Group 7 - Milin Bhatia - Gautam Burye - Arihant Jain - Sagnik Niyogi - Ellina Rath

D-004 D-008 D-024 D-043 D-051

ONGC-CSR Report

Page 1

Energy Scenario globally

Energy Consumption grew by 2.5% globally. Global consumption growth decelerated in 2011 for all fuels, as did total energy consumption for all regions. OIL Oil share of Global Energy Consumption stands at 33.1%. Oil averaged $111.26 per barrel in 2011, an increase of 40% from the 2010 level. The loss of Libyan supplies early in the year, combined with smaller disruptions in a number of other countries, pushed prices sharply higher despite a large increase in production among other OPEC members following the Libyan outages and a release of strategic stocks from International Energy Agency member countries. Global oil consumption grew by a below-average 0.7%, to reach 88 million b/d. NATURAL GAS World natural gas consumption grew by 2.2%.Consumption growth was below average in all regions except North America, where low prices drove robust growth. Outside North America, the largest volumetric gains in consumption were in China (+21.5%), Saudi Arabia (+13.2%) and Japan (+11.6%). These increases were partly offset by the largest decline on record in EU gas consumption (-9.9%), driven by a weak economy, high gas prices, warm weather and continued growth in renewable power generation. Global natural gas production grew by 3.1%.The US (+7.7%) recorded the largest volumetric increase despite lower gas prices, and remained the worlds largest producer. Output also grew rapidly in Qatar (+25.8%), Russia (+3.1%) and Turkmenistan (+40.6%), more than offsetting declines in Libya (-75.6%) and the UK (-20.8%). As was the case for consumption, the EU recorded the largest decline in gas production on record (-11.4%), due to a combination of mature fields, maintenance, and weak regional consumption. OTHER FUELS Coal consumption grew by 5.4% in 2011; the only fossil fuel to record above average growth and the fastest-growing form of energy outside renewable. Coal now accounts for 30.3% of global energy consumption, the highest share since1969.Global hydroelectric output grew by 1.6%, the weakest growth since 2003. Renewable energy sources saw mixed results in 2011. Global biofuels production stagnated, rising by just 0.7%, the weakest annual growth since 2000. In contrast, renewable energy used in power generation grew by an above-average 17.7%, driven by continued robust growth in wind energy (+25.8%), which accounted for more than half of renewable power generation for the first time. Trends from 2001 2011 Sources of energy 2001 2011 Oil Production 74767 82840 Oil Consumption 77245 87439 Natural Gas Production 2477.2 3178.2 Natural Gas Consumption 2453.6 3153.1 Coal Production 2460.2 3726.7 Coal Consumption 2381.1 3532 Nuclear Energy Consumption 600.8 626.3 778.9 Hydroelectricity 587.2 165.5 Renewable Energy Sources 54 *Oil Production & Consumption: - Thousand Barrels per day *Natural Gas Production & Consumption: - Billion Cubic Metres *Coal, Nuclear Energy, Hydroelectricity and Renewable Energy Sources: - MTOe
ONGC-CSR Report Page 2

Energy Scenario in India

India has emerged as one of the fast growing economies in the world, after having recorded an annual average growth rate of 8% during the last four years. Although the growth has slowed down considerably due to the various macro and micro economic issues, India can still reverse the trend and aspire to clock higher growth rates .The energy sector holds the key to fulfill this aspiration.

The rapidly growing industrial base, urbanization, as well as improvement in the standard of living have widened the gap between energy demand and supply. The Indian oil & gas industry constitutes around 15% of Indias GDP. While the Indian Petroleum Industry is one of the oldest in the world, India's crude oil and natural gas production has been stagnating in recent years. Demand, however, has been growing by more than 5% annually, owing to the strong growth of the Indian economy and rising population. The widening of the demand supply gap has increased the dependency on imports. Presently, almost 75% of Indias crude oil requirements are met from imports. This overdependence on imports coupled with a steeply depreciating currency are a definite impediment to the India growth story. Indias per capita energy consumption is quite low as compared to the world average. This indicates that there is huge potential in India for the growth of energy consumption. As demand for energy in India is projected to grow at a steady rate, there is ample scope and opportunity for companies to invest in various streams of the Oil and Gas industry in the country. With each new discovery in gas and/or oil, Indias global status as a serious investment destination for exploration increases. With its increased refining capacity and exports of petroleum products, India has begun to induce various private sector companies including the foreign companies to venture into this stream. This also offers Indian energy companies a great chance to invest in the energy infrastructure of the country and reap rich rewards in the future.

ONGC-CSR Report

Page 3

About ONGC
Oil and Natural Gas Corporation Ltd. (ONGC), is the No. 1 Exploration & Production company in the world and 18th in the overall listing of global energy companies (Platt's Top 250). Established 56 years ago to work on the vision of achieving energy security for India, it is the flagship Exploration & Production Company of India. ONGC stood at the 172nd position in the Forbes Global 2000 list of world's biggest companies for 2010 (April 2011). ONGC was elevated to the coveted status of "Maharatna" Central Public Sector Enterprise (CPSE) on 16 November,2010 by the Government of India. As on 31st March 2011, ONGC have 33,273 employees on their rolls including employees in executive and non-executive positions. For the reporting year 2010-11, ONGC had a turnover of INR 695.32 billion, a net worth of INR 967.09 billion and a net profit of INR 189.24 billion. This represents a growth of 12% in both turnover and net worth and 13% in net profit over FY2010. As a CPSE under the Ministry of Petroleum & Natural Gas (MoP&NG), the key mandate for ONGC is maximizing exploration and production of crude oil and natural gas, including accretion of reserves. Exploration & Production activities of ONGC are spread across India. As a group, ONGC operate along key elements of the hydrocarbon value chain, including Exploration and Production, manufacturing of value added products, refining, liquefied natural gas, power generation, petrochemicals and select related services. ONGC have made successful forays in the field of unconventional hydrocarbons such as coal bed methane, shale gas and underground coal gasification. ONGC have the largest share of oil and gas acreages in India. In the reporting period, ONGC contributed over 73% of the country's crude oil and 48% of the natural gas production. Through ONGC Videsh Limited (OVL), ONGC's wholly owned subsidiary, ONGC are engaged in the overseas exploration & production, including sourcing of equity oil. OVL, with its participation in 33 projects across 14 countries, is the largest Indian MNC with an overseas investment of more than INR 590 billions. Currently producing from 9 projects, OVL recorded the highest-ever production of 9.45 MMTOE. Primary products ONGC's primary products include crude oil, natural gas and value added products such as naphtha, aviation turbine fuel (ATF), liquefied petroleum gas (LPG), and superior kerosene oil (SKO).

ONGC-CSR Report

Page 4

Triple Bottom Line Approach of ONGC

ONGC follows the Triple Bottom line approach to take care of all its Stakeholder interests.

Economic Performance
Economic responsibilities form the base of Pyramid of responsibility for any organization. Being profitable is the foundation on which the sustainable development programme of ONGC is built.. This year saw ONGC reaching new heights on the economic front. Key achievements include: Net Profit: 189 billion Dividend payout: 74.86 billion Employee spending: 67 billion Exchequer contribution: 317.76 billion Subsidy to Government: 248.92 billion Profit shared for CSR: 2.2 billion INR on community activities Economic sustainability for ONGC implies increased asset recovery creating a secure energy future for India and sharing wealth among stake holders. The company lays faith in the fact that long term profitability is essential to achieving business goals and year-on-year growth. To provide for these ONGC has decided to lay importance on the following strategic goals: Double the reserves from 6 to 12 BTOE (Billion tonne oil equivalent) To improve recovery factor from 28% to 40% by 2020 To source 20 MMTPA (Million Metric Tonne per annum) oil and gas by 2020

The long term, organization specific goals have been charted out keeping the above three strategic goals in mind. These are further broken down into midterm goals of five years duration. Short term annual goals are also derived out of the midterm goals. The proposals and achievements of ONGC for the year are given below: Area Crude Production Natural Gas Production Natural gas sales Value added products Achievement 24.419 MMT 23094.57 MMSCM 18263.187 MMSCM 3203.1 Achievement as a % of target 97.88 101.4 102.0 98.9

At the top level, ONGC is guided by GOI policies. However the economic approach is steered by market conditions and technological progress. Oilfields are being depleted rapidly especially in non OPEC nations. The newly discovered oilfields are smaller in comparison and are deep seawhich require high investment. In India although the demand has been on the rise, production levels have remained nearly stagnant. To approach this situation in a sustainable way, the
ONGC-CSR Report Page 5

mission has been to arrest the declining rates in mature (old) oilfields through improved use of technology in enhanced oil recovery processes. ONGC has invested in excess of 365 billion INR on this since 2001. To put things in to perspective, ONGC has performed well in term of realistic goal setting and achievement. Sustainable growth has been kept in mind while policies and goals were set for the company. Going ahead, ONGC aspires to maintain a steady growth rate and play a key role in the Energy development of India.

Environmental Performance
ONGC realizes the importance of mitigating the impact of their operations and also addressing larger issues such as climate change, water and bio-diversity management, and procuring cleaner sources of energy. Taking this agenda forward ONGC is investing a huge amount in the pursuit of renewable energy. Their approach to environment management is guided by principles of Manage, Reduce & Diversify. Manage: Their activities have a huge impact on land, water, biodiversity, local environment and climate change through wastes such as drilling waste, effluents and emissions. As part of their commitment to pollution prevention and protection of the environment, they have following action plan policies: o Integrated HSE Policy o Sustainable Water Management Policy o Climate Change and Sustainable Development Policy o Rain Water Harvesting Policy o Greening the Vendor Chain Policy o Risk Management Policy Reduce: The Companys exploration activities impact the environment through the use of natural resources such as water. To reduce this impact, they strive to improve their resource utilization through operational efficiency, reduced wastage, adoption of technological innovations, industry best work practices, and recycling when feasible. Diversify: They actively pursue the untapped sources of unconventional hydrocarbons from the conventional resources. They currently contribute almost half of the natural gas production in the country, operate five Coal Bed Methane blocks and have made a successful foray in Underground Coal Gasification and Shale gas. All of these are less carbon intensive as compared to crude oil.

ONGC has adopted a two-fold approach when it comes to looking at new sources of energy: 1. Adopt renewable sources of energy to lower the carbon footprint of ONGC's operations 2. Invest in exploration, drilling and processing of low carbon intensive fuel sources

ONGC-CSR Report

Page 6

Investing in Renewable Energy

ONGC is setting up a 102 MW Wind Farm in Rajasthan, in addition to a 51 MW Unit already working successfully in Bhuj, Gujarat. The planned investment is about INR 8 billion and the plant is likely to be commissioned by 2014-15.

R&D in New Energy Technologies The ONGC Energy Centre (OEC) set up for holistic research for new and alternate energy sources has been pursuing a number of new projects like the application of Solar Thermal Engine, Thermo-chemical generation of hydrogen, Bioconversion of coal/oil to methane gas, Uranium exploration, Solid state lighting, and a Solar PV Energy Farm. OEC is working towards the goal of establishing mass scale commercialization of alternate energy technologies. OEC has installed three state-of-the-art Solar Thermal Engines at the Solar Energy Centre (SEC), Ministry of New and Renewable Energy (MNRE) campus at Gurgaon. Cleaner Hydrocarbons ONGC invests heavily in the exploration and production of natural gas. Natural Gas production by ONGC during the year 2010-11 was 23,094.57 MMSCM which was 101.4 % of the MoU target agreed with the Ministry of Petroleum and Natural Gas and about half of the total gas production in India. Unconventional Hydrocarbons Underground Coal Gasification ONGC has ventured into the new frontier of underground coal gasification in Vastan Mine block in Surat district, Gujarat and has set up the Underground Coal Gasification (UCG) Pilot project. Coal Bed Methane ONGC is currently operating in five Coal Bed Methane (CBM) blocks namely Jharia, Bokaro, North Karanpura and South Karanpura Blocks in Jharkhand and Raniganj block in West Bengal. To have a focussed approach for the development of CBM, a dedicated CBM development project is functioning from Bokaro to drive their CBM operations. A collaborative research program with School of Petroleum Engineering (SCOPE), University of New South Wales (UNSW), Australia for reservoir characterization, stimulation designing and stimulation studies is operational. Shale Gas ONGC struck Shale gas for the first time in India at Well RNSG #1 at Icchapur near Durgapur, West Bengal, confirming the presence of gas in Indian Shale

It is universally known that globally rising Green House Gas emission have to be reduced for a sustainable planet. Towards this objective, the National Action Plan on Climate Change (NAPCC) has been adopted by India. The NAPCC requires India to reduce its GHG intensity by 20-25% by 2020. For this purpose, ONGC has embarked on a long term plan to understand,
ONGC-CSR Report Page 7

base-line, and reduce its own GHG contributions. The company has adopted a three-fold approach towards this purpose: 1. Expand the GHG emissions reporting boundary 2. Take action on identified low-hanging fruits 3. Engage with policy makers to better

Clean Development Mechanism (CDM) Projects

ONGC has developed 17 DNA approved CDM projects, six of which have been registered by the United Nation Framework Convention on Climate Change (UNFCCC) and the others are in the various stages of development.

Water
ONGC uses fresh water for its exploration and production operations at offshore and onshore locations. ONGC offshore installations also use sea water for water injection, where necessary, as well as for making water for potable use. ONGC decided to adopt a companywide: "Sustainable Water Management Strategy" aimed at reduction in specific fresh water consumption and reporting on the water footprint based on internationally recognised standards and practices. The company has various plans such as baseline assessment of water use, build reporting capability in the short term followed by operation specific sustainable water management plans, location specific SOPs with water recycling, and reuse targets as appropriate in the medium to long term. As a part of their strategy, the company also participates in the Carbon Disclosure Project (CDP) water reporting and is pioneering the same in the Indian Public Sector Enterprises.

Managing Waste
The company has site specific Environment Management Plans (EMPs) that necessarily comprise of the restoration of abandoned drill sites to original conditions. Effluent Management The onshore operations result in about 70,000 m3 of produced water per day. The produced water contains traces of emulsified oil, which is a source of pollution if discharged untreated. The produced water is treated before disposal to meet the statutory requirements. To reduce their fresh water consumption and maintain reservoir pressure during the drilling operations, efforts are made to consume the treated effluents to the extent possible by using it instead of water, the balance being disposed off in the water bodies or re-injected into abandoned wells. Disposal/Treatment Practices Tank bottom sludge - Treated after recovering possible quantities of oil from sludge by use of bio-remediation techniques. Drill cuttings - Washed with water, checked and used in land filling, if found nonhazardous. Spent oil - Recycled / Reused. Used up lead acid batteries - Sold to authorized vendors for recycling. Bio-medical waste - Disposed off by incineration using the organization's own incineration facilities or through State Pollution Control Board approved agencies.
ONGC-CSR Report Page 8

Critical Analysis
ONGC has prepared its CSR report based on the Global Reporting Initiative 2006 Guidelines(GRI G3). Though the development, content and presentation were ONGCs prerogative, the report has been assured by Ernst & Young. Thus ONGC leaves no doubt to mind, that it has maintained the highest standards in the industry. From the report, it is evident that the local population stands to gain the most out of the operations carried out by ONGC. Helping in overall development, the execution of these numerous initiatives has been more streamlined since 1996. Promotion of education, health and community development and proactive help during times of natural calamities has been ONGCs forte. Given the current scenario, ONGC has done extremely well in its duty towards the marketplace, workplace, environment and community but through the project we have identified some avenues in which the State Governments and the organization could undertake with the purpose of localizing CSR training initiatives. This initiative would be the only way to arrive at an understanding on the way in which we can contribute to social value creation through business development. In the given context, setting up a CSR agency to support CSR development through integrating private and civil society organizations would fill the gap for addressing initiatives. Among the various initiatives are: Increasing awareness of CSRs contribution towards human capital development for social value creation strategy. For instance, long term vision and commitment could be promoted for meeting educational needs. Concentration on core competencies would enable ONGC to innovate on their various initiatives taken. This would ensure consistency between the companys activities and the CSR roles played. Regional integration and network development among governments and civil organizations with the goal of promoting CSR training initiatives.

It must be kept in mind that the case is a preliminary exploration of ONGCs CSR activities as reported on the internet and one has to delve much deeper for more definite conclusions to be drawn.

ONGC-CSR Report

Page 9