No communication from govt on buyback or crossholding: ONGC

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Despite the newsflow surrounding the government's disinvestment plan, ONGC 's chairman, Sudhir Vasudeva, tells CNBC-TV18 that they have not received any communication from the government on buyback of shares or cross holding. "So far we have not been told to go for buyback or crossholdings. We are only following instructions to be prepared for a follow-on public offer (FPO)," he said. He further added that it was too early to comment on the possibilities of the SEBI allowed auction.

Yesterday, SEBI allowed top 100 companies by market cap to auction shares in stock exchanges so as to pare down promoter holding. The market regulator also made the necessary regulatory changes to allow buyback of PSUs.

Vasudeva goes on to say that the company's main concern right now is the depreciation in the rupee. "The fall in the rupee is worrying because it leads in a rise in under-recoveries," he said. As of now, ONGC needs to realize between USD 55-65 per barrel.

Below is an edited transcript of his interview with Reema Tendulkar and Sonia Shenoy. Also watch the accompanying video.

Q: On this share auction by the promoters, ONGC's promoter stake is at 74%, so do you think you would look at that particular option?

A: So far we have not been told to go for buyback or crossholdings. It is the government's prerogative to sell this 5% equity and we have been only following the instructions of Department of Disinvestment for being in readiness for FPO and we are still today ready for that FPO.

Q: Do you think this new route that the SEBI has talked about would be a feasible option?

A: All these are various options available; these are hypothetical. Unless and until something is asked to us, it is rather premature for us to react on that.

Q: Given the fact that crude prices have been very resilient and that the rupee has depreciated quite a bit, the gross under recovery has shot up. So what is the communication that you have got from the government about how much the upstream has to bear for H2?

A: We haven't got any communication from the government as to what would be our subsidy burden for Q3 or what is going to be the formula for the year. So far in the first two quarters, we have paid about Rs 17,000 crore. The third quarter has now ended and we are waiting for the instructions from the government to workout.

Q: So do you get a sense that it could be higher than the 33% that companies like yours have had to pay in the quarter gone by?

A: I would like to believe that it remains at 33%. What the Ministry of Petroleum is saying is that this 33% needs to be the burden of oil PSUs that needs to be distributed between oil PSUs and OMCs put together.

Q: Could you give us a sense of how the ramp up of gas has been at the C-Series field for FY12 and FY13? Will we actually see a growth which will compensate the decline in production from maturing fields?

A: As far as C-Series is concerned, we are producing about 1.3-1.4 million tonne and there are upsides available in C-Series. There is also another field called B-12. So what we are doing is that we are breaking this entire C-Series development into three phases. First phase, which is already there, will ramp up the production to about 3 million cubic meters per day.

Another portion is that the fields which are up north can probably be taken towards Hazira for which we are working out the feasibility. We are also making plans of taking this gas towards the landfall point around Daman and we are scouting for land there and the schemes are under preparation. The C-Series and B-12 put together the potential would be of the order of 10-15 million cubic meters per day.

Q: Completely for FY13, what's the kind of growth we might see in gas production?

A: I don't have the figures available at hand, but I assume that the figures would be something like about 70 million cubic meters per day. It will be up from about 65 million cubic meters per day of today's level of production.

Q: What have you made of the big rise that we have seen in crude prices and in tandem with that how would the realizations of ONGC get impacted?

A: We are concerned with crude oil prices and whatever is happening in the Middle East and north eastern regions. Every time crude oil prices increase, and whenever this dollar rupee exchange rate varies in favor of dollar, it is always a cause of concern because that adds to the under recoveries and in turn the subsidy burden for oil PSUs.

Q: So what kind of a range do you think ONGC can hold in terms of realizations from hereon?

A: All along we have been telling that we have absolutely no issue on paying these subsidies from nominated fields and the only worry which we have is that we should be getting remunerative prices.

If we get at least USD 55-60 per barrel, because all our plans dependend on our internal resource generation, USD 55-60 is required for us to generate enough cash and surplus to support our expansion plans and also to support ONGC Videsh Limited's (OVL's) and Mangalore Refinery and Pertochemicals Limited (MRPL's) requirements etc.

Q: So there is an expectation that perhaps ONGC is likely to buy out BG from the KG offshore block. Is there such a likelihood? Could you give us an idea on that?

A: I would rather not discuss that today. This probably would be discussed in the board meeting and as and when the board takes a view it would be proper for me to react.

Q: Is OVL looking for acquisitions as it has been reported?

A: We are always looking for acquisitions.

Q: Is it shale gas and oil sands and everything?

A: Yes, we are interested in all this. We are interested both in conventional hydrocarbons and unconventional hydrocarbons, we are interested in LNG and we are looking for all these opportunities which are there in the market.