To the Members of HINDUSTAN OIL EXPLORATION COMPANY LIMITED
 
 The Directors have the pleasure in placing before you the 27th Annual
 Report including the Audited Statement of Accounts for the year ended
 March 31, 2011.
 
 1.  FINANCIAL HIGHLIGHTS
 
                                                          INR million
 
 Particulars                          Standalone         Consolidated
 
                             2010-2011  2009-2010  2010-2011  2009-2010
 
 Turnover                        3,285      1,450      3,444      1,607
 
 Other Income                       88        139         92        144
 
 Revenue                         3,373      1,589      3,536      1,751
 
 Profit before Depreciation/
 Depletion/                      2,402      1,123      2,430      1,160
 Amortization/Write Offs/
 Taxation
 
 Less : Depreciation/ 
 Depletion/                      1,223        472       1,223       473
 Amortisation
 
 Less : Provisions & Write Offs      0          0           0         0
 
 Profit Before Tax                1,179        651       1,207       687
 
 Less : Provision for Tax          377        235         391       247
 
 Profit After Tax                   802        416         816       440
 
 Profit/(Loss) brought forward    1,870      1,454       1,930     1,490
 
 Profit available for 
 Appropriation                   2,672      1,870       2,746     1,930
 
 Balance carried to the 
 Balance Sheet                   2,596      1,870       2,670     1,930
 
 Figures have been rounded off.
 
 During the year, your Company produced 2.7 mmboe of crude oil and gas
 (previous year 1.0 mmboe), the increase being on account of full year
 production from PY-1 and PY-3 Fields. This has resulted in a turnover of
 INR 3,285 million, an increase of 2.26 times over the previous year.
 
 Te Profit-Before-Tax was INR 1,179 million, an increase of 81% over the
 previous year.
 
 Provision for tax was higher because of higher taxable income in the
 current year.
 
 During the year under review, your Company had a Profit-After-Tax of INR
 802 million, an increase of 93% over the previous year.
 
 2.  DIVIDEND
 
 During the year, the Directors declared an interim dividend of 5%.  In
 view of foreseeable capital expenditure in existing producing fields and
 development of discoveries in Assam and Cambay, the Directors recommend
 to the members that the interim dividend of 5% may be treated as the
 final dividend for the year 2010-2011.
 
 3.  CAPITAL EXPENDITURE
 
 During the year under review, the Company invested capital expenditure
 of INR 150 million towards development activities, including PY-1 Field
 and INR 334 million towards exploration activities covering primarily
 appraisal programme in Block AAP- ON-94/1.
 
 4.  DIRECTORS'' COMMISSION
 
 While the Compensation and Remuneration Committee has recommended an
 aggregate commission of INR 3.0 million to be distributed amongst the
 Non Executive Independent Directors, however the Independent Directors
 have chosen not to accept this commission as a gesture to support the
 Company in its immediate endeavors.
 
 5.  OPERATIONAL HIGHLIGHTS
 
 Operations review has been provided in the Management Discussion and
 Analysis Report, which forms part of this Annual Report.
 
 6.  COMPLETION OF DRILLING OF APPRAISAL WELL IN ASSAM
 
 Your Company, as Operator of AAP-ON-94/1 consortium, has successfully
 drilled and tested first appraisal well in Block AAP-ON-94/1 during the
 year. Te drill stem test has resulted in initial flow rate of
 approximately 6.50 million standard cubic feet per day (mmscfd) of
 natural gas and 140 barrels per day of condensate through a 32/64
 choke. Te Company has a 40.323% participating interest during
 exploration/appraisal period in the said Block.
 
 7.  GN-ON-90/3 BLOCK (PRANHITA GODAVARI) ARBITRATION AWARD
 
 Arbitral Tribunal, in the matter of arbitration between Company, as one
 of the claimants, and ONGC and Government, as respondents, has given
 its award in favour of the Company (claimant). Te Award has upheld the
 Company''s claims and ordered respondents to pay to the claimants the
 entire amount of encashed Bank Guarantee along with interest and cost
 of arbitration.
 
 8.  TECHNICAL SUPPORT FROM ENI (PROMOTERS OF THE COMPANY)
 
 Pursuant to the Petroleum Service Agreement (PSA) with Eni India
 Limited (Eni), your Company has received during the year under review,
 support from Eni in activities like updation of PY-1 Geological &
 Reservoir Models, seismic and structural studies in Assam, and
 continuous improvement in HSE standards besides deputation of technical
 personnel at HOEC.
 
 9.  MANAGEMENT DISCUSSION AND ANALYSIS REPORT
 
 In terms of Clause 49 of the Listing Agreement with the Stock
 Exchanges, Management Discussion and Analysis Report is appended to and
 forms part of this Annual Report.
 
 10. CORPORATE GOVERNANCE
 
 Pursuant to Clause 49 of the Listing Agreement, the report on Corporate
 Governance, along with a Certificate thereon, from a Company Secretary
 in Practice, is appended to and forms part of this Annual Report.
 
 Te Board of Directors have implemented certain provisions of the
 ''Corporate Governance Voluntary Guidelines 2009'', issued by the
 Ministry of Corporate Afairs in December 2009 in order to pursue best
 Corporate Governance practices.
 
 11. COST ACCOUNTING RECORDS
 
 Te Company has maintained cost records as required by Cost Accounting
 Records (Petroleum Industry) Rules, 2002 notified on October 8, 2002.
 
 Te Ministry of Corporate Afairs vide its Order dated May 02, 2011 has
 notified that a company engaged in petroleum operations shall get its
 cost accounting records in respect of each financial year commencing on
 or after April 01, 2011, audited by a cost auditor who shall be, either
 a cost accountant or a form of cost accountants, holding valid
 certificate of practice under the provisions of Cost and Works
 Accountants Act, 1959. In compliance with the aforesaid requirement,
 the Company has appointed a qualified practicing cost accountant for
 auditing its cost accounting records for FY 2011-12.
 
 12.  HOEC BARDAHL INDIA LIMITED (HBIL), SUBSIDIARY OF HOEC
 
 During the year under review, net income of HBIL, HOEC''s wholly owned
 subsidiary, was INR 170 million being marginally higher as against
 previous year of INR 169 million. Te net Profit was INR 13.4 million
 during the year as against INR 24 million in the previous year. Te
 decrease in the net Profit was mainly on account of higher inputs costs
 and competitive pricing policy to maintain the market share of HBIL
 products.  Te Consolidated Financial Statements presented by the
 Company include financial information of HBIL prepared in compliance
 with applicable accounting standards. Te Ministry of Corporate Afairs,
 Government of India vide its Circular No.  5/12/2007-CL-III dated
 February 8, 2011 has granted general exemption under Section 212(8) of
 the Companies Act, 1956, from attaching the balance sheet, Profit and
 loss account and other documents of the subsidiary companies to the
 balance sheet of the company, provided certain conditions are fulfilled.
 Accordingly, annual accounts of HBIL and the related detailed
 information will be made available to the shareholders of the Company
 seeking such information at any time during the office hours.  Te annual
 accounts of HBIL are available for inspection by any shareholder at the
 Company''s Registered office and at the Registered office of HBIL, at
 Vadodara.  Details of the financial information required under the
 Circular is covered in Note No. 1 under Schedule 17- Notes to the
 Consolidated Accounts.
 
 13. CONSOLIDATED FINANCIAL STATEMENTS
 
 Pursuant to Accounting Standard AS-21 and the Listing Agreement entered
 into with the Stock Exchanges, Consolidated Financial Statements for
 the financial year 2010-2011 are appended to and form part of this
 Annual Report.
 
 14. CREDIT RATING
 
 Company continues to have LA  rating assigned by ICRA to the term loan
 facilities availed by the Company. LA  is the adequate- credit quality
 rating assigned by ICRA and the rated instrument carries average credit
 risk.
 
 15.  AUDITORS'' REPORT AND DIRECTORS'' EXPLANATION
 
 In the previous Annual Report for FY 2009-10, the Company had stated
 that it had issued certain job orders to Eni for specific services,
 subsequent to Board approval. As per the Board''s directive,
 
 the Company had accrued the charges of INR 160,438,827 as on March 31,
 2010 for these services based on Eni''s invoices.  Pending receipt of
 detailed documentation supporting the charges for such services
 including independent certification by the auditors of Eni regarding the
 basis of such charges, the Auditors of the Company had then drawn a
 reference in their Audit Report of the amounts accounted for as
 development expenditure in the Financial Year ended March 31, 2010.
 
 During the year under review, Company has received substantial
 documentation including the certification from the auditors of Eni to
 support basis of the charges towards services received in FY 2009-10
 which satisfies the conditions as stipulated by the Audit Committee and
 Board and thus the Auditors'' observation for FY 2009-10 has been
 complied with.
 
 Further, during the year under review, Company has issued job orders to
 Eni for specific services subsequent to obtaining Board approval. As per
 the Board''s directive, the Company has accrued the charges of INR
 186,039,614 for these services as of March 31, 2011. Based on the
 principles established by PSA and expected to be consistently followed
 by Eni, a reference to such matter has not been made by the Auditors in
 their Audit Report for the Financial Year ended March 31, 2011.
 
 16. UNINCORPORATED JOINT VENTURES
 
 Te financial statements of the Company reflect its share of assets,
 liabilities, income and expenditure of the Joint Venture operations
 which are accounted on the basis of available information on a
 line-by-line basis with similar items in the Company''s Accounts to the
 extent of the participating interest of the Company as per various
 Production Sharing Contracts. Te financial statements of the
 Unincorporated Joint Ventures are prepared by the respective Operators
 in accordance with the requirements prescribed by the respective
 Production Sharing Contracts of the Unincorporated Joint Ventures.
 
 17.  FIXED DEPOSIT
 
 Your Company has not accepted any fixed deposits and, as such, no amount
 of principal or interest was outstanding as at the balance sheet date.
 
 18.  DIRECTORS
 
 In accordance with the Articles of Association of the Company and
 provisions of the Companies Act, 1956, Mr. Sunil Behari Mathur, Mr.
 Mukesh Butani, Mr.  Luigi Ciarrocchi and Mr.  Manish Maheshwari will
 retire by rotation and being eligible, have ofered themselves for
 re-appointment as Directors.
 
 Te Board of Directors recommends aforesaid re-appointments at the
 ensuing Annual General Meeting.
 
 Te term of appointment of Mr. Luigi Ciarrocchi as Managing Director
 will expire at the conclusion of the ensuing Annual General Meeting. He
 has declined to be re-appointed as Managing Director due to his
 pre-occupation and other business commitments.
 
 Board herein places on record its appreciation for valuable services
 made by Mr. Luigi Ciarrocchi as the Managing Director.
 
 Te term of appointment of Mr.  Manish Maheshwari will expire at the
 conclusion of the ensuing Annual General Meeting.
 
 He has given his consent to be re-appointed as Managing Director.
 
 Board, at its meeting held on May 09, 2011, has recommended the
 appointment of Mr. Manish Maheshwari as Managing Director of the
 Company.
 
 Further, Board at its meeting held on August 05, 2011 has recommended
 Mr. Sergio A. Laura to be appointed as Managing Director of the Company
 at the ensuing Annual General Meeting.
 
 Mr. Laura has given his consent for such appointment.
 
 19. EMPLOYEES STOCK OPTION SCHEME
 
 During the year FY 2010-11, an aggregate of 17,680 stock options were
 granted to Non Executive Independent Directors.  While performance
 bonus was awarded to Executive Director and employees, no stock options
 were granted to them during the FY 2010-11.
 
 Te ESOS disclosure as at March 31, 2011 is as below:
 
 PARTICULARS                                                   HOEC
                                                             EMPLOYEE
                                                           STOCK OPTION
                                                            SCHEME-2005
 
 (a)  Stock Options outstanding as at            :            34,441
 April 01, 2010
 
 (b)  Option Granted during the year             :            17,680
 
 (c)  Pricing Formula                            :               Nil
 
 (d)  Options Vested during the year             :               Nil
 
 (e)  Options Exercised during the year          :               Nil
 
 (f)   The total number of shares arising        :            17,680
 upon/after exercise of Option
 
 (g)  Options Lapsed during the year             :             3,011
 
 (h) Variation in terms of Options               :    Not Applicable
 
 (i) Money realized by exercise of Options       :               Nil
 
 (j)   Total number of Options in force as of    :            49,110
 March 31, 2011
 
 (k) Details of Options granted during the
 
 FY 2010-11:
 
 Non-Executive Directors:
 
 Mr. R. Vasudevan                                :             6,800
 
 Mr. Mukesh Butani                               :             5,440
 
 Mr. Sunil Behari Mathur                         :             5,440
 
 Managing Director/Joint Managing                :               Nil
 
 Director
 
 Senior Management Personnel                     :               Nil
 
 Any other employee who received                 :               Nil
 a grant in any one year of Options
 amounting to 5% or more of
 Options granted during that year
 
 Identified employees who were granted            :              None
 Options, during any one year, equal to
 or exceeding 1% of the issued capital
 (excluding outstanding equity share) of
 the Company at the time of grant.
 
 (l)  Diluted Earnings Per Share (EPS)           :          INR 6.15
 before exceptional items pursuant to
 issue of shares on exercise of Options
 calculated in accordance
 with Accounting Standard (AS) 20
 ''Earning Per Share'' refer note-1
 
 (m) Weighted- average exercise price            :               Nil
 
 Weighted- average fair value of                 :        INR 183.85
 options separately for options, whose
 exercise price either equal or exceed
 or is less than the market price of the
 stock on the grant date
 
 Note:
 
 1.  Under the ESOS Scheme approved by the Shareholders, the exercise of
 options has no dilution impact on the EPS.
 
 20. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE
 EARNINGS AND OUTGO
 
 Particulars required under the Companies (Disclosure of Particulars in
 the Report of the Board of Directors) Rules, 1988: A.  Conservation of
 Energy:
 
 (a) energy conservation measures taken:
 
 During the year, Company continued to focus on minimizing the energy
 consumption and the measures taken are summarised below:
 
 1. Due consideration has been given to energy consumption while
 procuring services and equipments.
 
 2.  As a responsible Corporate Citizen and in adherence to our climate
 change strategy, Company is continuously taking efective steps to
 conserve energy and to reduce methane and other Green Houses Gases
 (GHG) emissions, wherever feasible.
 
 3.  Minimized environmental impact from its activities: Many measures
 have been implemented in PY-1 Project for prevention and control of
 pollution and improvement of environmental performance.  Company
 continues with its initiatives on energy and resource conservation at
 its PY-1 facilities.
 
 4.  Te Company regularly monitored air emission sources and the ambient
 air quality and maintained emission levels within regulatory standards
 in 2010-11.
 
 5.  Solar panels at ofshore PY-1 Platform were installed to provide
 un-interrupted power supply.
 
 6.  Except the emergency lights, all lights and electrical gadgets are
 turned of after working hours and on holidays at office premises of the
 Company to help in minimising the energy consumption.
 
 (b) additional investments and proposals, if any, being implemented for
 reduction of consumption of energy: NIL
 
 (c) impact of the measures at (a) and (b) above for reduction of energy
 consumption and consequent impact on the cost of production of goods:
 
 Reduction in emission of Green House Gases (GHGs) as a result of
 minimal use of air conditioning system and reduced consumption of power
 and fuel.
 
 (d) total energy consumption and energy consumption per unit of
 production as per Form A of the annexure to the Rules in respect of
 industries specified in the schedule thereto:
 
 Te Company is neither part of the industries nor engaged in any
 activity specified in the Schedule to the Rules.  A miniscule fraction
 of gas production is being utilized for internal consumption at PY-1
 Site.
 
 B.  Research and Development (R&D): Nil
 
 C.  Technology absorption, adaptation and innovation: Various
 technology absorption, adaptation and innovation initiatives were taken
 including inter alia Managed Pressure Drilling for gas wells in PY-1,
 multi-well-single-pad approach
 
 reducing the environmental imprint in Assam, rotary steerable drilling
 and high-end-logging-while-drilling technology, customized compact well
 head equipment, and usage of environmentally friendly bio degradable
 base oil in synthetic oil-based-mud-system for drilling applications
 which is not only environmentally friendly but also re- used in
 multiple wells thus avoiding disposal of thousands of barrels of
 drilling fuids. Te use of modern horizontal well technology, well
 control technology, with multiple mechanical barriers/reservoir
 isolation were utilized during well construction.
 
 Young engineers and geoscientists were deputed for assignments relating
 to HOEC projects at Eni S.p.A, Milan with a view to gain advance
 technical expertise in geoscientific disciplines.
 
 benefit derived as a result of the above eforts: All these initiatives
 are helping the Company in improving the overall efficiency, lowering 
 the land impact and addressing environmental concerns, cost 
 efectiveness and project economics.
 
 Technology imported during last five years: NIL 
 
 D.  Foreign exchange earnings and outgo:
 
 (a) activities relating to exports; initiatives taken to increase
 exports; development of new export markets for products and services;
 and export plans: Company is engaged in production of crude oil and
 natural gas; the existing Government policies and Production Sharing
 Contracts (PSCs) to which Company is a Party, do not allow Company to
 export its production till India achieves self suficiency in domestic
 production of hydrocarbons.
 
 (b) total foreign exchange used and earned:
 
                                             INR million
 
 Particulars                             2010-2011    2009-2010
 
 A.  Forein Exchange Earnings                 0.62        10.69 
    (See Note 1)
 
 B.  Foreign Exchange Used
 
 - Cash Call Payment to Joint               444.65     5,748.47
 
 Ventures
 
 - Farm in Consideration                         0       134.87
 
 - Expenditure in Foreign
 
 Currency (See Note 2)                      266.54       192.21
 
 - Repayment of Foreign
 
 Currency Loan (See Note 3)                 453.27       243.24
 
 Total Foreign Exchange Used (B)          1,164.46     6,318.79
 
 Net Foreign Exchange Used (B-A)          1,163.84     6,308.10
 
 Notes:
 
 1.  Te above includes Interest received in foreign currency netted of
 against Borrowing Cost in accordance with the Accounting Standard 16.
 Current Year amount is NIL (Previous Year: INR 7.82 million)
 
 2.  Te above includes Interest paid in foreign currency capitalized as
 Borrowing Cost in accordance with the Accounting Standard 16. Current
 Year amount is NIL (Previous Year: INR 28.08 million)
 
 3.  Te above excludes drawdown of foreign currency loan. Current Year
 amount is NIL (Previous Year: INR 6,165 million).
 
 21.  HUMAN CAPITAL & MANAGEMENT
 
 Te Company continues to pursue best practices to develop it''s human
 capital. Te Company continuously evaluates it''s HR polices and
 practices to attract and develop talent.  Company has made its
 web-based Performance Appraisal System (PAS) fully functional which has
 now completed its one full cycle of implementation with focus on
 organizational objectives aligned with KRAs of key personnel, objective
 performance measurement, assessment of potential and identification of
 training needs for individual growth.
 
 22.  PARTICULARS OF EMPLOYEES
 
 Te particulars of employees required to be furnished pursuant to
 Section 217(2A) of the Companies Act, 1956 read with the Companies
 (Particulars of Employees) Rules, 1975 are appended hereto and forms
 part of this Report.
 
 23.  AUDITORS
 
 Te Auditors, S. R. Batliboi & Associates (SRB), will retire at the
 forthcoming Annual General Meeting. Based on the recommendation of the
 Audit Committee, the Board has, at its meeting held on May 09, 2011,
 recommended the appointment of SRB as the Statutory Auditors of the
 Company to hold office from the conclusion of the ensuing Annual General
 Meeting until the conclusion of the next Annual General Meeting.
 
 24.  DIRECTORS'' RESPONSIBILITY STATEMENT
 
 In accordance with the provisions of Section 217(2AA) of the Companies
 Act, 1956, with respect to Directors'' Responsibility Statement, it is
 hereby conformed:
 
 (i) that in the preparation of the annual accounts for the financial
 year, the applicable accounting standards have been followed along with
 proper explanation relating to material departures, if any;
 
 (ii) that the directors have selected such accounting policies and
 applied them consistently unless otherwise stated and made judgments
 and estimates that were reasonable and prudent so as to give a true and
 fair view of the state of afairs of the Company at the end of the
 financial year and of the Profit or loss account of the Company for the
 year ended on that date;
 
 (iii) that the directors have taken proper and suficient care for the
 maintenance of adequate accounting records in accordance with the
 provisions of the Companies Act, 1956, for safeguarding the assets of
 the Company and for preventing and detecting fraud and other
 irregularities;
 
 (iv) that the directors have prepared the accounts on a ''going concern''
 basis.
 
 25.  ACKNOWLEDGEMENTS
 
 Your Directors place on record their gratitude for the support and
 co-operation received from Government agencies namely, the Ministry of
 Petroleum & Natural Gas, Directorate General of Hydrocarbons,
 Government of Gujarat, Government of Tamil Nadu, Government of Assam,
 Government of Andhra Pradesh, Government of Rajasthan and the
 authorities working under them. Your Directors express their gratitude
 to the Company''s stakeholders, shareholders, business partners, and
 bankers for their understanding and support and look forward to their
 continued support in future. Your Directors value the professionalism,
 dedication and commitment of the HOEC team, which has contributed to
 the growth and performance of the Company.
 
                                       For and on behalf of the Board
 
                                                         R. Vasudevan
 
 Date: August 05, 2011                                       Chairman