By IANS,
New Delhi : State-run Oil and Natural Gas Corp (ONGC) Friday declared a dividend of Rs.68.44 billion – the largest by an Indian company – but warned that the non-availability of oil rigs will push up production costs.
Earlier this year, ONGC had announced an interim dividend of 180 percent. At the annual general meeting Friday, shareholders approved an additional final dividend of 140 percent, bringing the total to 320 percent.
“In absolute terms, the total dividend of Rs.6,844 crore is the highest declared by any Indian corporate body, private or public,” said ONGC chairman R.S. Sharma.
The ONGC group, comprising ONGC, ONGC Videsh and Mangalore Refinery Petroleum Ltd, recorded the highest turnover, crossing the Rs.1-trillion mark at Rs.1,037.1 billion for 2007-08.
It has also posted the best-ever production at 61.85 million tonnes of oil equivalent (mtoe). The ‘tonne of oil equivalent’ is an energy unit, signifying the energy released by burning one tonne of crude.
Sharma said that one of the reasons for the company’s stellar production figures was its investments of over Rs.200 billion in improved oil recovery projects that has arrested the decline in several oilfields.
Further, he said that ONGC’s reserve replacement ratio, the measurement of how well it is replenishing its supplies, was more than one – which compared positively with that of global oil majors.
But despite the positive figures, the public sector company is facing serious challenges on the production front, with a worldwide shortage of drilling rigs.
“The single major concern is the availability of drilling rigs,” said Sharma. With all rigs in the world being utilised fully and booked for the next two years, hiring rates have risen sharply.
“Earlier, we paid $192,000 per day for a deepwater rig. Two months ago, we granted a contract for $520,000, which will only be ready by December 2010,” he said.
He said being a public sector company, ONGC was required to contract drilling rigs only after issuing tenders. “ONGC must get special dispensation. We cannot hire on tender basis,” Sharma added.
Illustrating the problem, Sharma said ONGC had negotiated one rig at $550,000 a day, but it was not approved under government procedures. “The same rig was finally hired out at $600,000,” he said.
With the company planning for more deepwater exploration, the need for deepwater and ultra-deepwater rigs will become even more acute. It has already made an investment plan for $5 billion to start production from two deepwater blocks in Krishna-Godavari basin by 2013.
Further, ONGC Videsh’s exploration and production outlay has also been increased by 85 percent to meet the Eleventh Plan’s increased production target of 39.5 million tonnes of oil equivalent.
Sharma also expressed concern at the “huge under-recoveries” on the gas front, where it was getting negative returns.
Currently, ONGC sells gas at $2.2 per million British thermal units – the measure of heat created by burning any material – while the international average price is about $10.
“We think a reasonable price would be that of the Reliance (Industries) east coast gas pegged at $4.2,” said Sharma. The tariff commission’s recommendation for a price hike is still to be implemented.
Meanwhile, the ONGC head said the company intended to increment its effort in the non-conventional energy sector, as hydrocarbon was a limited resource.
It has already signed a deal with Uranium Corp of India to look at uranium mining from its oil wells, which have shown traces of uranium and thorium.
To a question if nuclear power production is a natural step after this, Sharma replied: “Why not? We are not venturing into just for research and development, but looking at commercialisation. As we move forward, we shall look forward to growth opportunity.”