Technology

ONGC today is one of the most established and well renowned companies in the field of oil exploration
and production in India. The core activities which are involved in oil exploration and production are to
develop ,operate fields to extract crude oil and natural gas and to continue exploring and
searching for new reserves of oil.

In order to accomplish this the following activities are carried out which include the
following
1.
2.
3.
4.

Exploration
Development
Drilling
Production

. The primary work starts with exploring and looking for oil reserves in areas which are suggested by
the Geology department. Once the survey is done, an accurate estimation is done based on the data
available. On the basis of estimation a production facilities and other installation is made at that
particular field.

After installation of production facilities drilling process start. They do drilling by

two ways:
1. Vertical Oil Well Drilling
2. Directional Oil Well Drilling
At the bottom of the Rig, One cutting machine is there which is called the BIT. It is used to cut the
heavy stones while drilling. The bit is made up of diamonds which is helpful in the cutting of the
stones. Once the drilling is completed, tubing pipes is used to extract crude oil and other hydro
carbon from the earth. Along with Tubing pipes, Casing pipes are also attached with it to provide
support to it.The crude oil extract from well is transferred to GGS (Group Gathering Section) for
separation of Natural Gas from Crude Oil. GGS is a separator which have dome like structure from
which Natural Gas is separated from upper side of machine as it is light as compared to Crude Oil.
The Natural Gas separated is transfer to GAIL. The Crude Oil that remains is the mixture of Crude
oil and Water.

The mixture of Crude oil and water is transfer to CPF (Central Processing

Facilities). CPF is Heater-Treater machine water is burnt without allowing oxygen to enter in

process in order to convert water into gas so that water can be separated from crude oil.The crude
oil after processing in CPF is ready for sale which is transferred to Refineries such as IOCL, BPCL
& HPCL through pipelines.The extraction work is to be done in the ONGC but it does not work for
the purification and the bifurcation. It directly sells the crude oil to the IOCL, Baroda. The further
work is to be done at the IOCL.The ONGC is working at both On-shore and Off-shore. Onshore
means the production is on the land. It is to be done by at-

Gujarat

Ankleshwar
Mehsana
Ahmadabad
Surat

Assam
Chennai
The biggest off-shore is at MUMBAI (Bombay high) in India

ANKLESHWAR SECTOR:-

Ankleshwar sector is divided into ankleshwar field and satellite fields. Ankleshwar and motwansisodra is the major field and kosamba, Kim and olpad are satellite fiels. Surface facilities for ankleshwar
field comprises of central tank farm (CTF) complex, production installation namely GGS-I, GGS-II, GGS-III,
GGS-IV, GGS-V, GGS-VI, GGS-motwan, GCS-motwan, EPS-anadada and other installation namely main
pump house, water treatment plant and intake well at kathor on tapti river. The ankleshwar installations are
located within distance of 30 kms from ankleshwar city. Surface facilities of satellite field include GGSkosamba, GGS-kim and GCS-olpad which are as far as 50 kms away from ankleshwar.

Ankleshwar CTF has facility for processing of crude oil to meet refinery specifications, one LPG
plane based on cryogenic technology, gas compressor plant and one effluent treatment plant. Typical
ankleshwar GGS has facility for receiving oil and gas from wells. High pressure (above 6kg/cm2) oil and
natural gas is directly sent to CTF after separation. Low pressure oil is stored in the tank and pumped to
CTF. The processing of crude oil to meet refinery specification can be done only at CTF. Some CTF has
low pressure gas compressors. Low pressure gas is either compressed and sent to CTF through low
pressure gas line and is compressed in gas compressor plant at CTF. GGS also has headers for
distribution of gas to gas lift wells, demulsifier injection facility etc.

As oil is processed centrally and low pressure gas compressed at CTF so the rich high pressure
gas available centrally at CTF from which LPG and naphtha is produced. GGS operation thus remains
simple. Water from intake water well is treated at kathor water treatment plant and sent to main pump
house for water injection into the reservoir for its pressure maintenance. Water for main pump house is
also used at ankleshwar colony for house hold purpose. High pressure lean gas is received at GCS
motwan from Hazira plant for use in gas lift wells.

GANDHAR SECTOR:-

This divided into gandhar field and north gandhar fields. Gandhar is the main field and other
satellite fields are dahej, pakhajan, dabka, nada, sarbhan, kural-gajera and jambusar. Surface facilities for
gandhar field comprises of central processing facility named CPF-gandhar, production installation namely
GGS-I,GGS-II, GGS-III, GGS-IV, GGS-V, GGS-VI, GGS-VII, GGS-VIII, GGS-dahej, GGS-jolwa, one EPS
253, and water intake and treatment plant at zanore where water is lifted from river narmada. Gandhar
installations are more or less 75 kms away from Ankleshwar city.

GGS-dabka, GGS-north gandhar have facility to process oil to refinery specifications and other
typical GGS facility. Processed oil is pumped from CTF, CTF to koyali refinery. Gas from the field is sold to
consumers, main one is GAIL.

DRILLING SERVICES:-

The drilling of oil well in Ankleshwar started by Russian rig (uralmarsh-sd) in the year 1960 at well
no Ankleshwar -1 later on christened as VASUDHARA by pandit Javaharlal Nehru, first prime minister of
India. This rig had drilled well nos. 1, 2, 5, and 6 successfully in Ankleshwar field during the drilling of
Ankleshwar 7.

During the year 1993-94, Ankleshwar project was operating maximum 22 numbers of drilling rigs
both own and charter hired. Deeper wells were drilling with deep drilling rig with dual completion and well
having longer horizontal drill of 300-400 meters were drill directionally. Some rigs are equipped with hi-tech
equipments such as IRD (independent rotary drive units) and top drive system.

RIG e-1400-7 was installed with the state of the art top drive drilling system for the first time on
ONGCs on land rig in gandhar. The rig has also been equipped with drill watch which is an advanced
drill digital instrumentation and is compatible for transmission of data to head quarters though SCADA
satellite connectivity for on-line display and monitoring of rig operation.

1.

ONGC is having core competency in oil exploration and production and they enjoys 84%
market share in India crude oil gas production. ONGC invested in MRPL and became first
integrated oil company in India. But in 1990s and onwards company faces many problems
and to overcome different problems they have used different strategies. In early 1990s GoIs

policy of liberalization reorganized company and family distribution in company changes from
to fall government holding to public sector investment. Table 1 ONGCs Equity Distribution
(April 2004) Major Stakeholder Share % Government 74.1 Public 13.9 IOC 9.6 GAIL 2.4
Source: www.ongcindia.com Table 1 shows equity distribution of ONGC which helped
government to raise fund and disinvestment their fund from ONGC. In late 1990s, ONGC felt
problem of obsolete technology and due to this their sales has declining in that time
overcome this problem that have adopted two strategies on different time. Firstly they started
investing into MRPL in different proportion but when MRPL failed to performed they acquired
MRPL for their advance technology so that they can achieve Euro II standards. Second
strategy was in early 2000s they employed Increased Oil Recovery (IOR), Enhances Oil
Recovery (EOR) an SCADA. They also adopted modern technology like virtual reality
Interpretation centers and ERP system which covered all aspects of MIS.
2. 7. S.R.LUTHRA INSTITUTE OF MANAGEMENT-SURAT(750) 7 They also acquired bets
possible system for data exploration, compilation, monitoring, and processing. Analysts
claimed that ONGC was over-exploiting reserves and from suggestion of consultants ONGC
cut down sales by 25% of Bombay High Oil Wells. ONGCs strategy of vertical integration by
acquiring MRPL has given them advantage of technological development MRPL has given
several advantages like retail business, tax concessions, savings in investment, etc. After
technological upgrades vertical integration ONGC plans for growth through new domestic
production enhancement programme. For year 2004-2005 approximately Rs.100 billion were
planned to invest in capital expenditure and they also planned to redevelop north and south
projects of Bombay High. ONGC invested in Capital Vietnam, Sachalin (Russia) and in
Sudan to expand its global operations through OVL. In growth plan ONGC Considered
development of Human Resource and for that they have planned several incentive schemes
and for skill development they have established institute called ONGC Academy. ONGC
considered financial restructuring for cost reduction and operation efficiency. They paid their
foreign loans through idle reserves and invested in better technology which reduced their tax
burden. These measures resulted into efficient operations and increase in production in year
2001. Table 2 ONGC Production ONGC Crude Oil Production 2001-2003 (millions of barrels)
Year Type 2001 2002 2003 Onshore 137 132 36 Offshore 63 65 144 Overseas - - 1 Total 200
197 208 Source: www.ongcindia.com
government of deregulating oil industry in 2002 has given independency of price decision
making to ONGC, but simultaneously it increased competition as the international players are
entering into the market. ONGC has planned to establish new plants at Dahej, Gujarat and
Mangalore, Karnataka and agreement of establishing Special Economic Zone was entered
by ONGC With respective State Governments. ONGC has planned relative diversification
into areas such as LNG marketing, diesel, naphtha and kerosene. And they have also
planned unrelated diversification by investing in Insurance and shipping industry. Petroleum
Ministry had formerly draft order that ONGC should focus on its core that is Exploration and
Production business. These decision of Petroleum Ministry vanished ONGCs decision of
diversification in to unrelated sectors to reduce dependency on one business.
3. 9. S.R.LUTHRA INSTITUTE OF MANAGEMENT-SURAT(750) 9 Issues: Examine the
growth strategy of a public sectoroil exploration and production company. First, ONGC exists,

just as with NOCs in many other countries, because of a legacy of suspicion about outsiders.
It performed well when it was tasked with things that were not that difficult and when it had
help for the more difficult ventures, such as frontier E&P and development. Two factors were
critical in the Indian governments decision to put a stateowned company (ONGC) in charge
of Indias O&G exploration and production (E&P) efforts: the governments socialist bent; and
fears of opportunism of the international oil companies (IOCs). In the years following Indias
independence in 1947 a large fraction of Indias production was under government
ownership, reflecting the strong bias of the GoI for a Socialistlike development of India.
Additionally, by the mid 1960s GoIs fears of possible opportunistic behavior of the IOCs
seemed to be justified, as there was increasing evidence of unfair products pricing
internationally by the IOCs. The past baggage of imperial control and fears of opportunistic
behavior of the IOCs convinced GoI to have government ownership of oil and gas E&P. The
subsequent years, from 1975 and 1990, were ONGCs golden era. Production went up from
4.5 MMT (O+OEG) in 197475 to nearly 48 MMT (O+OEG) in 198990. Starting barely from
450 employees at formation in 1956, ONGC swelled to over 47,000 employees by 1990.
Second, ONGC has run into trouble as it matured, and the roots of its troubles are mainly in
its interactions with the goal and secondarily in its management. The years of expanding
production masked severe and growing performance problems emerged at ONGC. Among
other problems, financial profligacy, organizational and planning difficulties, declining
reserves, and the deteriorating health of producing fields brought much flak and negative
attention to ONGC in the 1990.
4. 10. S.R.LUTHRA INSTITUTE OF MANAGEMENT-SURAT(750) 10 Third, a slew of reforms
instituted since the mid 1990s have fundamentally changed the landscape of the E&P sector
in India and the dynamic of governmentONGC relationship. Targeted at improving corporate
governance, enhancing competition in E&P, and eliminating price controls, those reforms
have had a mixed impact on ONGCs performance and strategy. They also highlight the
difficulties the GoI has had in encouraging higher efficiencies in ONGC and the oil and gas
sector.. ONGCs production: Figure shows that, ONGCs major exploration areas (basins)
and producing areas (assets). In 200708, about 70% of ONGCs crude oil and 75% of
natural gas production came from offshore areas, mostly off the western coast of India. The
GoI set up ONGC in 1956 to lead Indias indigenous E&P efforts, but the breakthrough for
Indias indigenous oil plans and ONGC came from Russia. Russia transferred technology
and equipment to kick start ONGCs exploration work. In the 1970s ONGC and its Russian
partners began exploration in offshore areas and soon found the giant Mumbai High field in
February 1974.
5. 11. S.R.LUTHRA INSTITUTE OF MANAGEMENT-SURAT(750) 11 Study the internal and
external factors that contributed to the growth of ONGC. The main three internal factors
contributing to the growth of ONGC are 1. Technology Upgrades 2. Human Resources
Development 3. Financial restructuring 1. Technology Upgrades: ONGC realized during the
late 1990s that outdated and obsolete technologies were not only leading to high operation
and maintenance costs but also was acting as an impediment to its high growth plans. To
enhance the recovery quantities from basins which were near their maturity phase, they
employed technology-enabled measures such as Increased Oil Recovery (IOR) and

Enhanced Oil Recovery (EOR). Enhanced Oil Recovery is a generic term for techniques for
increasing the amount of oil that can be extracted from an oil field. Using EOR, 30-60 %, or
more, of the reservoir's original oil can be extracted compared with 20- 40% using primary
and secondary recovery. Another modern technology used was SCADA (Supervisory Control
& data Acquisition), which facilitated around-the-clock monitoring and an automated sensory
system for each oil well. ONGC also invested in developing Virtual Reality Interpretation
Centers with applications in exploration, drilling and engineering. Other measures included
horizontal drilling, side- tracks, in-fill drilling, water injection, chemical & thermal methods to
enhance oil recovery. Extensive investments were also made in IT, covering Enterprise
Resource Planning (ERP), Control Systems and Communication Networks. 2. Human
Resources Development: As part of ONGCs Vision & Mission statement, the HR policy was
aimed to Foster a culture of trust, openness and mutual concern to make working a
stimulating and challenging experience for our people. To overcome the problem of
overstaffing and procedural delays, ONGC revamped all internal processes to facilitate faster
file processing. It also redesigned its appraisal system by introducing a new result oriented
incentive and reward scheme like
6. 12. S.R.LUTHRA INSTITUTE OF MANAGEMENT-SURAT(750) 12 the Productivity
Honorarium Scheme, Quarterly Incentive Scheme, Group incentives for Cohesive team
working and reward and recognition scheme. ONGC also established the Institute of
Management Development (IMD), later named ONGC academy. It had an ISO 9001
certification for designing parameters to measure the performance of human resources,
succession planning, work climate and work culture analysis, managing change and other
areas of research related to management development. Seminars, Conventions, Workshops,
interactive brain-storming sessions were introduced to involve all the employees at regular
intervals. In 2001, ONGC launched the SHRAMIK Project (Integrated System of Human
Resource Automated management Information). This was an integrated, online HR system
where all transactions were done through computers. This new system was expected to help
streamline systems and procedures, minimizing processing time and administrative costs,
improving level of employee satisfaction and enhancing the quality of decision making. 3.
Financial Restructuring: Here again, ONGC strived to improve its operational efficiencies and
reduce costs. ONGC had huge cash reserves on the one hand and huge interest outgo due
to foreign debt on the other hand. ONGC thus took steps to make itself a zero-debt company.
The excess cash was then employed to acquire better technology which would support its
growth momentum. ONGC was also entitled to huge tax-concessions after its takeover of
loss making MRPL, which was a strategic move to acquire assets which would not only have
taken years for ONGC to develop otherwise but also reduce the overall cost for acquisition of
such assets. Related functions such as Treasury management, Budget Control, Expenditure
Monitoring and Reporting were also streamlined. As a result of all these steps by ONGC and
the resultant streamlined operations, production output increased from 24.7 million tons in
2001 to 26 million metric tons in 2003. The main external factor that contributed to growth of
ONGC was Deregulation of the Indian oil industry. 1. Deregulation: After the Government of
India (GoI) deregulated the Indian Oil industry from April 1, 2002 by doing away with APM,
ONGC was in a very strategic position where it could leverage on

7. 13. S.R.LUTHRA INSTITUTE OF MANAGEMENT-SURAT(750) 13 its strong investment

base, superior infrastructure and extended distribution network. As a result of tyhis
deregulation, ONGC reported a 70% jump in net profits over the previous year and an
increase in revenue by 53.4% in 2002-03 over the previous year. 2. Strengths and
Opportunities. The company is cash rich, and has very low levels of debt. It has more than
Rs 22000 crores in cash, as per its latest Balance Sheet. This means that it can go on an
acquisition spree. Its foreign arm, ONGC Videsh (OVL) is acquiring energy assets in foreign
countries in the Middle East, Latin America, Asia and Africa. This cash is a significant asset;
it means that it can obtain cheap financing from lenders to fund its acquisitions. Having
financial resources also means that it can foray into renewable sources of energy such as
solar and wind. The company obviously does not want to put all its eggs in the exhaustible
fuel basket, and wishes to diversify and thus ensure long term relevance. The company is a
financial behemoth and can afford to throw its weight around. Witness the recent acquisition
of UK based Imperial Energy Ltd. ONGC outbid companies from many other countries,
including China. The case under analysis mentions that ONGC has implemented a slew of
technological improvements, adding high technology assets and processes to increase
productivity. A marked improvement in the financial situation of the company has enabled it
to invest wisely in improving and streamlining processes and enhancing capability. The
company also needs to manage its talent effectively and stem attrition to private companies.
Towards this end the company has instituted several measures to increase employee
satisfaction and improve talent (as detailed in the case). The company is also providing perks
and other benefits to the employees in an attempt to curb attrition. In the wake of the
finalization of the nuclear deal between India and the US, ONGC has announced that it will
start surveying for uranium deposits in India, to fuel the nuclear energy boom that is surely to
come in the near future. ONGC also is the countrys biggest Oil (77%) and Natural gas (81%)
producer. The company has licenses to explore huge swathes of Indias surface for oil and
gas deposits. It also owns and operates more than 19,000 kms of pipelines in the country
(both offshore and sub-sea). Until recently the company was the largest corporation in India,
in terms of market cap. The company controls Bombay High oilfields, which produce more
than 38% of all domestic crude.
8. 14. S.R.LUTHRA INSTITUTE OF MANAGEMENT-SURAT(750) 14 Having acquired MRPL,
the company is in a good position to diversify into downstream activities. In fact ONGC has
set up a test retail outlet in Mangalore under its Retail arm OVaL (ONGC Values). The
company will sell finished petroleum products under the brand name RelaxTop. This means
that the company is secure from the cyclical nature of oil prices. 3. Weaknesses and Threats:
ONGC is owned by the Indian government. The government decides where the company can
diversify and controls its sphere of influence and control. Witness the government vetoing
ONGCs intention to venture into shipping and insurance. The government is the owner and
the decision maker in most matters. The company has tried its best to professionalize and
has succeeded to a large extent. However, the government has placed restrictions as to what
areas the company can operate in. ONGC is pretty much dependant on one industry, and its
oil fields are giving declining yields of oil. The company needs more flexibility in terms of its
areas of operations and needs to diversify. ONGC is affected by the ups and downs of the

international prices of oil. Indian oil companies like HPCL and BPCL have to sell finished
petroleum products at subsidized rates, i.e. they have to bear losses (under recovery).
ONGC has to compensate them for the under recoveries. (ONGC gives these companies
discounts in the purchase of crude oil, LPG etc). If international prices of oil rise, then under
recoveries are high. The price of crude oil touched nearly USD 150 per barrel in the past few
months, and the under recoveries hit the roof. Because of increase under recoveries, ONGC
had to put its retail venture OVaL on the back burner for the time being. ONGC is also prone
to having its employees being poached by private companies.
9. 15. S.R.LUTHRA INSTITUTE OF MANAGEMENT-SURAT(750) 15 Critically analyze the
vertical integrationstrategyof ONGC by entering into refining and retailing businesses One
cannot be against "core competence", especially during periods when crude oil prices are
skyrocketing. For, it's during this time that upstream oil companies can make huge profits by
doing what they know and do best, that is, exploring and prospecting for oil and gas, and
producing them. But that, at best, is a short-term approach. In the long run, it is better for an
oil company to vertically integrate upstream, midstream and downstream sectors i.e., oil
and gas exploration, refining of crude to derive various petroleum products, and marketing
them. And for success stories, one needn't look too far. The world's seven largest oil
companies known as the Seven Sisters were vertically integrated. This made corporate
sense and provided sustained profits over a long-term period. The strength of vertical
integration lies in sustained profitability of the company. For example, when crude prices are
high, the upstream wing makes the highest profit, while the refining wing has more or less
fixed margins on which they operate. The other profit centre is, of course, constituted by the
retail marketing outlets. When crude prices are low, then the growth of the upstream wing is
stunted, the refineries make the usual margins of profit, but the retail outlets become the
most important profit centres. This kind of flexibility is available only in a vertically-integrated
company. In my view, companies should concentrate and develop expertise in all three of the
above areas. The reason being that the oil and gas produced by a company can only be
used after it undergoes value-addition through refining. Subsequent value-addition to refined
products can be made through an efficient marketing network. Thus, there is a natural
synergy between these three activities. However, it may not be possible to support vertical
integration to the extent that an oil company decides to diversify into power generation, civil
aviation, shipping, etc. One oil company in Indonesia tried this and failed miserably.
10. 16. S.R.LUTHRA INSTITUTE OF MANAGEMENT-SURAT(750) 16 Examine the
latestdiversification plans of ONGC to enter insurance, powergenerationand shipping
businesses andidentify synergies, if any, with its core businesses The case describes the
growth strategy and diversification plans of the Government owned Oil and Natural Gas
Corporation Limited (ONGC), the largest oil exploration and production (E&P) company in
India. ONGC has near monopoly in India's oil E&P industry producing nearly 90 percent of
the country's crude oil and natural gas. Till the late 1990s, the company was mainly confined
to upstream activities of E&P. In order to reduce risks inherent in confining to one activity and
to achieve financial stability and steady growth, ONGC acquired a major equity stake in
Mangalore Refinery and Petrochemicals Limited so as to enter the down stream activities of
refining. With this, ONGC became the first integrated oil company in India. The case

examines the benefits and drawbacks of oil E&P Company entering into refining and retailing
businesses. The case also discusses the possible benefits and disadvantages of ONGC's
plans in 2004 to enter insurance, power generation and shipping businesses as part of its
diversification program.
11. 17. ONGC also implemented Enterprise Resource Planning (ERP) system which covered all
aspects of management information system. It also redeveloped in 2001 under name
Promise. ONGC adopted some technologies namely Increased Oil Recovery (IOR),
Enhanced Oil Recovery (EOR) and SCADA (Supervisory Control and Data Acquisition).
Major decision of government affected ONG must is of no diversification in unrelated sector
and continuing with their core business by ONGC. Government of India plans to merge with
HPCL and BPCL and IOC with oil India, but because of refusal of HPCL and BPCL plan
were gets delayed. ONGC planned to enter into areas like LNG marketing, diesel, naphtha
and key resources. They also announced entering into insurance and shipping business.
ONGC had planned for forward integration in gas petrochemicals and in power sector.
ONGC announced new plants set up in Dahej, Gujarat and Mangalore, Karnataka.