development plan will now need
to be submitted. It will take at
least six to seven months and only
then will the process start. Some
appraisal wells are being drilled.
Once they are completed, we will
have to wait for the next stage. The investment figure of $9 billion is
only a rough estimate. Unless
we prepare the FDP, we won’t
be able to comment on the
investment levels.
Please elaborate on your
LNG plans. Are you looking
to buy any stake in an existing
LNG terminal?
We do not have any plans yet for
picking up a stake in an existing
LNG terminal. However, we are
thinking of setting up an LNG
plant at Mangalore. We are looking
to be firmed up. It can be anything
between 2.5 and 5 mmt. It will not be
necessarily for Mozambique gas but
that is still an option. Different options
are being examined.
What is the progress on drilling
for shale oil and gas in the
Cambay basin?
Drilling is going on. It is premature to
say anything now. Earlier, as an R&D
pilot, we had drilled some wells with
Schlumberger and there we found
some shale. That’s why we are keen
to take it up further. We have planned
to drill 10 wells this year and another
20 wells next year. The capex for next
year is around `500 to `600 crore.
ONGC has been quite vocal on
reducing its subsidy burden.
What are the main issues?
We are hardly left with any margins
after accounting for subsidies to
oil marketing companies. We have
requested the government that we
should be able to hold on to at
least $65 per barrel so that we can
reinvest in the oil and gas sector. The
petroleum ministry has been quite
supportive. They have understood
that this is very essential. The
proposal is being discussed with the
finance ministry.
How much dividend is ONGC
expected to share this year?
We are maintaining almost the same
level of dividend as last year, at least
that is what we are anticipating but
it will depend on the board decision.
Last year, we had paid an interim
dividend of 180 per cent and final
dividend of 10 per cent. This year, the
interim dividend is expected to be 185
per cent, but the final decision will be
taken by the board.
at Mozambique as a gas source,
along with other options. We have
already signed a memorandum of
understanding (MoU) with Mitsui
in this regard. The capacity is yet to be firmed up. It can be anything
between 2.5 and 5 mmt. It will not be
necessarily for Mozambique gas but
that is still an option. Different options
are being examined.
What is the progress on drilling
for shale oil and gas in the
Cambay basin?
Drilling is going on. It is premature to
say anything now. Earlier, as an R&D
pilot, we had drilled some wells with
Schlumberger and there we found
some shale. That’s why we are keen
to take it up further. We have planned
to drill 10 wells this year and another
20 wells next year. The capex for next
year is around `500 to `600 crore.
ONGC has been quite vocal on
reducing its subsidy burden.
What are the main issues?
We are hardly left with any margins
after accounting for subsidies to
oil marketing companies. We have
requested the government that we
should be able to hold on to at
least $65 per barrel so that we can
reinvest in the oil and gas sector. The
petroleum ministry has been quite
supportive. They have understood
that this is very essential. The
proposal is being discussed with the
finance ministry.
How much dividend is ONGC
expected to share this year?
We are maintaining almost the same
level of dividend as last year, at least
that is what we are anticipating but
it will depend on the board decision.
Last year, we had paid an interim
dividend of 180 per cent and final
dividend of 10 per cent. This year, the
interim dividend is expected to be 185
per cent, but the final decision will be
taken by the board.