Oil and Natural Gas Corporation

The behalf of the Board of Directors of your Company, it is my privilege
 to present the 15th Annual Report and Audited Statement of Accounts for
 the year ended 31st March, 2008, together with the Auditors Report and
 Comments on the Accounts by the Comptroller and Auditor General (C&AG)
 of India.
 
 At the outset, I must congratulate you as your Company has been the
 first and only Indian company to be enlisted in Fortunes Most Admired
 Companies 2007. The Fortune Global 500, 2008 list has ranked your
 Company at 335, 34 notches higher than the previous year.
 
 The fiscal 2007-08 was yet another year of growth and success for your
 Company, which along with other group companies, excelled in all its
 endeavours; particularly in the core activity of Exploration and
 Production (E&P) of Crude Oil and Natural Gas. Your Company maintained
 a Reserve Replacement Ratio (RRR) of more than one, for the fourth
 consecutive year. During the year, your Company registered RRR at 1.32,
 with Ultimate reserve accretion (3P reserves) of 63.82 Million Metric
 Tonnes (MMT) against production of 48.28 MMT of Oil & Oil Equivalent
 Gas (0+OEG).
 
 Your Company accreted 182.23 MMT of Initial In-place reserves, the
 highest in last decade and 7% more than the last years accretion of
 169.52 MMT, with 33 discoveries (Oil: 13, Gas: 20) spread across Indian
 sedimentary basins against 22 discoveries during 2006-07. Exploratory
 performance during ensuing fiscal 2008-09 also started on a high note
 with 11 discoveries in the first quarter of current fiscal.
 
 During the year, O+OEG production of your Company, including the
 production from domestic joint ventures and overseas assets, was the
 highest-ever at 61.85 MMT, 1.84% more than the previous year. ONGC
 maintained the O+OEG production level at 48.28 MMT, marginally (0.4%)
 lower than last year, against the natural decline of mature fields.
 However, the oil and gas production from overseas assets increased by
 10.7% and O+OEG production from domestic joint ventures also increased
 by 11.2%.
 
 The augmenting and enhancing efforts taken up by your Company, through
 Improved Oil Recovery and Enhanced Oil Recovery (IOR/EOR) schemes,
 implemented since 2001, have helped to arrest production decline in the
 mature fields. Twelve IOR/ EOR schemes have been completed and six
 projects are under implementation with an investment of Rs. 85,630
 million. Out of the 165 marginal fields, 143 are either monetized or
 under delineation or under monetization on service contract. Remaining
 22 fields will be put on production by offer under new marginal field
 policy. The new field Vasai East discovered in Western Offshore has
 commenced production from 7th July, 2008.
 
 Your Company launched the second phase of Mumbai High South
 redevelopment on 19th April, 2008, with an investment of Rs. 63,392
 million (USD 1,584 million).  
 
 Last year, your Company had opened up ultra- deepwater province in the
 country by making first discovery at a water-depth of 2,841 metres in
 NELP block KG-DWN-98/2. So far, your Company has made 10 discoveries in
 the NELP Block KG-DWN-98/2 and 3 (Fig.3) discoveries in the adjoining
 PEL acreage KG- 0S-DW4. Appraisal plan for development of these blocks,
 which was submitted in October, 2007, has now been approved by Director
 General of Hydrocarbons (DGH).  Your Company will develop these fields
 with an approximate investment of over Rs.  200,000 million (USD 5
 billion); production is expected to commence from 2013.
 
 Your Company is also participating with M/s Cairn Energy India Pty.
 Ltd. (CEIL) for development of Mangala, Aishwariya,
 
 Raageshwari and Saraswati fields in Barmer Basin of Rajasthan, in which
 your Company has 30% share, with estimated investment of USD 450
 million(Rs. 18,000 million). Your Company has also launched Assam
 Renewal Project (ARP) for revamping of aged surface facilities of brown
 fields in the north-eastern state of Assam.
 
 Your Company is setting up a 3,000 bopd Mini Refinery at Gandhar in
 Gujarat with an estimated investment of Rs.  640 million (USD 16
 million) which is expected to be commissioned by August 2009.
 
 The foundation stone for Rajiv Gandhi Urja Bhavan which will house
 ONGC Energy Centre, a state-of-the-art R&D centre for holistic
 research in alternate energy sources beyond hydrocarbons, was laid by
 Honble Prime Minister Dr. Manmohan Singh on 20th August, 2007 at New
 Delhi.
 
 Your Company appointed DeGolyer and MacNaughton (D&M) Canada Ltd.
 during May 2007 for Post Drill Analysis of 579 exploratory wells
 drilled during Xth Five Year Plan period (2002-07). D&M has submitted
 its interim report for first 350 wells drilled during 2002-05. Out of
 these 350 wells, 348 wells have been validated as having satisfactory
 exploration process.
 
 Government launched the VII round of the NELP on 13th December, 2007,
 offering 57 blocks (19 Deep-water, 9 Shallow-water and 29 On-land
 blocks). As per early indications your Company may get 20 blocks out of
 27 blocks for which it submitted bids.
 
 New sources
 
 Your Company is setting up a 50 MW Wind Farm in Gujarat consisting of
 34 wheeling units with an investment of Rs. 3,070 million.  Power will
 be utilized in nearby ONGC installations. All 34 units have been
 erected, 10 have started wheeling power.
 
 The first CBM development well for CBM was spudded in Parbatpur pilot
 area on 1st December, 2007 near Bokaro Steel City of Jharkhand;
 production is likely to commence from April 2009.
 
 Under UCG exploration, data from fifteen different sites were sent to
 Skochinsky Institute of Mining, Russia for comprehensive study. Based
 on that study, Vastan Mine in Gujarat has been selected as pilot
 project. 18 bore holes were drilled to know the extension of lignite
 which helped in preparing detailed geological maps and Hydro geological
 studies.  Finalization of agency for engineering and construction of
 UCG pilot is in process.
 
 National Gas Hydrate Core Repository has been established at ONGCs
 Institute of Engineering and Ocean Technology (IEOT) near Mumbai for
 long-term preservation of both hydrate and non-hydrate bearing cores
 under cryogenic and refrigerated conditions.
 
 Your Company, in association with Saha Institute of Nuclear Physics and
 Department of Science and Technology, has installed Indias first pilot
 plant for Helium recovery from natural gas at Kuthalam, Tamil Nadu.
 
 1.  Financial ResuIts
 
 Your Company scaled a new milestone to record a Net Profit of Rs.
 167,016 million (up 6.77% from Rs. 156,429 million in 2006-07).
 
 During the year under review, your Company registered a gross revenue
 of Rs.  615,426 million, (up 4.21% from Rs. 590,575 million in year
 2006-07) despite sharing under recoveries of Rs. 220,009 million (Rs.
 170,239 million in 2006- 07) of the Public Sector Oil Marketing
 Companies by way of discounts in the price of Crude Oil, Domestic LPG
 and PDS Kerosene (SKO), on administrative instructions of the
 Government of India.
 
 Summary 
 
                                                     (Rs. in million)
                                       2007-08                2006-07
 
 Gross Revenue                         615,426                590,575
 
 Gross Profit                          351,912                335,431
 
 Less:
 
 Interest                        590                  215
 
 Exchange variation           (1,070)                 177
 
 Depreciation, Depletion
 & Amortisation               98,416                93265
 
 Impairment                     (437)               1,730
 
 Provision / writeoffs         2,067                3,342
 
 Provision for Taxation
 (including deferred tax
 Liability of Rs. 8,481 
 million)                     85,330   184,896     80,273     179,002
 
 Profit after tax                      167,016                156,429
 
 Appropriations
 
 Interim Dividend                       38,500                 38,500
 
 Proposed Final Dividend                29,944                 27,805
 
 Tax on Dividend                        11,632                 10,125
 
 Transfer to General Reserve            86,940                 79,999
 
 Total                                 167,016                156,429
 
 2.  Dividend
 
 Your Company declared an interim dividend of Rs. 18 per share (180%) in
 December, 2007. The Board of Directors have now recommended the final
 dividend of Rs. 14 per share (140%), making the aggregate dividend at
 Rs. 32 per share (320%), against previous years Rs. 31 per share
 (310%). The total dividend will absorb Rs. 68,444 million besides Rs.
 11,632 million as tax on dividend.
 
 3.  Production & Sales
 
 Highlights of production and sales of Crude Oil, Natural Gas and
 Value-added Products:
 
                                    Unit             Production
                                                2007-08      2006-07
 
 Direct
 
 Crude Oil                          MMT          27.93*       27.94*
 
 Natural Gas                        BCM          25.12**      24.88**
 
 C2-C3                           000 MT           520          549
 
 LPG                             000 MT          1035         1023
 
 Naphtha/ARN                     000 MT          1469         1450
 
 SKO                             000 MT           167          155
 
 Others
 
 Sub-total
 
 Trading
 
 Motor Spirit                    000 KL
 
 SKO                             000 KL
 
 HSD                             000 KL
 
 Sub-total
 
 Total
 
          Sales                   Value (Rs. in million)
 2007-08         2006-07        2007-08         2006-07
 
 24.08             24.42        386,803         372,212
 
 20.43             20.30         71,780          72,078
 
 520                 548          9,291           9,095
 
 1037               1033         20,169          14,866
 
 1442               1442         43,848          37,907
 
 168                 156          3,374           2,827
 
                                    937             654
 
                                 536,202        509,639
 
 232                 121           9,159          4,530
 
 308                 563           7,401         12,926
 
 1539               1394          48,608         42,017
 
                                  65,168         59,473
 
                                 601,370       5,69,112
 
 * includes 1.99 MMT (Previous year 1.89 MMT) from Joint ventures.
 
 ** includes of 2.79 BCM (Previous year 2.44 BCM) from Joint ventures
 
 4.  Oil & Gas Reserves
 
 ONGC has made voluntary disclosures in respect of Oil & Gas Reserves,
 conforming to SPE classification 1994 and US Financial Accounting
 Standards Board (FASB-69). ONGC has added 110.21 Million Metric Tonnes
 (MMT) of ultimate reserves of oil and oil-equivalent gas (O+OEG) during
 the year under review from its domestic and overseas assets (OVL).
 
 Ultimate Reserve Accretion O+OEG                       (in MMT)
 
 Year                Domestic            Domestic             Total
                     Assets                JVs                Domestic
                                      (ONGCs Share)          Reserve
                      (1)                  (2)              (3)=(1)+(2)
 
 2005-06              51.53                0.12                51.65
 
 2006-07              65.56                4.77                70.33
 
 2007-08              63.82               -0.34                63.48
 
    Foreign                Total
    Assets
 (OVLs Share)
     (4)                (5)=(3)+(4)
 
   16.72                   68.37
 
    9.96                   80.29
 
   46.73                  110.21
 
 5.  Statement of Reserve Recognition Accounting 
 
 1.  The Concept of Reserve Recognition Accounting attempts to recognize
 income at the point of discovery of reserves, and seeks to demonstrate
 the intrinsic strength of an organization with reference to its future
 earning capacity in terms of current prices for income as well as
 expenditure. This information is based on the estimated net proved
 reserves (developed and undeveloped) as determined by the Reserves
 Estimates Committee.
 
 2.  As per FASB-69 on disclosure about Oil and Gas producing
 activities, publicly traded enterprises that have significant Oil and
 Gas producing activities are to disclose with complete set of annual
 financial statements, the following information, considered to be
 supplemental information:
 
 a) Proved Oil and Gas reserve quantities
 
 b) Capitalized costs relating to Oil and Gas producing activities
 
 c) Cost incurred for property acquisition, exploration and development
 activities
 
 d) Results of operations for Oil and Gas producing activities
 
 e) A standardized measure of discounted future net cash flows relating
 to proved Oil and Gas reserve quantities.
 
 3.  Your Company has disclosed information in respect of (a) and (d)
 above in the Annual Financial Statements.
 
 In respect of item (e) above, your Company has made voluntary
 disclosure on standardized measure of discounted future net cash flows
 relating to proved Oil and Gas reserves at annexure-b
 
 6.  Financial Accounting
 
 The Financial Statements have been prepared in accordance with the
 Generally Accepted Accounting Principles (GAAP) and in compliance with
 all applicable Accounting Standards (AS-1 to AS-29) and Successful
 Efforts Method as per the Guidance Note on Accounting for Oil & Gas
 Producing Activities issued by The Institute of Chartered Accountants
 of India (ICAI) and provisions of the Companies Act, 1956.
 
 7.  Internal Control System
 
 The Company has well established and efficient internal control system
 and procedures. Your Company has already implemented SAP R/3 system for
 integration of various business processes across the organization. The
 Company also has well defined financial powers of various executives in
 its Book of Delegated Powers. The Company has in-house Internal Audit
 Department commensurate with its size. Audit observations are
 periodically reviewed by the Audit & Ethics Committee of the Board and
 necessary directions are issued wherever required.
 
 8.  Subsidiaries
 
 (i) ONGC Videsh Limited (OVL)
 
 ONGC Videsh Limited (OVL), the wholly-owned subsidiary of your Company
 engaged in overseas E&P activities, continued to maintain robust growth
 during 2007-08. It acquired 11 E&P projects in 6 countries during the
 year.
 
 ONGC Videsh Ltd. (OVL) signed a joint venture agreement with Petroleous
 de Venezuela SA (PdVSA) on 8th April, 2008 at Caracus to take 40% stake
 in the San Cristobal oilfield located in Orinoco Heavy Oil belt of
 Venezuela; PdVSA will hold the remaining 60% stake. The agreement was
 signed by Mr. R.S.Butola, MD, OVL and Mr. Eleogao Del Pino, MD, PdVSA
 during the visit of Mr. Murli Deora, Honble Minister of P&NG, GOI.
 Under the agreement OVL and PdVSA will develop the field from its
 current production level of 20,000 bbl/d to 40,000 bbl/d.
 
 The company now has participation in 38 projects in 18 countries. Of
 the projects acquired, NEMED Block in Egypt offshore is under appraisal
 phase; Blocks AD-2, AD-3 and AD-9 in Myanmar offshore; Blocks RC-8,
 RC-9 and RC-10 in Colombia offshore; Block ES-M-470 and Block SM-1413
 in Brazil offshore; MTPN Block in Congo offshore and Block 11-12 in
 Turkmenistan offshore are under exploration phase. The Turkmenistan
 Block is held through ONGC Mittal Energy Limited (OMEL), a joint
 venture of OVL and Mittal Investment Sarl.
 
 Out of 38 projects, OVL is operator in 18 projects and joint operator
 in 2 projects in 11 countries. OVL is currently producing oil and gas
 from Greater Nile Oil Project and Block 5Ain Sudan, Block 6.1 in
 Vietnam, Al Furat Project in Syria, Sakhalin-I Project in Russia and
 Mansarovar Energy Project in Colombia.  Block BC-10 in Brazil is
 currently under development with production expected to begin in
 2009-10. Block A-1 and A-3 in Myanmar, North Ramadan Block and NEMED in
 Egypt and Farsi Offshore Block in Iran have discoveries and appraisal
 work is being carried out. The remaining projects are in exploration
 phase.
 
 OVLs share in production of oil and oil-equivalent gas (O+OEG),
 together with its wholly-owned subsidiaries ONGC Nile Ganga B.V. and
 ONGC Amazon Alaknanda Limited, increased from 7.95 MMTOE to 8.80 MMTOE,
 up 10.7%.  Consolidated gross revenue of OVL increased from Rs. 118,610
 million to Rs. 169,540 million, up 42.93% and consolidated net profit
 from Rs. 16,633 million to Rs. 23,971 million, up 44.12 %.
 
 Direct Subsidiaries of OVL :
 
 a) ONGC Mile Ganga B.V. (ONGBV):
 
 ONGC Nile Ganga B.V. (ONGBV) is engaged in E&P activities in Sudan,
 Syria and Brazil. ONGBV holds 25% Participating Interest (PI) in
 Greater Nile Oil Project (GNOP), Sudan; the other partners in this
 project are National Oil Company (NOC) of China (with 40% PI), a
 Malaysian NOC (with 30% PI) and a NOC of Sudan (with 5% PI). ONGBVs
 share in oil production from GNOP was 2.969 MMT during 2007-08.
 Besides, ONGBV also holds PI in AFPC Syrian producing asset and
 deepwater discovered Block BC-10 and exploratory Blocks ES-M-470 and
 Block SM-1413 in Brazil.
 
 b) ONGC Narmada Limited (ONL):
 
 ONGC Narmada Limited (ONL), a wholly-owned subsidiary of OVL is engaged
 in E&P activities in Nigeria. ONL holds 13.5% PI in deep water
 exploration Block-2 in Nigeria-Sao Tome & Principe, Joint Development
 Zone (JDZ). The Chinese NOC, Sinopec is operator with 28.67% PI.
 
 c) ONGC Amazon Alaknanda Limited (OAAL):
 
 ONGC Amazon Alaknanda Limited (OAAL), a wholly-owned subsidiary of OVL
 incorporated in Bermuda, is engaged in E&P activities and holds stake
 in E&P projects in Colombia, through Mansarovar Energy Colombia Limited
 (MECL), a 50:50 JV company with Sinopec of China. MECL is currently
 producing oil at 24,000 bbls/d.  During 2007-08, OVLs share of
 production was about 0.349 MMT of oil.
 
 Joint Venture of OVL
 
 d) ONGC Mittal Energy Limited (OMEL)
 
 OVL along with Mittal Investments Sarl (MIS) promoted ONGC Mittal
 Energy Limited (OMEL), a joint venture company incorporated in Cyprus.
 OVL and MIS holds 98% shares of OMEL in the ratio of 51 (OVL): 49(MIS)
 with 2% shares held by SBI Capital. OMEL holds PI in the AFPC Syrian
 Assets through ONGBV, exploration Blocks OPL279 and OPL285 in Nigeria
 and Block 11 -12 in Turkmenistan.
 
 (i) Manga lore Refinery & PetrochemicaIs Limited (MRPL)
 
 Your Company continues to hold 71.62% equity stake in MRPL, which has
 achieved new heights in excellence in both financial and operational
 performance during the year.
 
 In view of the improved performance MRPL Board has recommended the
 dividend of 12%.
 
 MRPLs launched its brand HiQ through its first retail outlet at
 Maddur, Karanataka.
 
 MRPL Refinery was awarded prestigious Jawaharlal Nehru Centenary Award,
 for Energy conservation in refinery for the year 2006-07, instituted by
 the Ministry of Petroleum and Natural Gas, for the fourth consecutive
 year.
 
 MRPL continues to be a major exporter of petroleum products with
 exports valuing Rs. 111,410 million during 2007-08 which is 41% of
 total dispatches.  MRPL has been granted status of a Premier Trading
 House by DGFT, Govt, of India.
 
 MRPL and Shell Gas B.V., Netherland entered into an agreement on 5th
 February, 2008 to form a joint venture company Shell MRPL Aviation
 Fuel and Services Private Limited for marketing of Aviation Turbine
 Fuel to both Domestic and International airlines at Indian Airports.
 
 Product supply agreement with STC, Mauritius for export of Petrol,
 Diesel, Aviation Turbine Fuel and Fuel Oil valuing US$ 2,000 million
 (approx.) has been renewed for a further period of three years starting
 from August 2007.
 
 MRPLs Phase III Refinery Project is progressing as per schedule.
 
 MRPL has acquired the Nitrogen manufacturing facilities from Essel
 Mining Industries Limited (formerly, Hindustan Gas Industries Ltd.),
 located in the close proximity of refinery at Mangalore, so as to
 ensure self sufficiency for this critical input.
 
 Joint Ventures of MRPL
 
 Kakinada SEZ Pvt. Ltd.  (KSEZ) and Kakinada Refinery and Petro-
 chemicals Pvt. Ltd (KRPL) Considering all circumstances and factors
 affecting the steering of these two projects, ONGC and MRPL have
 decided not to continue as equity partners in these two Joint Ventures
 and have accordingly withdrawn with effect from 23rd June, 2008. ONGCs
 proposed equity participation, through MRPL, was 46% in KRPL and 26% in
 KSEZ.
 
 9.  Exemption in respect of Annual Report of Subsidiaries and
 Consolidated Financial Statement
 
 In terms of approval granted by the Central Government under Section
 212(8) of the Companies Act, 1956 copy of the Balance Sheets, Profit
 and Loss Accounts, Reports of the Board of the Directors and Reports of
 the Auditors of the Subsidiary Companies have not been attached to the
 Accounts of the Company. The Company will make these documents/details
 available upon request by any member of the Company interested in
 obtaining the same. Annual Reports of MRPL and OVL are available on
 website www.mrpl.co.in and www.ongcvidesh.com respectively.
 
 In accordance with the Accounting Standard AS-21 on Consolidated
 Financial Statements read with Accounting Standard AS-23 on Accounting
 for Investments in Associates and with Accounting Standard AS-27 on
 Financial Reporting of Interests in Joint Ventures, Audited
 Consolidated Financial Statements for the year ended 31st March, 2008
 of the Company and its subsidiaries form part of the Annual Report and
 Accounts.
 
 10, Joint Ventures/ Associates
 
 (1) Petronet LNG Ltd. (PLL)
 
 ONGC has 12.5% equity stake in PLL. PLL has started expansion of Dahej
 LNG terminal to 10.0 MMTPA capacity and also setting up LNG Receiving
 and Re-gasification Terminal of 5.0 MMTPA at Kochi. The turnover of PLL
 during 2007-08 is Rs. 65,553 million (previous year Rs. 55,089 million)
 and net profit is Rs. 4,747 million (previous year Rs. 3,133 million)
 PLL has declared a dividend of 15% (previous year 12.5%).
 
 (ii) ONGC Tripura Power Company Pvt. Ltd. (OTPC)
 
 Your Company has promoted ONGC Tripura Power Company Pvt. Ltd. (OTPC)
 which is setting up a 726.6 MW (363.3x2) Combined Cycle Gas Turbine
 based Power Generation project . This would facilitate monetization of
 the idle gas reserves of ONGC in Tripura. ONGC has 50% share in OTPC
 along with Government of Tripura (0.5%), IL&FS (26%) and balance 23.5%
 by Financial Institutions (Fl) and other investors. Your Company placed
 Notice of Award on 23rd June, 2008 to M/s BHEL for generation project.
 
 (iii) Pawan Hans Helicopters Ltd. (PHHL)
 
 Your Company, ONGC, has 21.5% equity stake in PHHL, which provides
 helicopter support for its offshore operations. PHHL has an operational
 fleet of 36 helicopters, me PHHL was successful in providing all the 12
 Dauphin N & N3 helicopters fully compliant with AS-4 as per the new
 contract with ONGC by December 2007. PHHL earned a net profit of
 Rs.95.2 million in the year 2006-07 (previous year Rs. 473.9 million).
 
 (iv) Petronet MHB Ltd. (PMHBL)
 
 ONGC has equity stake of 28.76% in PMHBL, which owns and operates a
 pipeline between Mangalore - Hassan - Bangalore and provides direct
 evacuation facility of MRPL products. The company has achieved a
 throughput of 2.141 MMT which is 50% higher than that in 2006- 07. The
 total revenue of Rs 57,640 million is 48.91% higher as compared to
 2006-07. As per audited results for the year 2007-08, the company has
 made a net profit of Rs. 3.841 million, for the first time since
 inception.
 
 (v) Dahez SEZ Ltd.(DSL)
 
 Your Company with 23% equity stake along with GIDC (26%) is promoting a
 Special Economic Zone (5EZ) at Dahej in the coastal Gujarat.  SEZ has
 been formally approved by Ministry of Commerce and Industry and Gazette
 notification issued. Master Plan for the SEZ has also been finalized.
 ONGC, as the anchor tenant, is implementing its C2+ extraction plant,
 the product of which will be utilized as feedstock to OPaL.
 
 (vi) ONGC Petro-additions Ltd. (OPaL)
 
 OPaL, an SPV promoted by ONGC, with 26% stake and management control,
 and GSPC with 5% holding, is implementing a mega petrochemical complex
 as an anchor industry in Dahej SEZ. The project has been reconfigured
 according to current market demand-supply dynamics with estimated
 investment of Rs. 124,400 million. Contract for site infrastructure
 development has already been awarded. Tenders for Dual Feed Cracker
 unit and Project Management Consultancy are under finalization. Project
 office has been established at Vadodara on 28th June, 2008.
 
 (vii) Mangalore SEZ Ltd. (MSEZ)
 
 MSEZ was incorporated to develop the Special Economic Zone at Mangalore
 through a SPV. As per the proposed equity structure ONGC will hold 26%,
 KIADB 23% and IL&FS + KCCI 51%.
 
 Formal approval for Sector Specific SEZ (Petro-Chemical) has been
 received from Ministry of Commerce and Industry on 6th November, 2007.
 Nearly 2,262 acres of land is under acquisition
 
 (viii) ONGC Managalore Petrochemicals Ltd. (OMPL)
 
 An aromatic petrochemical complex is being set up for 0.92 MMTPA
 Para-xylene and 0.14 MMTPA Benzene manufacturing facilities based on
 MRPLs aromatic rich Naphtha. The project is being implemented through
 a SPV - ONGC MangaLore Petrochemicals Ltd. (OMPL) with following equity
 participation: ONGC 46%, MRPL 3% and balance from Banks, Financial
 institutions & strategic partners. 454 acres of land has been allotted
 by Mangalore Special Economic Zone.  Site grading job is in progress.
 
 (ix) 0NIGC TERI Biotech Ltd. (OTBL)
 
 ONGC formed a Joint Venture in association with The Energy Research
 Institute (TERI) for addressing the requirement of Bioremediation,
 Microbial Enhanced Oil Recovery and prevention of wax deposition in
 tubular for its E&P operations. The JV has been incorporated on 26*
 March, 2007.
 
 11.  Other Business Initiatives
 
 a.  Memorandum of Understanding:
 
 ONGC signed various MOUs during the year for cooperation and
 collaboration in various areas of activities as follows:
 
 i.  MoU with Institute for Energy Technology, (IFE) Norway on 11th
 March, 2008
 
 To emphasizes Indo-Norwegian collaboration in areas of Trace Study
 Multiphase Flow and Corrosion Studies.
 
 ii.  MoU with HPCL on 18th July, 2007
 
 For sale of products and for sharing of HPCLs marketing infrastructure
 predominantly for MRPL products.
 
 iii.  MoU with GAIL on 24th July, 2007
 
 For co-operation in purchase of gas from new sources to be developed by
 ONGC in KG & Mahanadi Basins and its transportation, distribution &
 marketing.
 
 iv.  MoU with Ashok Leyland Project Services Ltd (ALPS) on 4th
 November, 2008
 
 For sourcing of LNG on long term basis at a competitive price and
 pursuing integrated E&P & downstream opportunities.
 
 v.  MoU with Shell on 23rd January, 2008
 
 For co-operation in various areas of exploration & production
 hydrocarbon, coal gasification, oil products, HSE, technology and
 business consulting services.
 
 b.  C2-C3-C4 Extraction Plant
 
 ONGC is setting up a C2-C3-C4 (Ethane, Propane and Butane) Extraction
 Plant at Dahej using LNG from PLL as feed stock. Overall progress of
 the project is 89.07% as on 31st March, 2008. The project is expected
 to be commissioned in 2009.
 
 12.  Information Technology
 
 Entire 3D seismic data and original logs of more than 9,000 wells were
 computerized under Project EPINET.  Supervisory Control and Data
 Acquisition (SCADA) is being implemented covering entire production and
 drilling facilities.
 
 The e-procurement process along with reverse auctioning has gone live
 and centralised electronic processing of vendors payment has been
 started for payment through National Electronic Fund Transfer (NEFT).
 All Welfare Trusts of your Company went on-line.
 
 13.  Health, Safety and Environment (HSE)
 
 HSE occupies an elevated position in the business agenda of your
 Company.
 
 While all work centres are certified with ISO 9001, OHSAS 18001 and ISO
 14001, extensive training is provided to the work force for ensuring
 the maintenance of HSE practices
 
 Your Company has undertaken Mangrove plantation at Gulf of Khambat and
 implemented Bioremediation of oily sludge at various onshore
 installations.
 
 Your Company has renewed Participant Agreement with OSRL (Oil Spill
 Response and East Asia Response Limited) to combat major oil spills.
 
 14.  Clean Development Mechanism (CDM)
 
 Your Company has formalized its corporate policy on Climate Change and
 Sustainability, thereby becoming, once again the first PSU to have this
 policy. It has got registered four CDM projects with United Nations
 Framework Convention on Climate Change (UNFCCC), with expected annual
 Certified Emission Reductions (CERs) of 119, 865.  19 more CDM projects
 are identified for development.
 
 Your Company has signed an Moll with the United States Environment
 Protection Agency {US EPA) for identifying and capturing fugitive
 methane emission from various operations. It has also entered into an
 MoU with StatoilHydro, Norway to develop Carbon Dioxide Capture and
 Sequestration (CCS), CDM and Carbon Management projects. Your Company
 has joined the global initiative on Carbon Disclosure Project (CDP)
 giving it access to the technologies adapted by different signatory
 companies in achieving sustainable development.  
 
 15.  Human Resource
 
 Your Company believes that its human resource is its greatest wealth.
 Therefore, it is the endeavour of your Company to nurture and develop
 this wealth.
 
 Your Company continues to extend several welfare benefits to its
 employees and their dependants by way of comprehensive medical care,
 education, housing, and social security. During the year 2007-08 your
 Company implemented 84 new and revised welfare polices for its
 employees, During the year, 60 employees were released under the
 Voluntary Retirement Scheme.
 
 16.  Human Resource Accounting
 
 The organisational knowledge in your Company is the sum total of
 information and experience in the minds of our people, well as the
 cumulative knowledge in the organisational systems. This is a priceless
 asset, and therefore, beyond the mechanics of accounting.
 
 There are, however, methods to measure the potential ability of all
 employees across the ranks, to produce value out of their knowledge and
 skills. The standard Lev and Schwartz model equates the anticipated
 future earnings as the surrogate of the value of an employee. This
 model has been used as per the details given in annexure-d.
 
 Based on these assumptions, your Companys Human Resource has been
 valued at Rs. 290,528.9 million as on 31st March, 2008.  These are
 unaudited figures.
 
 17.  Welfare Trusts
 
 Employees Contributory Provident Fund (ECPF) Trust, managing Provident
 Fund accounts of employees of your Company, has settled 1,639 cases of
 final withdrawal and 2,029 cases for non-refundable withdrawals during
 the year.
 
 The Post Retirement Benefit Scheme (PRBS) Trust of your Company, set up
 to provide financial security to superannuating employees separating on
 or after 01.04.2007, is to enhance the pension amount by almost 45%.
 
 The Composite Social Security Scheme (CSSS) formulated by your Company
 provides an assured ex-gratia payment in the event of unfortunate death
 or permanent disability of an employee in service. Families of deceased
 employees get a financial assistance under the scheme ranging between
 Rs.  1.5 million to Rs. 2.0 million. During the year, 61 bereaved
 families were supported through this Scheme.
 
 ONGC Sahayog Trust has been created for welfare of secondary workforce
 or their heirs, who are in financial distress. Approximately Rs. one
 million was disbursed during 2007-08 amongst 23 such beneficiaries.
 
 Your Company implemented the Employees Pension Scheme (EPS-1995)
 retrospectively w.e.f. 16th November, 1995 and remitted Rs. 215.09
 million as employers contribution.
 
 Your Company complies with the Government guidelines on reservation for
 SC and ST. The percentage of SC and ST employees, as on 1st April, 2008
 was 15.9% and 8.4% respectively. During the year 2007-08, Rs.  12.50
 million was spent for welfare of the SC and ST communities.
 
 18.  Industrial Relations
 
 During the year, harmonious industrial relations were maintained in
 your Company and no man days were lost due to internal factors.
 
 19.  Grievance Management System
 
 Your Company provides an easily accessible machinery to the employees
 for redressal of their grievances, either through informal channel
 (open hearing day) or through formal channel. All Key Executives of
 your Company have designated a publicized time slot thrice a week to
 meet public representatives for speedy redressal of their grievances.
 
 20.  Medical Services
 
 Your Company has a comprehensive health care scheme for all serving
 employees and their dependants.  Retired employees and their spouse are
 availing Companys medical facilities. In addition serving employees of
 CISF and KV (along with their dependents), posted at the Companys work
 centres, are eligible for the Companys medical facilities.
 
 21.  Human Resource Development (HRD)
 
 Many HRD initiatives were taken like; comprehensive review of the
 performance incentive scheme, skill mapping for various disciplines,
 Assessment and Development Centre workshops for Surface Managers, Block
 Managers and Sub-surface Managers.
 
 During the year, ONGC Academy organised 242 training programmes for
 7,427 executives (86,840 training days). The Regional Training
 Institutes conducted 243 training programmes for 4,496 non-executives.
 Two unique qualification upgradation programs, one for Diploma holders
 (Unnati Prayas) and the other for Degree holders (Super Unnati Prayas)
 have been continuing.
 
 An intense Leadership Development Programme for senior level (E7)
 Executives was launched from 17th January, 2008 at ISB Hyderabad.
 
 The details of awards and recognitions to your Company are placed at
 Annexure-e.
 
 22.  Sports
 
 Around 150 sportspersons including 95 international level performers
 are on the rolls of ONGC representing your Company in 15 different
 games.
 
 Your Companys basketball team won the National Federation Cup.
 
 Your Company hosted the ONGC Nehru Cup International Invitational
 Tournament during the year.
 
 Chess Queen Koneru Humpy was conferred with Padmashri and Badminton ace
 Chetan Anand received the
 
 Arjuna Award.
 
 Reigning World Billiards Champion Pankaj Advani retained his title
 after an all ONGC Final in which Dhruv
 
 Sitwala was the Runner-up.
 
 Arjuna Awardee Virender Sehwag became the first Indian and third
 cricketer to score two triple Test centuries.
 
 Your Company won the Petroleum Ministers PSPB Trophy for Overall Best
 Performance in 2007-08 for the fifth year in succession.
 
 23.  Corporate Social Responsibility (CSR)
 
 ONGC is spearheading the United Nations Global Compact - Worlds
 biggest corporate citizenship initiative to bring Industry, UN bodies,
 NGOs, Civil societies and corporates on the same platform.
 
 During the year, your Company has undertaken various CSR projects at
 its work centres and Corporate level.
 
 24.  Official Language
 
 During the year, a series of initiatives were undertaken for promotion
 and propagation of Rajbhasha.  Literary works in official language
 continued to be financially supported by your Company. In addition, all
 inductees at the executive level were exposed to the Official Language
 Policy of the Govt, of India.
 
 25.  Right to Information Act, 2005 (RTI Act)
 
 An appropriate mechanism has been set up across the company in line
 with the RTI Act. During the year, 318 applications were received under
 RTI Act, out of which information has been supplied to 283 applicants,
 3 cases have been transferred to other public authorities and 32
 requests have been rejected.  In addition, 90 first appeals were filed
 and 17 appeals were filed before Central Information Commission.
 
 26.  Women Empowerment
 
 Women employees constituted about 5% of ONGCs workforce. Various
 programmes for empowerment and development, including programme on
 gender sensitization were organized.
 
 27.  Directors Responsibility Statement
 
 Pursuant to the requirement under Section 217(2AA) of the Companies
 Act, 1956, with respect to Directors Responsibility Statement, it is
 hereby confirmed that:
 
 (i) In the preparation of the Annual Accounts, the applicable
 accounting standards have been followed and there are no material
 departures from the same;
 
 (ii) The Directors have selected such accounting policies and applied
 them consistently and made judgments and estimates that are reasonable
 and prudent, so as to give a true and fair view of the state of affairs
 of the Company as at 31st March, 2008 and of the profit of the Company
 for the year ended on that date;
 
 (iii) The Directors have taken proper and sufficient 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; and
 
 (iv) The Directors have prepared the annual accounts of the Company on
 a going concern basis.
 
 28.  Corporate Governance
 
 A report on Corporate Governance as stipulated as per Clause 49 of the
 Listing Agreement, together with Management Discussion and Analysis
 Report supported by a certificate from the Companys Auditors
 confirming compliance of conditions, form part of this Report.
 
 Your Company, acknowledging its corporate responsibility, has
 voluntarily obtained a Secretarial Compliance Report for the
 financial year ended 31st March, 2008 from M/s A.N. Kukreja & Co.,
 Company Secretaries in whole-time practice, which is annexed to this
 Report.
 
 In line with global practices, your Company has made all information,
 required by investors, available on the Companys corporate website
 www.ongcindia.com.
 
 29.  Statutory Disclosures
 
 Section 274(1)(g) of the Companies Act, 1956 is not applicable to the
 Government Companies. Your Directors have made necessary disclosures,
 as required under various provisions of the Act and Clause 49 of the
 Listing Agreement. The information required under section 217(1)(e) of
 the Act read with the Companies (Disclosure of Particulars in the
 Report of Board of Directors) Rules, 1988, as amended is annexed as
 annexure-a.
 
 None of the employees of your Company is drawing remuneration exceeding
 the limits laid down under provisions of section 217(2A) of the Act
 read with Companies (Particulars of Employees) Rules, 1975 as amended.
 
 30. Auditors
 
 The Statutory Auditors of your Company are appointed by the Comptroller
 & Auditor General of India (C&AG). M/s K K Soni & Co., M/s S C Ajmera &
 Co., M/s PSD & Associates, M/s. Padmanabhan Ramani & Ramanujam and M/s
 Singhi & Co. Chartered Accountants were appointed as joint Statutory
 Auditors for the financial year 2007-08. There is no qualification in
 the Statutory Auditors Report.
 
 The review by C&AG forms part of this report as annexure-c.
 
 Notes on Accounts referred to in the Auditors Report are
 self-explanatory and therefore do not call for any further comments.
 
 Cost Audit
 
 Pursuant to the direction of the Central Government for Audit of Cost
 Accounts, your Company appointed Cost Accountants, for auditing the
 cost accounts of your Company for the year ended 31st March, 2008.
 
 31.  Directors
 
 Pursuant to the provisions of Section 260 of the Companies Act, 1956
 and Clause 104(1) of Articles of Association of the Company, Dr.
 R.K.Pachauri, Shri V.P.Singh, Shri P.K.Choudhuryand Dr. Bakul H.
 Dholakia, retire by rotation at this AGM and being eligible offer
 themselves for reappointment.
 
 Shri D. K. Sarraf was appointed as an Additional Director and
 designated as Director (Finance) effective from 27th December, 2007 and
 holds office up to the 15th Annual General Meeting and in respect of
 whom, the Company has received a notice in writing from a member
 pursuant to the provisions of Section 257 of the Companies Act, 1956,
 proposing his name for appointment as a Director of the Company,
 subject to retirement by rotation under the Articles of Association of
 the Company.
 
 Brief resume of the Directors seeking re-appointment, together with the
 nature of their expertise in specific functional areas and names of the
 companies in which they hold the directorship, number of shares held
 and the membership/ chairmanship of committees of the Board, as
 stipulated under Clause 49 of the Listing Agreement with the Stock
 Exchanges are given in notice convening the 15th Annual General Meeting
 of the Company, and form part of the Annual Report.
 
 32.  Acknowledgement
 
 Your Directors acknowledge the involvement of the Government of India
 in the Ministry of Petroleum and Natural Gas and the support from the
 Ministry of Finance, the Reserve Bank of India and other agencies in
 Central and State Governments.
 
 Your Directors recognise all shareholders, business partners, and
 members of the ONGC Family for their sustained support.
 
 Your Directors wish to place on record their sincere appreciation for
 the dedicated contribution by the ONGCians in the remarkable
 performance and impressive results of your Company.
 
                                   On behalf of the Board of Directors
 
 New Delhi                                        (R.S. Sharma)
 22nd July, 2008                           Chairman & Managing Director