Oil and Natural Gas Corporation

Dear Shareholder,
 
 Let me at the outset greet you with the pleasant news that your Company
 has come out with laudable improved performance, despite various odds
 against it. The highest ever Sales Revenue of Rs. 601,370 million and
 Net Profit of Rs.  167,016 million during 2007-08 reflect an increase
 of 5.7% and 6.8% respectively as compared to the previous financial
 year. We are pleased to share these upsides with you and accordingly a
 final dividend of Rs. 14 per share (140%), has been recommended making
 it the highest aggregate dividend at Rs 32 per share (320%).
 
 The fundamentals of the global oil and gas industry have changed
 radically during the last one year. Demand growth for oil and gas has
 outstripped supply growth largely on account of the unrelenting
 appetite of growing economies. As a consequence, the demand-supply axis
 is getting skewed lending momentum to the north-bound crude prices.
 This is a major concern that the economies need to address on first
 priority.
 
 The positive side of this situation is that the industry is now poised
 to invest substantially in exploration and development of new oil and
 gas assets. The hunt for new oil is headed towards unconventional
 sources and new frontiers, like deepwater, ultra-deepwater and even the
 frigid Arctic environs. Sizeable success has come from Brazil, West
 Africa and East Coast of India. These results are substantiating the
 hope that large pools of hydrocarbon are yet to be discovered subject
 to commitment of adequate investment and technology to exploration.
 
 In this context, your Company has also moved ahead towards seeking new
 E6P solutions. In recent years we intensified exploratory efforts and
 have made significant discoveries in Deepwater and Ultra-deepwater
 provinces in the East coast. This focus has enabled us to maintain a
 Reserve Replacement Ratio (RRR) of more than one consistently for the
 past four years. Our overseas acquisitions have also increased to 38
 projects in 18 countries.
 
 Production of your Company including that from Joint Ventures and
 overseas assets now stands at an all-time high of 61.85 MTOE. This is a
 result of our constant endeavour to adopt best reservoir management
 practices and systematically bringing new assets on-stream in the
 shortest possible time. Our proactive approach towards reservoir
 management has enabled us to arrest the decline in domestic mature
 fields through innovative technological solutions for our Improved Oil
 Recovery (IOR) / Enhanced Oil Recovery (EOR) schemes. Fast-track
 monetization of new and marginal fields has also begun to pay-off.
 
 We are making systematic investment to fuel growth, not only in our
 core operations of Exploration and Production, but also for opening up
 new revenue streams from other energy sources such as Coal Bed Methane
 (CBM) and Underground Coal Gasification (UCG). As you are aware, the
 ONGC Energy Centre is dedicated to holistic research on alternate
 energy sources. A number of projects are in incubation and have the
 potential to open up new avenues of growth beyond hydrocarbons. Our
 investments in value multiplier projects in petrochemicals, LNG, SEZ
 and power will also provide substantial upside to the revenue stream in
 the future.
 
 It may be appreciated that your Company is the torchbearer in seeking
 energy security for the nation and in providing affordable energy to
 fuel our growth. We attach great importance to this national duty and
 are constantly seeking new opportunities domestically and overseas to
 meet this objective. Of course, as a responsible Corporate, your
 Company is ensuring that this objective is met through environmentally
 sustainable solutions. You will be pleased to learn that your Company
 received the Earth Care Award for excellence in climate change
 mitigation and adaptation. It is also the only PSU Company that has
 four CDM projects registered with the United Nations Framework
 Convention on Climate Change (UNFCCC).
 
 With a view to ensuring sustained growth and meeting the future energy
 needs of the country, your Company has adopted a multi-pronged
 approach. It is investing in new and marginal fields so that these are
 brought into production at the earliest. As per the initial reports,
 your Company may get 20 blocks out of 27 blocks for which it submitted
 bids for the VII round of the NELP for which bids were closed on 30th
 June, 2007. Your company is investing heavily in Mumbai High South
 redevelopment - Rs. 63,392 million (USD 1,584 million) and envisages to
 invest in deep water and ultra- deepwater province in the East Coast in
 excess of Rs. 200,000 million (USD 5 billion). Through its subsidiary
 OVL, the Company is aggressively scouting and taking up acreages
 overseas to increase the footprint of brand ONGC as well as to increase
 overall profitability.
 
 In addition, through IOR and EOR measures an investment of Rs. 85,630
 million is planned in the near future. Moreover development of Mangala,
 Aishwariya, Raageshwari and Saraswati fields in Barmer Basin of
 Rajasthan, in which your Company has 30% share, is also on the anvil
 with an estimated investment of USD 450 million(Rs. 18,000 million)
 apart from revamping the aged surface facilities of North-Eastern state
 of Assam through Assam Renewal Project (ARP).  These are apart from its
 forays in Underground Coal Gasification (UCG), Coal Bed Methane (CBM),
 Wind Farms and Helium recovery from Natural Gas. Technological
 collaboration, wherever necessary, is being sourced from the best in
 the world.
 
 The Company is about to sign an MoU with Uranium Corporation of India
 Ltd, so that the traces of uranium discovered by ONGC during its E&P
 activities are pursued as a formal exploration venture to address the
 energy security concerns of the economy.
 
 Some major financial highlights of 2007-08 which are worth noting are:
 
 - The aggregate sales revenue of the ONGC Group of companies crossed
 Rs. One Trillion mark during the year- an increase of 18% (Rs. 1018,349
 million in 2007-08 against Rs. 862,762 million in 2006-07) and Net
 Profit of the Group registered a growth of 11.8% (Rs. 198,723 million
 in 2007-08 against Rs. 177,696 million in 2006-07).
 
 - These results are inspite of the fact that your Company continues to
 absorb the under-recovery of Oil Marketing Companies (OMCs) through
 discount on Crude Oil, LPG and SKO, which was of the order of Rs.
 220,009 million for the year.
 
 As we look to the future, it is strewn with opportunities. Even though
 your Company is committed to concentrate into its core business area of
 E6P, it shall continue to capture growth opportunities in the
 integration projects and retain its leadership position in the Energy
 Sector of the country.
 
 Your consistent support gives us the confidence to live upto our motto
 - Courage to Explore, Knowledge to Exceed, Technology to Excel.
 
 
 R S Sharma 
 Chairman & Managing Director