ONGC will pay a hefty Rs 24,882.43 crore towards compensating the oil marketing companies’ losses in 2010-11. This will hit the company’s bottom line by nearly Rs 2,000 crore. The government has planned an FPO for the explorer in July. It will be a challenge for the maharatna firm to attract investors for its issue. ONGC group chairman AK Hazarika discusses several facets of the company in an interview with Siddhartha P Saikia. Excerpts:

ONGC bleeds every year for sharing under-recoveries of oil marketing companies (OMCs). How will you convince investors while launching your FPO?

FPO is being launched by the department of disinvestment. The government is also well aware of the fallback of its present subsidy policy on the investors’ sentiment. To reduce the under-recoveries of OMCs, if you do not increase fuel prices and increase the subsidy-sharing amount for upstream companies to take care of the burden of common man, the sentiment of investor community gets affected and possibly you end up with less cash generation from the FPO. On the other hand, if you increase price of fuels and maintain the same subsidy burden of one-third for upstream companies, you get to generate a better amount through FPO by a positive investor sentiment.

But then the higher fuel prices directly affect the common man due to inflation. At the same time, if we distribute the burden of increased oil prices among the masses and reduce the burden of higher international oil prices from upstream and downstream companies, these companies would be in a better position to invest more in expansion and new projects. Finally, the government has to take a balanced view of the options, as either side will affect the economy as well as the common man of the country.

ONGC’s biggest onshore discovery happened in 1980s in western part of the country. What is the reason for not finding any prolific onshore reserve in three decades?

It is true that we have not discovered a ‘giant field’ in on-land area. But it is also true that our efforts have led to bring two entirely new basins on the hydrocarbon map of the country during this period — Krishna-Godavari and Cauvery located in the southern part of the country. In the on-land Krishna-Godavari basin, first strike of gas at Razole was made in 1983. On-land Cauvery basin too joined the fold in 1985 with a discovery at Kovilkalappal. In other basins also notable discoveries have been made during the past three decades which have helped in sustaining production from these areas. However, all these discoveries are small to medium in size. Our exploration are on to find big ones, but fact remains — except Rajasthan field discovery by Cairn, no other company working in land areas has been able to discover any big find. A significant discovery, Khubal, has been made in Nelp-III Tripura block. Similarly Vadtal and Aliabet discovery in western on-land has opened up large area for exploration and leads are being pursued. With exploration success in smaller size, we are able to sustain production from onshore field with an overall decline rate of 1 to 2 per cent annually.

ONGC was looking for an international partner for technological tie-up for exploring blocks in Krishna-Godavari basin. What is the latest on this?

ONGC had invited international majors to a data room visit for possible tie-up in the integrated appraisal, development process of Nelp block KG-DWN-98/2 and adjoining nomination PEL blocks. ENI and BG have evinced interest and the process of firming up the modalities for partnership is in progress. It needs to be mentioned that ONGC has partnership with BG Exploration & Production India in three blocks in KG offshore, two operated by ONGC and one operated by BG. Petrobras and ENI have also partnership in one block each.

Has ONGC entered into second development phase in any of the acreages it has in KG basin? Which are the other blocks in the country where ONGC has started second phase drilling and struck prolific reserves in the past two years?

ONGC has entered into an extended period of exploration for appraisal after completing the exploration MWP commitments in block KG-DWN-98/2. Apart from this, ONGC entered into subsequent exploration phases in all the Nelp-I KG offshore blocks.

Besides this, in the block AA-ONN-2001/1 in eastern Tripura, a gas discovery in well Khubal-4 was made. We estimate about 21.84 bcm of in-place gas in this block. The block is now in appraisal phase.

After completing MWP of exploration phase-I, ONGC has entered into the phase-II of exploration phase in block CB-ONN-2001/1 and HF-ONN-2001/1. In the block CB-ONN-2001/1 ONGC made a small discovery (Nadiad-1) in lower eocene reservoirs of Chhatral member. The discovery is under appraisal and two appraisal locations have been released for delineation of the pool.

Would you throw some light on unconventional resources that ONGC is trying to exploit?

Apart from renewables like wind and solar power, ONGC is also pursuing for unconventional and alternate sources of energy. While in unconventional front, we are trying for shale gas, CBM and UCG, in alternate front, we have also undertaken research for generating hydrogen from thermo-chemical process, producing methane from bio-chemical conversions, tracing uranium sources in some of our fields where we have some indication of radioactive sources from our well-log data of our existing wells, among others.