India: ONGC is becoming a serious BRIC player

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16 November 2010, Oil, Gas

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The policy is a sensible one, as Oil and Natural Gas Corporation (ONGC) is an experienced upstream operator; however, ONGC's caliber comes as a surprise and appears to have previously been underestimated. Platts recently ranked ONGC as the top exploration and production company in the world in terms of profits. This hides the fact that ONGC's annual oil production (25 million tonnes, or about 500,000 barrels per day) is less than 25% of that of the likes of BP or Exxon, but that in turn shows that the company is extremely efficient at turning reserves into profits.

The company's portfolio of depleted fields has forced it to squeeze every last drop of value from its reserves, and this has brought with it rapid technological improvement. If ONGC is able to scale this efficiency up significantly, then the future looks very bright for its operations.

Reportedly, ONGC's latest plan is to acquire a 25% share in small Australian oil company Advent Energy as a means of obtaining access to the Australian energy market. Interestingly, this is the opposite approach to that used by many other companies, which have recently sought access to Australia's abundant gas reserves. Perhaps this means that the oil industry is seen to be less competitive and an easier route for a new entrant to the Australian market. Crucially, this is not ONGC's main investment and therefore its size is not the important factor, but rather the firm's mere presence in Australia. Domestically, ONGC is focusing its attentions on a massive $10bn investment in Indian gas, of which there are 39 trillion cubic feet of reserves that remain relatively undeveloped.

What is becoming clear is that Indian energy companies are evolving into global players alongside companies from fellow BRIC countries, namely Brazil, Russia, and China. ONGC may soon be a member of the "super-majors club" alongside Petrobras, Gazprom, and China National Offshore Oil Corporation (CNOOC). The world stage is gaining new Indian players.

Source: Datamonitor

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