The business of oil and gas continues to be challenging, complex and uncertain. However, ONGC has continued to grow, first as a dominant E&P company and now as a diversified energy major with strong presence across the entire value chain. You have been an important partner and stakeholder of this transformative journey. Your faith in us, is what propels and sustains us through the ups and downs and the uncertainties that we face in this constant pursuit of business growth and value-creation while delivering on our role as the country''s foremost energy explorer.
FY''19 was yet again a year of growth for ONGC and its business. Internationally as well, it was a period of steady recovery in the oil and gas sector as crude oil prices stabilised at levels higher than a year ago and E&P sector recorded impressive numbers.
That being said, uncertainty, still, remains a key feature of the industry. Crude oil prices swung from a high of USD80 a barrel to around USD50 in a span of few months as markets reacted to, first, the impending impact of US sanctions on Iran and then to record US production and a more conservative outlook on global economic growth due to escalating trade tensions between US and China.
While the need to plan for energy transition in the wake of the global consensus and policy actions on the issue of climate change and sustainability does make the current period within the oil and gas community an exciting one as it opens up new opportunity areas, it does bring its own set of challenges with it.
As a Maharatna NOC in the energy sector, ONGC''s decisions and actions during this period will be of immense consequence to the country''s future energy landscape and I want to assure you that the Company has chalked out a comprehensive roadmap for its future growth factoring in its historical competencies as well as emerging avenues that align with its business objective of ensuring country''s energy security.
On behalf of the Board of Directors and around 31,000 dedicated energy soldiers of Oil & Natural Gas Corporation Ltd (ONGC), I now present to you the Company''s Annual Report for the financial year 2018-19.
Performance in our core business of E&P remained impressive during FY''19. With another year of positive reserve replacement and meaningful discoveries, Exploration continues to power the Company''s promises of future growth in the domestic basins. We made a total of 13 discoveries during the year, of which 8 were onland and 5 in offshore areas. More importantly, we monetized 5 of those discoveries during the year itself. Reserve accretion for the year stood at 63.02 MMtoe on 2P basis and a Reserve replacement ratio of 1.41 means that we replenished more than the total quantum of hydrocarbon produced during the period.
A big positive of our exploratory efforts were the first-time discoveries in Bengal Basin (Well Asokenagar-1) and Vindhyan Basin (Well Hatta-2). With this exploratory success, these basins have now been upgraded to Category-II (basins with known accumulation of hydrocarbons) from Category III (basins with just having hydrocarbon shows).
Production of standalone oil and gas edged up marginally relative to FY''18 - we produced 45.86 MMtoe in FY''19 against 45.79 MMtoe in the preceding fiscal. The higher output was driven by pickup in gas output, which grew 5.4% year-on-year, on the back of additional supplies from Daman in Western offshore, Sl-Vashistha in deepwater Eastern offshore and Tripura onland. It represents the fourth yearsin succession that gas output has increased and production outlook remains positive for the next few
years with significant contribution coming from East-Coast Deepwater development project KG-DWN-98/2 coupled withupswingin output from Daman in Western Offshore. In view of the critical role of energy, especially Oil and Gas in the country''s economic growth and development agenda, the Company is actively implementing redevelopment and Enhanced Oil Recovery schemes.
Overall, our cumulative domestic hydrocarbon volumes (inclusive of our share in JV-operated properties), stood at 50.04 MMtoe. Production of Value Added Products increased for the fifth consecutive year - VAP output in FY''19 stood at 3.64 MMT versus 3.39 MMT in FY''18 i.e. a growth of 7% over previous year.
Management will remain focussed on the E&P business, even as it diversifies into different areas of the hydrocarbon value-chain. 10 E&P projects, worth Rs. 112,585 Million, were completed during the year. As many as 25 projects, with an estimated outlay of around ^830,000 Million, are currently under execution, of which 15 would directly contribute to hydrocarbon production. Envisaged cumulative oil and gas gains from these projects through their lifecycle stand at over 180 MMtoe.
Beyond greenfield projects, there is significant room for maximizing production from our mature fields as well. Globally, as per Wood Mackenzie report, almost 20% of new production will come from incremental projects between 2017 and 2025. Within ONGC, we expect as much as 190 MMT of incremental oil from the 29 IOR/EOR projects that are currently underway. During FY''19, more than one-third of our standalone crude production came via these projects.
There is significant scope to increase production through EOR technologies in the mature fields. ONGC has been a pioneer in implementation of EOR technologies in India both in Onshore and Offshore fields. Presently, EOR projects contributes 9% of total onshore production. ONGC has given renewed thrust on Enhanced Oil Recovery (EOR) schemes after recently announced policy framework by the Government of India for incentivising production through improved recovery schemes in domestic fields. Some of the EOR schemes which are at various stages of implementation are Thermal EOR -Heavy Oil belt of Mehasana viz In-situ combustion in Balol, Santhal and Cyclic Steam Stimulation in Lanwa; Chemical EOR-Polymer Flooding in North Kadi, Sanand, Bechraji and Alkali Surfactant Polymer in Viraj, Jhalora, Kalol, Sobhasan, Lakwa-Lakhmani (Assam); Gas based EOR - Immiscible Gas Injection in Borholla (Assam), Miscible Gas injection in Gandhar (Gujarat), Miscible CO2 injection (CCUS) in Gandhar (Gujarat), Gas Assisted Gravity Drainage (GAGD) in Kasomarigaon (Assam) besides Low Salinity Water Flooding at Mumbai High.
FY''19 marked another year of strong performance for our Drilling operations. ONGC drilled a record a number of wells - 516, the highest ever in the last 28 years. This comprised of 105 exploratory wells and 411 development wells.
Oil and gas is a capital-intensive enterprise and your Company''s capital commitments over the years is testament to this. Capex for FY''19 stood at Rs.294,498 Million, while budgeted capex for the ongoing fiscal i.e. FY''20 is Rs.329,208 Million. Cumulative core capex, exclusive of any non-core expenditure on account of mergers/acquisitions etc., of the past 5 years stood at Rs.1,495,106 Million.
Evidently, even through the downturn, when service sector costsdeflated, ONGC did not implement any cuts in its budget. While the focus on ''doing more with less'' has gained substantial support in the E&P community in the aftermath of the recent oil price crisis, it is also true, at least in the case of our country, producing every additional barrel of oil has also become more difficult, complex and costly. This is why managing costs will be vital to securing profitability in the business, especially now when we are moving to more logistically difficult and operationally complex terrains such as deep and Ultra-deepwater, HP-HT etc.
In terms of financial performance, your Company recorded a Gross Revenue of Rs. 1,096,546 Million in FY''19 compared to Rs.850,041 Million in FY''18. Net profit touched a record high at Rs.267,158 Million (an increase of 34% as compared to FY''18 which was at Rs.199,453 Million). The Company realized USD 68.19/bbl for crude sold in the domestic market in FY''19 as compared to USD 55.19/bbl in FY''18.
Dividend to shareholders for FY'' 19 remained healthy with a total payout of Rs.88,062 Million which again was the highest ever with impressive payout ratio (including Dividend distribution tax) of 39.7%. Dividend per share was Rs.7.00 as against Rs.6.60 in FY''18. Even as your Company expands and diversifies its business, the Company remains steadfast in its commitment to equitable value-creation for all its stakeholders, and a healthy and consistent dividend payment track record is part of this business philosophy.
Your Company''s wholly-owned subsidiary mandated with international operations, ONGC Videsh Limited, has achieved a stellar landmark by achieving its higher-ever production of 14.833 MMToe for the year. This constitutes 23% of ONGC group production for the year, indicating the significance that the Group ascribes to its overseas operations. ONGC Videsh''s 2P reserves stand at 675.72 MMtoe at the end of the year, constituting 36% of ONGC group reserves. These two significant metrics establish that ONGC Videsh continues to be the second-largest E&P company of India, second only to its Parent. Consolidated revenue from operations and PAT for ONGC Videsh during FY''19 stood at Rs.146,320 Million and Rs.16,823 Million as against Rs.104,176 Million and Rs.9,815 Million in FY''18, respectively.
It also gives me great pleasure in informing you that production from Greater Pioneer Operating Company (GPOC), South Sudan project of ONGC Videsh, has resumed during the year after prolonged shutdown since December 2013, and presently the block is flowing crude oil at ~3 8,000 bopd. ONGC Videsh also achieved its second consecutive exploratory drilling success in Block CPO-5, Colombia. This follows the first success in the same block CPO-5 where commercial oil of 40° API was discovered in 2017. With above two wells, current production from CPO-5 is ~8000 bopd. Continuing its thrust towards ensuring equity oil, the first equity oil cargo of ONGC Videsh of Das Blend crude produced from Lower Zakum Concession, ADNOC Offshore, UAE, arrived at New Mangalore port on 08th June 2018. This equity crude of ONGC Videsh was refined at MRPL (a group company).
True to our vision of becoming an integrated energy major of global reckoning, your Company has, over the years, built up a sizeable presence in the downstream arena as well. The process of integration which was initiated with the acquisition of MRPL way back in 2003, has gained further steam with the acquisition of HPCL, the country''s third largest retailer, in FY'' 18. While E&P business remains the predominant cash-generator for the group, our downstream businesses lend the desirable balance to our energy portfolio and acts as a necessary hedge during periods of market volatility.
FY''19 was a strong year for our downstream refining and petrochemical units. Physical and financial performance of HPCL during the year has been very impressive. Its refineries at Mumbai and Vizag have maximized crude processing and achieved the highest ever combined refining throughput of 18.44 MMT with capacity utilization of 117%, compared to throughput of 18.28 MMT achieved during FY''18. It also achieved the highest ever market sales of 38.7 MMT.
HPCL also expanded its retail network by commissioning 478 new outlets, expanding its retail reach to a total of 15,440 as on March'' 19. Gross Sales during the financial year has increased to Rs.2,957,126 Million as against Rs.2,432,267 Million during the previous financial year. Net profit for the year stood at Rs.60,287 Million, against Rs.63,571 Million in FY''18. Further, FY''19 also marked the company''s foray into the gas distribution business as it received PNGRB authorization for CGD network in 20 geographical areas in 9 states.
MRPL registered highest ever throughput at 16.43 MMT in FY''19. At Rs.723,151 Million, the company also recorded a 14.6% growth in its turnover while posting a net profit of Rs.3,320 Million. During the year, MRPL also achieved the highest ever poly-propylene production of 388 TMT and LPG production of 970 TMT. A new retail outlet was also commissioned during the year, bringing the total number of operated outlets for the refiner to 7.
In the Petrochemical segment, both ONGC Petro additions Ltd (OPaL) and ONGC Mangalore Petrochemicals Limited (OMPL) registered operational successes and improved financial performance. During FY''19, OPaL has run at an average plant capacity of 70%; it is expected to reach 100% operating capacity in the current financial year. OPaL has sold more than 1 MMT of polymers and has grossed Rs.97,854 Million as revenues. OMPL operated at close to 100% capacity in FY''19. It also achieved a 12.5% increase in its throughput and 18.2% exports growth. Total revenue in FY'' 19 stood at Rs.83,624 Million. It also recorded its first-ever profits with PAT of Rs.229 Million.
ONGC Tripura Power Company (OTPC), our Power JV in the country''s North-eastern state of Tripura, has been one of the most cost effective & efficient power producer in India having reliable fuel supply arrangements. During FY 2018-19, OTPC catered to about 29% of the total electricity requirement of the North Eastern region. With 5 years of consistent operations, OTPC has positioned itself well and gained reputation of a credible power generator in the Region. As per the report published by Central Electricity Authority (CEA), OTPC has emerged as the largest central sector gas based power plant in the country in terms of generation during FY 18-19. It achieved its highest ever turnover of Rs.14,558 Million and net profit of Rs.2,139 Million. The largest Indian Clean development Mechanism (CDM) project, OTPC is also the only dividend paying standalone gas based Power Generation Company in India.
The global energy universe is changing - in fact change has been a constant theme in our business, be it through new technologies, or new markets or new oil and gas frontiers. But, the transformation of the current period has been brought on by a convergence of multiple factors, key among them being a near-universal acknowledgment of the need for a cleaner energy, increasing instability of traditional energy markets, sovereign policy support for renewables and electrification and, most importantly, a growing tribe of ''conscious'' energy consumers. More and more, as we move forward, we will talk and act more as an ''energy'' company and not merely as oil and gas explorer and producer.
It is through these lens that ONGC views the landscape of tomorrow and defines its role and responsibilities. The ONGC Board recently approved the business roadmap for the Company and its other group entities - ONGC Energy Strategy 2040. It envisions ONGC as A diversified energy company with strong contribution from non E&P businesses; 3x revenues and ~5-6x market capitalization . It aims to transform ONGC into a future-ready energy entity, one that positions itself well to respond to the challenges and opportunities of the tomorrow''s energy scene. Of course, Technology, Digitalization of operations, Meaningful partnerships and Organizational restructuring will play critical roles in the successful implementation of the plan.
Beyond business, our CSR initiatives have also helped the organization in making a positive impact in people''s lives. At the same time, it also sensitizes us to our role as an important stakeholder of the society and environment. In FY''19, your Company spent Rs.6,146 Million for its various CSR programs with target areas spanning from Healthcare, Poverty, Environment, Women Empowerment and Heritage preservation.
Your Company has also taken a lead role in implementing the Government''s Startup India program within oil and gas. Having launched the Rs. 1,000 Million dedicated Startup corpus, the Company, in response to Hon''ble PM''s call for a solar revolution, launched a nationwide Solar Chulha Challenge inviting Entrepreneurs/ Scientists/ Researchers to participate in the indigenous development effort of Solar Chulha suitable for cooking Indian food. Concepts of 3 teams (IIT-Bombay, NIT-Kurukhsetra and BMS College of Engg., Bangalore) were selected and awarded prizes by Hon''ble Minister of Petroleum and Natural Gas. ONGC took up the task of pilot project implementation. A total of 86 Solar PV cooking stoves were installed at two villages (74 at Bacha covering the entire village and 12 at Jamthi) in Betul District of Madhya Pradesh. With further reduction in cost of battery and PV module, it is believed that it can become one of the preferred cooking solution. An additional benefit of this solution can be to use the stored electrical energy to power home lighting systems and other appliances.
Your Company is committed to conduct the business in a legal, ethical and transparent manner and observes highest standards of corporate governance. Accordingly, your Company has been continuously rated Excellent grade for its compliances with the DPE Guidelines on corporate governance.
Here, I would like to thank the Government of India, especially our administrative Ministry of Petroleum and Natural Gas, for its positive approach to policy making and the constant endeavours to improve attractiveness of the industry. As a National Energy Company with a mandate that goes beyond business, we are grateful for Government''s guiding hand and timely counsel on key issues. Before I conclude, I would like to make special mention of the dedication and commitment of all the employees of ONGC for contributing wholeheartedly to the success and growth of the Company.
Finally, while our operating environment may undergo changes, we are quietly reassured by your continued confidence in ONGC. We deeply value this relationship - it is a source of strength and stability to us, one that allows us to dream big while holding us accountable and responsible for all our plans and pursuits. I thank you for having chosen us and remaining invested through all these years. I firmly believe that the future energy landscape holds great promises and we can together add another meaningful chapter to
ONGC''s rich history.
Chairman and Managing Director