RESEARCH INSIGHT 3: Oil & Natural Gas Corporation Limited

1. General Overview-
Oil and Natural Gas Corporation (ONGC) is an Indian Multinational Crude Oil and Gas
Corporation.It is involved in exploring for and exploiting hydrocarbons in 26 sedimentary basins
of India, and owns and operates over 11,000 kilometers of pipelines in the country. Its
international subsidiary ONGC Videsh currently has projects in 17 countries. ONGC has
discovered 6 of the 7 commercially producing Indian Basins, in the last 50 years, adding over 7.1
billion tonnes of In-place Oil & Gas volume of hydrocarbons in Indian basins. Against a global
decline of production from matured fields, ONGC has maintained production from its
brownfields like Mumbai High, with the help of aggressive investments in various IOR (Improved
Oil Recovery) and EOR (Enhanced Oil Recovery) schemes. ONGC has many matured fields with a
current recovery factor of 25–33%. Its Reserve Replacement Ratio for between 2005 and 2013,
has been more than one. During FY 2012–13, ONGC had to share the highest ever under-
recovery of INR 89765.78 billion (an increase of INR 17889.89 million over the previous financial
year) towards the under-recoveries of Oil Marketing Companies (IOC, BPCL and HPCL). On 1
November 2017, the Union Cabinet approved ONGC for acquiring majority 51.11% stake in HPCL
(Hindustan Petroleum Corporation Limited). On Jan 30th 2018, Oil & Natural Gas Corporation
acquired the entire 51.11% stake of Hindustan Petroleum Corporation.
2. Management of the company-
Name Designation Qualification
Shashi Shanker Chairman & Managing Director B.Tech(Petroleum Engineering)&MBA(Finance)
Rajesh Kakkar Director B.Tech(Mechanical Engineering)&Global Manager’s Program
Navin Chandra
Director B.Tech(Mechanical Engineering)
Pandey
Alka Mittal Director - Human Resources Master’s in Eco.,MBA(HRM),PhD(commerce and Business Studies)
Ganga Murthy Independent Director
Rajiv Bansal Government Nominee Director
Amar Nath Government Nominee Director B.Sc(Mechanical Engineering),MA(International Development Policy)
Santrupt B Misra Independent Director
Rajiv Bansal Government Nominee Director
Name Designation
Sanjay Kumar
Director
Moitra
Rajesh Kumar
Director M.Sc(Geology).M.Tech(Geology)
Srivastava
Subhash Kumar Director – Finance B.Sc and M.Sc (Commerce)
Amitava
Independent Director B.Sc(Physics) , Post-Grad From University of Delhi
Bhattacharyya
Amar Nath Government Nominee Director
Santrupt B Misra Independent Director

1|Page RESEARCH INSIGHT3: ONGC

Rajiv Bansal Government Nominee Director
Amar Nath Government Nominee Director

Organizational Structure-

Stability of Management-

From a zero-debt company, Oil and Natural Gas Corp (ONGC) had to resort to borrowings in the past
couple of years after the government asked it to acquire state-owned refiner Hindustan Petroleum Corp
Ltd (HPCL), pay record dividend and buy back shares..ONGC in 2017 bought Gujarat government
firm GSPC's 80 per cent stake in a complex KG Basin gas field for Rs 7,738 crore and in January last year, it
acquired the government's holding in HPCL for Rs 36,915 crore.In the fiscal year ended March 31, 2019, it
paid hefty dividend to shareholders and completed a Rs 4,022 crore share buyback. The government was
the biggest beneficiary of both dividend payout and share buyback.These acquisitions and payouts to the
government have eroded ONGC's cash reserves, which was about Rs 13,000 crore a couple of years back
and has loaded its balance sheet with a debt of about Rs 20,000 crore.

The rating of the company is also very strong compared with its peers in the industry, it said adding ONGC
today is the largest integrated oil company in the country with a strong presence in the entire
hydrocarbon value chain.

2|Page RESEARCH INSIGHT3: ONGC

 Operation of the company-

ONGC is operated by Government of India and it is a PSU so it is professionally operated by the

group of professional people working under the government of India. It is not operated as a
family Business.

3. SWOT (Strengths-Weaknesses-Opportunities-Threats) Analysis-

SWOT analysis is a vital strategic planning tool that can be used by ONGC managers to do a situational
analysis of the firm . It is a useful technique to understand the present Strengths (S), Weakness (W),
Opportunities (O) & Threats (T) ONGC is facing in its current business environment.

The ONGC is one of the leading organizations in its industry. ONGC maintains its prominent position in
market by critically analyzing and reviewing the SWOT analysis. SWOT analysis a highly interactive
process and requires effective coordination among various departments within the company such as –
marketing, finance, operations, management information systems and strategic planning.

The SWOT Analysis framework facilitates an organization to identify the internal strategic factors such
as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads
to a 2X2 matrix – also known as SWOT Matrix.

Strengths of State Bank of India -

As one of the leading companies in its industry, ONGC has numerous strengths that enable it to thrive in
the market place. These strengths not only help it to protect the market share in existing markets but
also help in penetrating new markets
 Highly skilled workforce through successful training and learning programs. ONGC is investing
huge resources in training and development of its employees resulting in a workforce that is not
only highly skilled but also motivated to achieve more.
 High level of customer satisfaction – the company with its dedicated customer relationship
management department has able to achieve a high level of customer satisfaction among
present customers and good brand equity among the potential customers.
 Strong Free Cash Flow – ONGC has strong free cash flows that provide resources in the hand of
the company to expand into new projects.
 Automation of activities brought consistency of quality to ONGC products and has enabled the
company to scale up and scale down based on the demand conditions in the market.
 Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the
company to overcome any supply chain bottlenecks.
 Strong Brand Portfolio – Over the years ONGC has invested in building a strong brand portfolio.
The SWOT analysis of ONGC just underlines this fact. This brand portfolio can be extremely
useful if the organization wants to expand into new product categories.
 Highly successful at Go To Market strategies for its products.
 Strong dealer community – It has built a culture among distributor & dealers where the dealers
not only promote company’s products but also invest in training the sales team to explain to
the customer how he/she can extract the maximum benefits out of the products.


3|Page RESEARCH INSIGHT3: ONGC

 Weakness of State Bank of India-
Weakness are the areas where ONGC can improve upon. Strategy is about making choices and weakness
are the areas where a company can improve using SWOT analysis and build on its competitive
advantage and strategic positioning.

 Limited success outside core business – Even though ONGC is one of the leading organizations in its
industry it has faced challenges in moving to other product segments with its present culture.
 The profitability ratio and Net Contribution % of ONGC are below the industry average.
 Need more investment in new technologies. Given the scale of expansion and different geographies the
company is planning to expand into, ONGC needs to put more money in technology to integrate the
processes across the board. Right now the investment in technologies is not at par with the vision of the
company.
 High attrition rate in work force – compare to other organizations in the industry ONGC has a higher
attrition rate and have to spend a lot more compare to its competitors on training and development of
its employees.
 Organization structure is only compatible with present business model thus limiting expansion in
adjacent product segments.
 The company has not being able to tackle the challenges present by the new entrants in the segment
and has lost small market share in the niche categories. ONGC has to build internal feedback mechanism
directly from sales team on ground to counter these challenges.
 Investment in Research and Development is below the fastest growing players in the industry. Even
though ONGC is spending above the industry average on Research and Development, it has not been
able to compete with the leading players in the industry in terms of innovation. It has come across as a
mature firm looking forward to bring out products based on tested features in the market.

Opportunities for State Bank of India-

 New environmental policies – The new opportunities will create a level playing field for all the players in
the industry. It represent a great opportunity for ONGC to drive home its advantage in new technology
and gain market share in the new product category.
 Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower
interest rate to the customers of ONGC.
 The new technology provides an opportunity to ONGC to practices differentiated pricing strategy in the
new market. It will enable the firm to maintain its loyal customers with great service and lure new
customers through other value oriented propositions.
 The market development will lead to dilution of competitor’s advantage and enable ONGC to increase
its competitiveness compare to the other competitors.
 Organization’s core competencies can be a success in similar other products field. A comparative
example could be - GE healthcare research helped it in developing better Oil drilling machines.
 The new taxation policy can significantly impact the way of doing business and can open new
opportunity for established players such as ONGC to increase its profitability.
 Stable free cash flow provides opportunities to invest in adjacent product segments. With more cash in
bank the company can invest in new technologies as well as in new products segments. This should open
a window of opportunity for ONGC in other product categories.

4|Page RESEARCH INSIGHT3: ONGC

 Economic uptick and increase in customer spending, after years of recession and slow growth rate in the
industry, is an opportunity for ONGC to capture new customers and increase its market share.

Threats State Bank of India Facing –

 New environment regulations under Paris agreement (2016) could be a threat to certain existing
product categories .
 Increasing trend toward isolationism in the American economy can lead to similar reaction from other
government thus negatively impacting the international sales.
 Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for
ONGC in those markets.
 Liability laws in different countries are different and ONGC may be exposed to various liability claims
given change in policies in those markets.
 Changing consumer buying behavior from online channel could be a threat to the existing physical
infrastructure driven supply chain model.
 The demand of the highly profitable products is seasonal in nature and any unlikely event during the
peak season may impact the profitability of the company in short to medium term.
 Growing strengths of local distributors also presents a threat in some markets as the competition is
paying higher margins to the local distributors.
 As the company is operating in numerous countries it is exposed to currency fluctuations especially
given the volatile political climate in number of markets across the world.

4. Competitive Analysis –

Indian Oil-

IndianOil is one of ONGC's top competitors. IndianOil is a Public company that was founded in New
Delhi, Delhi in 1959. IndianOil is in the Oil & Gas Exploration, Production, Sales field. IndianOil has 2,433
more employees vs. ONGC.

HPCL-

HPCL is perceived as one of ONGC's biggest rivals. HPCL was founded in 1974 in Mumbai, Maharashtra.
HPCL operates in the Government Organization industry. HPCL generates $24.7B more revenue than
ONGC.

Bharat Petroleum-

Bharat Petroleum is a top competitor of ONGC. Bharat Petroleum's headquarters is in Mumbai,

Maharashtra, and was founded in 1952. Bharat Petroleum competes in the Consumable Fuels field.
Bharat Petroleum generates 326% of ONGC's revenue.

5|Page RESEARCH INSIGHT3: ONGC

 5. Conclusion-

Oil and Natural Gas Corporation (ONGC) has drawn up a ‘Perspective Plan 2030’ to invest Rs.11 lakh-
crore over the next 18 years.

Talking to newsmen here on Monday, Chairman and Managing Director Sudhir Vasudeva said the plan
envisaged doubling of production over the next 18 years at 4-5 per cent.

Investments

“The plan also includes a four-fold growth in market capitalisation, and a six-fold growth in production
from international operations. All this will require an investment of Rs.11,00,000 crore,” he said.

In 2011-12, ONGC produced 23.71 million tonnes of oil and 23.32 billion cubic metres (bcm) of gas. It
posted a net profit of Rs.25,123 crore on a turnover of Rs.76,130 crore. Its overseas arm, ONGC Videsh
Ltd. (OVL), produced 6.21 million tonnes of oil and 2.54 bcm of gas in 2011-12. Mr. Vasudeva said OVL
would be looking to explore investment opportunities in around 4-5 international hubs where the entity
could achieve adequate growth and source 60 million tonnes of oil and oil equivalent gas per year by
2030. The potential hubs included heavy oil, conventional plays, shale gas and deepwater exploration.
“ONGC also looks to unlock 450 million tonnes of oil and oil equivalent gas from yet-to-be found
domestic resources,” he added.

“We have signed a memorandum of understanding (MoU) with ConocoPhillips, U.S.-based oil major and
pioneer in shale gas and deepwater exploration, in March 2012 for co-operation in the research of shale
gas exploration in India, U.S. and elsewhere in the world. We have also signed a MoU with China
National petroleum Corp (CNPC), a leading integrated international energy company, this year for co-
operation in hydrocarbon sector, including midstream and downstream,” he added.

Asserting that considerable potential existed in Indian basins, Mr. Vasudeva said ONGC’s existing
portfolio contained yet-to-be-developed discoveries that could add more than 300 million tonnes of oil

6|Page RESEARCH INSIGHT3: ONGC

and oil equivalent gas to production by 2030. “ONGC plans to invest in the non-E&P (exploration and
production) sector.

These investments will include expansion and further petrochemical integration at the MRPL refinery,
additional LNG re-gasification and capacity in alternative energy generation, including solar, wind and
potentially nuclear,” he added

7|Page RESEARCH INSIGHT3: ONGC