Dear Shareholders
 
 The fiscal 2010-11 has been the year of achievements for your Company
 and it is indeed a privilege for me to share the same with you. First
 of all, your Company recorded highest-ever production (including the
 production share from its domestic joint ventures and the production of
 OVL) of 62.05 million tonne of oil and oil equivalent gas (MMTOE).
 Ultimate reserve accretion of 83.56 MMTOE in domestic operated fields
 has been the highest in last two decades. Your Company also made a
 significant breakthrough in Shale gas exploration.
 
 Your Company made highest ever Net Profit of Rs. 189,240 million despite
 sharing Rs. 248,924 million as under recoveries of the Oil Marketing
 Companies as per the government directives towards subsidizing
 petroleum products i.e., HSD, LPG and SKO. Net Worth of your Company
 increased to Rs. 967, 084 million; up by 6.6% over the last year. The
 aggregate dividend for FY 11 at Rs. 35 per share has been 20% more than
 the last year and the highest-ever dividend in absolute terms.
 
 In recent times, the emerging economies particularly in Asia Pacific
 region, led by China and India, emerged as the largest energy consuming
 centres in the world. India is now the fourth largest energy consumer
 after China, USA and Japan.
 
 Energy demand pressure is building up and it will be only intense in
 the future. However, supply side remains challenged; particularly for
 crude oil which accounts for largest slice (38%) in the global energy
 basket. Industry expects that it may be able to maintain demand supply
 balance with increased level of production from non-conventional oil,
 probably by 2050.
 
 The uncertainties in the oil industry due to ongoing turmoil in the
 Middle East and North African (MENA) region continues to bring
 unprecedented volatility in the industry; especially throwing the crude
 oil prices in the range of US$ 100-125 per bbl. In such high price
 regime, the growth momentum of the oil import dependent economies like
 India have taken a heavy toll. If the same scenario continues, Indian
 economy may be severely impacted.
 
 The average crude oil price for Indian basket during FY 11 has been US$
 85.09 per barrel; 22% higher than FY 10 (US$ 69.76/bbl). To make
 crucial petroleum products available at affordable prices, the
 Government had little option but to subsidize the prices. The upstream
 companies had to share this subsidy burden by 38.8%, instead of past
 practices of 33.3%, out of which ONGC had to share 82%. Our outgo on
 account of the subsidy payment of Rs. 248,920 million resulted in the net
 crude oil price realization at US$ 53.77 per bbl in FY 11 against US$
 55.94 per bbl during the last year.
 
 It is also pertinent to mention that the high oil prices always
 escalate the cost of oil field services. Thus while the cost of input
 is increasing due to high oil prices, our net realization is reducing
 due to higher subsidy burden. This double impact of rising oil prices
 seriously affects our investment capacity for upcoming cost intensive
 projects.
 
 You will appreciate that despite such challenging business environment,
 your Company has been consistently performing well. Its strategic
 pursuits maintain focus on locating and creating new hydrocarbon
 assets, prudent reservoir management, sourcing equity oil and gas,
 exploration of new sources of energy and meaningful integration in
 hydrocarbon value chain.
 
 For locating and creating new hydrocarbon assets, your Company
  intensified exploratory efforts and these efforts yielded desired
 results. During the last five years we accreted 1,124 MMTOE in-place
 volumes of hydrocarbons, making average Reserve Replacement Ratio (3P
 reserves) 1.53 for this period, which is one of the most important
 parameters for sustaining the growth of your Company.
 
 During FY’11, reserves of 63 major domestic fields, operated by your
 Company and having 80.6% of the total 3P reserves of 1211.39 MMTOE were
 audited by independent hydrocarbon reserve consultants. The overseas
 reserves of OVL for all its assets were also audited, and the 3P
 reserves were found to be more than what was estimated in-house.
 
 Your Company made some significant discoveries in the pre-NELP blocks
 of East Coast like G-1 & GS-15, G-4 & GS-29, Vashishtha and S-1. Some
 discoveries in NELP blocks like KG-DWN-98/2 in KG Basin and MN-
 DWN-98/3 and MN-OSN-2000/2 blocks in Mahanadi Basin are also
 significant. Most of these are gas discoveries and efforts are on to
 monetize them. As far as discoveries in pre- NELP blocks in East Coast
 are concerned, your Company is planning to develop them as clusters
 through common facilities to optimize cost.
 
 DOC (Declaration of Commerciality) for the KG- DWN-98/2 along with
 adjoining discoveries in nomination blocks and MN-DWN-98/3 has already
 been submitted to DGH with request for permission to drill additional
 appraisal wells that would help us firming up the reserves as well as
 our development plan.
 
 14 major fields, which contribute more than 71% of the total production
 of ONGC, are 25-50 years of vintage.  Improving recovery factor of
 these fields with prudent reservoir management practices and induction
 of new technology has been the focus area of your Company.
 
 Out of 21 Improved Oil Recovery (IOR)/ Enhanced Oil Recovery (EOR) and
 redevelopment schemes for improving recovery factor, 15 schemes have
 already been completed and six are under implementation. As of 31st
 March, 2011, your Company has made an investment of Rs. 257.97 billion in
 these schemes which has yielded desired results.
 
 Development of new and marginal fields has also been the focus area of
 your Company. We have taken up 10 major projects for development of new
 & marginal fields and one project for additional development of D-1
 field with estimated investment of Rs. 248.90 billion.  The fields under
 development are- C-Series, B-22 cluster, B-193 cluster, B-46 cluster,
 North Tapti gas field, Cluster-7, BHE & BH-35, WO-16 cluster, G-1 &
 GS-15 and SB-14. These fields are expected to be on stream by 2013-14.
 
 ONGC Videsh Ltd (OVL), a 100% subsidiary of ONGC, has established
 itself as our growth vehicle by meaningful expansion in global E&P
 business. OVL remains focused on expanding its E&P portfolio and its
 equity oil sourcing is increasing every year. During FY’11, it produced
 9.45 million tonne of oil and oil equivalent gas; the highest-ever.
 Presently it has 33 projects in 14 countries.
 
 Your Company achieved a breakthrough in Shale gas exploration in its
 maiden R&D Pilot venture in Damodar Basin at Durgapur, West Bengal. We
 are planning to take up exploration in other potential Shale basins
 like - Cambay, Krishna Godavari, Cauvery and Assam-Arakan.
 
 After successful commissioning of a 50 MW Wind Farm in Gujarat, your
 Company is setting up another wind farm of 102 MW capacity in
 Rajasthan. Besides that, ONGC Energy Centre (OEC) is pursuing several
 projects like, Thermo-Chemical Reactor for Hydrogen generation,
 Bio-conversion of Lignite to methane, Solar Thermal engine, exploration
 and exploitation of Uranium reserves and LED Project.
 
 The refining capacity of Mangalore Refinery & Petrochemicals Ltd
 (MRPL), a subsidiary of your Company is being enhanced to 15 MMTPA and
 it is expected that progressive commissioning may begin from January
 2012, as per schedule.
 
 Two petrochemical projects, ONGC Petro-additions Limited (OPaL) and
 ONGC Mangalore Petrochemicals Limited (OMPL) promoted by your Company
 are progressing well and expected to be commissioned in 2012 and 2013
 respectively.
 
 726.6 MW (363.3 MW x 2 units) gas based Combined Cycle Power Plant
 (CCPP) is being set up at Palatana, Tripura by ONGC Tripura Power
 Company Ltd.  (OTPC), an SPV promoted by your Company. The project aims
 to monetize the idle gas asset in the state of Tripura. This is a
 unique project for which all 90 packages of Over-dimension Cargos (ODC)
 are being transported through Bangladesh. Despite logistical
 challenges, the first GT (weighing about 300 tonnes) along with its
 ODCs has been successfully transported and expected to be commissioned
 as per schedule i.e.  March 2012.
 
 Good Corporate Governance has been the focus area of your Company. We
 have started implementing the voluntary guidelines on Corporate
 Governance issued by Ministry of Corporate Affairs. At the same time, a
 comprehensive Enterprise-wide Risk Management (ERM) framework has also
 been put in place.
 
 You will be happy to learn that besides the conferment of ‘Maharatna’
 status to your Company by the Hon’ble President of India in April,
 2011, another significant achievement in the last year has been the
 recognition by the Transparency International. As per the “Promoting
 Revenue Transparency (PRT) Report 2011” by Transparency International
 and Revenue Watch, ONGC occupies the Top rank among 44 global oil and
 gas companies in the world as far as Organizational Disclosure
 Practices are concerned. You will agree that this is a genuine
 international recognition of our ethical and transparent business
 practices.
 
 The first assured sustainability report of your Company was released on
 the day of last AGM, that is 23rd September, 2010. This year, we are
 working aggressively to bring out the second issue conforming to
 international standards and confirming our commitment to sustainable
 growth.
 
 The Corporate Social Responsibility (CSR) initiatives of your Company
 continues to primarily focus on education, health, entrepreneurship
 development, women’s empowerment, girl child development and water
 management. While our dedication in this front has brought us millions
 of smiles, it has also made us a distinct Company that cares not only
 for its shareholders but all stakeholders, especially the
 underprivileged section.
 
 You will also be pleased to know that as per a survey conducted by
 Business Today (6th February, 2011 issue); your Company has been ranked
 as the ''Best Employer to Work For'' among all PSUs as well as the ‘Best
 Employer to Work For’ in the Core Sector, including private and public.
 
 Your unstinted support and patronage has always given us confidence to
 achieve new milestones at performance fronts on continuous basis. I am
 sure the management of your Company will continue to receive the same,
 encouraging us to maintain our commitment for assured sustainable
 growth in the years to come.
 
 With Best Compliments,
 
 (A.K.Hazarika)
 Chairman & Managing Director