Business Strategy

The case describes the growth strategy and diversification plans of the Government owned Oil and
Natural Gas Corporation Limited (ONGC), the largest oil exploration and production (E&P) company
in India. ONGC has near monopoly in India's oil E&P industry producing nearly 90 percent of the
country's crude oil and natural gas. Till the late 1990s, the company was mainly confined to upstream
activities of E&P. In order to reduce risks inherent in confining to one activity and to achieve financial
stability and steady growth, ONGC acquired a major equity stake in Mangalore Refinery and
Petrochemicals Limited so as to enter the down stream activities of refining. With this, ONGC became
the first integrated oil company in India.

With ONGC's core business showing signs of stagnation, the company chalked out a massive
diversification plan to go into downstream activities such as LNG marketing, diesel, naphtha and
kerosene. ONGC was also contemplating forward integration opportunities in gas, petrochemicals and
the power sector.

The company also announced its intentions of entering the insurance and shipping business in the
next couple of years. However, ONGC's diversification plans received a major setback when the
Government of India (GoI) announced that the company should stick to its core business rather than
venturing into 'unrelated' areas.

ONGC tried to overcome the declining production of oil and natural gas by focusing on new domestic
production enhancement programs, offshore exploration and technology upgradation. To improve
productivity and financial performance, ONGC concentrated on human resources development and
financial restructuring.

Government and Organizational relationship

Development of R-Series Fields including Revival of R-12 (Ratna)” with Capital cost of Rs.
4,104.63 Crore
R-12 (Ratna) field was discovered in 1979 and put on production in 1983 which continued till 1994. The
Government awarded the contract for development of Ratna and R-Series fields in 1996 to a private
sector consortium in a competitive bidding round. However, the contract could not be signed due to
various issues. In March 2016, the Government reverted the Ratna & R-Series fields to ONGC for
development and production.
ONGC Board approved investment of Rs. 4,104.63 Corer for development of R-Series fields including
revival of R-12A (Ratna). Ratna-R Series fields are located about 130 km South-West of Mumbai and
around 41 km from Heera field in the Western Offshore at an approximate water depth of 40-50 meters.
Out of thirty seven (37) structures in the field, eight (8) structures were found to be oil bearing and only
one R-12 (Ratna) field was under exploitation during the period 1982 to 1994. The remaining R-series
structures are yet to be monetized.

CAPEX
(Rs.
Sl. Projects Crore)

1.1 Development of 4,104.63

R-Series
Fields,
including
 CAPEX
(Rs.
Sl. Projects Crore)

Revival of R-12
(Ratna)

1.2 Redevelopment 1,162.56

of Santhal Field

1.3 Development of 546.15

B-147 Field

1.4 Development of 511.30

BSE-11 Block

1.5 4th Phase 1,002.67

Development
NBP Field

Total Investment 7327.31