Global Compact Annual Communication on Progress 2009

ONGC The Company Oil and Natural Gas Corporation Ltd. (ONGC) is an Indian State Enterprise and integrated Oil & Gas Group with interests in E&P, Refining, LNG, Power, Petrochemicals and new sources of energy. It has been reliable energy solution provider for the country for more than five decades now. Driven by its strategic target to double its In-place Oil & Oil-Equivalent-Gas (O+OEG) reserves from 6 to 12 billion tonnes and improve recovery factor from 28% to 40% by 2020, ONGC with over 32,000 people - is aggressively pursuing energy aspirations of India. ONGC is ranked 402nd in Fortune-500 list 2009 by turnover. ONGC is the first and only Indian company to have figured in Fortunes Worlds Most Admired Companies List in 2007. It is recognized as no. 3 top E&P Company in the world and ranks 26th amongst leading global Energy majors as per Platts Top 250 Global Energy Company Ranking 2009. PFC Energy 50 ranked ONGC at 23rd amongst Global Oil & Gas Companies by Market Capitalization and ranked 4th leading Global E&P Company. ONGC is placed 152 in Forbes Global 2000 listing for year 2009(this is up 46 notches above last years rank of 198th). Forbes composite score is based on the ranking for sales, profits, assets and market value, which makes it realistic and admired. Biggest Wealth-Creator for Stakeholders The People of India (through Government of India) built ONGC with Rs. 342.8 Crore, contributed over 2 years from 1959 to 1981. ONGC has paid back so far: (a) Contribution to Exchequer: Rs. 2,33,486 Crore (Rs. 1,87,813 Crore to Central exchequer, Rs. 45,673 Crore to State exchequers) (b) Dividend (cumulative): Rs. 46,212 Crore till FY2009( GoI: Rs. 36,360 Crore +Other shareholders Rs. 9,852 Crore (c) Government of India realized Rs. 14,380 Crore through progressive Disinvestment in 2004. Performance During FY09, ONGC registered highest-ever Sales Income (Turnover) of Rs. 63,949 Crore (up 6% from Rs. 60,137 Crore in FY08). The Compounded Annual Growth Rate (CAGR) in Turnover in last 5 years is 14.49 %. It earned net Profit of Rs. 16,126 Crore despite providing for highest-ever subsidy discount of Rs. 28,225 Crore (up 28% from Rs. 22,001 Crore in FY08) as per the directives of the GoI. The Compounded Annual Growth Rate (CAGR) in Net Profit in last 5 years is 13.23%. ONGC continues to be a zero debt Company.

Exploration ONGC has discovered 6 of the 7 commercially-producing Indian Basins, in the last 50 years, adding over 6.9 billion tonnes of In-place Oil & Gas volume of hydrocarbons. ONGC has bagged 104 of the 203 Blocks (more than 50%) awarded in the seven rounds of bidding, under the New Exploration Licensing Policy (NELP) of the Indian Government. In addition ONGC is expected to be awarded 17 out of 36 blocks in NELP-VIII round of bidding. ONGC has recoverable reserves of 1.5 billion tonnes of Oil and Gas and produces more than 1.2 million Barrels of Oil Equivalent (BOE) per day, meeting around 79% of Indias domestic production of Oil & Gas (during 2008-09). It has registered an RRR (Reserve Replacement Ratio) of more than 1 during the last five successive years. ONGC accreted ultimate reserve of 68.90 MMT during 2008-09 against production of 47.85 MMT of O+OEG thereby achieving an RRR of 1.44. During 2008-09 ONGC made 28 discoveries which include 15 New Prospects (2 Deep waters, 1 Shallow water, 12 Onshore) and 13 new pools. Initial In-place volume of hydrocarbons of 284.81 MTOE is highest in 20 years and Ultimate reserve accretion at 68.90 MTOE are highest in 18 years. Production: During FY09, ONGCs combined Oil & gas production from Domestic, JV and Overseas was 61.23 Million Tonnes of Oil Equivalent (ONGC: 47.85, OVL: 8.78, PSC JV: 4.6). Biggest Indian Multinational ONGCs wholly-owned subsidiary ONGC Videsh Ltd. (OVL) is the biggest Indian multinational, with 39 Oil & Gas projects (9 of them producing) in 15 countries. Of these 25 are under exploration, 5 are discovered & under Development and 9 are producing. Overseas Projects include a 741 km long completed Pipeline in Sudan. Production from overseas properties have grown from 3.87 million metric tones oil equivalent in 2003-2004 to 8.78 million metric tones oil equivalent in 2008-09. During 2008-09, ONGC acquired 7 oil and gas projects, 2 of them producing. Ultimate reserve buildup had been the highest-ever at 135.08 MTOE. Production from Imperial Energy, which ONGC acquired in Jan2009, increased to 11,500 bopd from 6,000 bopd within six-seven months of acquisition by OVL (a 100% subsidiary of ONGC). Infrastructure ONGCs fleet comprises of 118 Onland drilling rigs (70 own and 11 charter-hired), 39 Offshore rigs (9 owned and 28 charter-hired) and 84 workover rigs (70 owned and deployed in onshore areas; 24 charter-hired, deployed in offshore). It operates 240 Onland installations; in Offshore, it operates 160 Well platforms and 34 Process & other platforms. It owns 2 Multi-Support Vessels (MSVs), one Seismic Survey and one Stimulation services vessel.

It owns and operates more than 25,000 kilometers of pipelines in India, including nearly 6,500 kilometers of sub-sea pipelines the longest in India. All the installations of ONGC Indias Greenest Company - are certified for Quality, Health, Safety and Environment Management (QHSE), making ONGC unique in the world in this regard. Sustainability and Green Initiatives ONGC has taken structured initiatives for Alternate Energy sources. Retaining focus on Oil & Gas, ONGC is bringing up an Energy Centre in Delhi housed in Rajiv Gandhi Urja Bhawan for holistic research in alternate energy sources. ONGC has also taken concrete steps to tap unconventional energy sources like Coal Bed Methane (CBM) and Underground Coal Gasification (UCG). ONGC is also investing in Renewable Energy Sources; its first Wind Power Generation plant (50 MW) has come up in Gujarat. Declared as the Greenest Indian company by the A C Nielsen - ORG MARG Survey, 2004, ONGC, is the only oil company in the SAARC region and the only public sector in India to have Carbon Credits on its balance sheet. Among its noteworthy initiatives, the prime achievements of ONGC have been in reducing emissions, reducing effluent discharge, phasing out of Halon firesuppression systems with environment-friendly systems, extensive mangrove plantation for shoreline protection, ringal bamboo plantation in Upper Himalayas for sustaining Himalayan ecosystem, bio-remediation for sludge treatment at ONGC installations. To integrate Environment Sustainability in its business, ONGC has also been actively pursuing a number of Clean Development Mechanism (CDM) projects, alternate sustainable source of energy and Carbon Neutrality. All operational units of ONGC are certified with ISO 9001, 14001 and OHSAS-18001. Market: ONGC has 2.139 billion shares in market with around 400,000 shareholders - which include more than 450 Foreign Institutional Investors (FIIs). ONGC continues to be amongst top three highest market capitalization companies in the country. ONGC CMDs statement on our commitment towards UNGC principles: Being a premier Public Sector undertaking in India, ONGC abides by all the statutory requirements, land of the law and the social obligations around which the priciples of Global Compact are woven. We at ONGC are committed to aligining our operations and strategies with ten universally accepted principles in the areas of human rights, labour, the environment and anti corruption. We firmly believe that business, trade and investment are essential pillars for properity and peace. Responsible business practices can in many ways build trust and social capital, contributing to broad-based development and sustainable economy. Participant : Oil & Natural Gas Corporation Limited (ONGC), India Sector : Oil & Gas Countr (ies) of impact : India and the countries where it is operating through its foreign arm ONGC Videsh.

Date : Jan 27th , 2010 Contact person : Dr. A. K. Balyan, Director (HR), e-mail: dir_hr@ongc.co.in / Ms. Alka Mittal, Dy.Gen.Mgr(HR), email: mittalka9@gmail.com / Shri Saket Gupta, EA to Director (HR), email: gupta_saket@ongc.co.in, A Kumaria, Dy. Gen. Mgr. (C), email arbindoo@ongc.co.in Brief description of nature of business Oil and Natural Gas Corporation Limited is in energy business with a global operational footprint. It is mainly an Oil and Gas exploration and production company. ONGC is undertaking value-multiplier integration projects like-Refinery, LNG, Petrochemicals, Power and SEZ etc., to establish its presence in the entire hydrocarbon value-chain. It is also investing substantially in renewable energy such as Wind and Solar power. Statement of support ONGCs vision and mission reflect ONGCs commitment to Millennium Development Goals by focusing on health, safety and environment and to enrich the quality of community life. Further, ONGC is aligned to imbibe high standards of business ethics and organisational values, foster a culture of trust, openness and mutual concern to make working a stimulating and challenging experience for ONGCians and strive for value addition for all its stakeholders. ONGC believes in action and strives to deliver the desired results under the following priciples of Global Compact. PRINCIPLE 1 BUSINESS SHOULD SUPPORT AND RESPECT THE PROTECTION OF INTERNATIONALLY PROCLAIMED HUMAN RIGHTS ONGC understands and accepts that as a responsible business enterprise it has the responsibility to uphold human rights at the workplace and within its sphere of influence. To this end, ONGC continues to treat its employees as the prime resource which drives its growth. The operations spread over the length and breadth of India are consistent with the legal principles enshrined by the Constitution of India and the Labour Laws. ONGC employees continue to be treated as partners in progress, enjoying some of the best working and living standards in the country. They have access to best in class medical facilities, subsidised housing and loans for building their own homes. The educational needs of the children of ONGC employees are also actively supported by the Company through payment of fees, scholarships, merit awards and grant of subsidised loans for higher education. The HR policies developed over the years have also dynamically changed with the changing business environment respecting the laws of the land and driving the aspirations of the employees. A key policy relates to the provision of a tiered Grievance Mechanism that endeavours to listen, consider and settle employee grievances related to the working environment and company policies. We also work in tandem with the local community where we operate in developing basic infrastructure, promoting self-help groups and sustainable economic livelihood. A systematic

management approach to Corporate Social Responsibility with identified areas of co-operation with the community has been followed diligently. PRINCIPLE 2 BUSINESS SHOULD ENSURE THAT THEY ARE NOT COMPLICIT IN HUMAN RIGHTS ABUSES ONGCs business is not at all complicit in human rights abuses as it deals strictly with any human Right abuse, ensures development and protection of women employees and other stakeholders. ONGC endeavours to ensure that nobody who contributes to our growth and success is deprived of his or her human rights, nor suffers harm due to such rights violations. As an affirmative step, ONGC has developed a Fair Wage Initiative which would ensure that workers engaged by Contractors providing services to ONGC are paid well above the statutory minimum wage along with compliance of social security laws. This initiative will be implemented over the coming years in phases, in consultation with the Contractors and other stake holders. In the past ONGC had introduced the Sahayog Yojana administered through a Trust setup with a corpus of Rs.100 million to meet certain specific contingencies faced by workers engaged through contractors in ONGC operations. Specific financial grants are released by the Trust for meeting expenses related to higher education of children of such contract labour, medical expenses related to high cost surgeries etc., and marriage of a girl child. PRINCIPLE 3 BUSINESS SHOULD UPHOLD THE FREEDOM OF ASSOCIATION AND THE EFFECTIVE RECOGNITION OF THE RIGHT TO COLLECTIVE BARGAINING ONGC upholds the freedom of Associaton and effectively recognizes the right in collective bargaining by generously recognising and promotiing the workers unions, officers associations, Mahila samities, ONGC uncha (Adventure Club), officers club etc. ONGC as a model employer respects the right to freedom of association of its labour force. The staff are free to join any union or association of their choice. In furthering the cause of collective bargaining, ONGC has formulated its Policy of Recognition of Trade Unions in consultation with the unions. Trade unions are recognised under the voluntary Code of Discipline at work-centre and Sectoral level to represent the unionised staff. They have the right to engage in a dialogue with the management to ventilate their grievances and deliberate on all issues concerning the work life of the employees. At the apex level, all the recognised unions sit together with the Corporate Management to discuss and deliberate policy issues concerning the organisation and its employees. This forum called the Joint Committee Meeting (JCM) also discusses issues related to wages, allowances, perks, facilities and working conditions and living conditions of the unionised cadre. While bilateral meetings at Work-centre level are convened at least once in a quarter, at the apex level the JCM meets once in six months. Thus, ONGC as a responsible corporate continues to respect the freedom of association of its labour force while supporting the development of the right to collective bargaining. Being organised into the business models of Assets and Basins, at ONGC, Collective bargaining is done at three levels:

At Asset/Basin level-issues which are within the power of Asset/Basin Manager and concerning the asset only like transfers, overtime, wage fixation, leave etc are discussed between the recognised union representative and Management representative. At Regional level- issues like promotion, seniority, recruitment of staff level, which are maintained at Regional Office are discussed and settled. At Corporate level- issues which effects all the employees of ONGC like pay revision, change in recruitment and promotion policy, laying of new policy for employee welfare etc are discussed and settled. Industrial disputes that may arise from time to time are dealt with, in accordance with the above mentioned policy and as required in the provisions of the Industrial Disputes Act, India. There has been no loss of workdays during 2007-08 on account of any labour dispute and complete freedom of Association and Collective bargaining is maintained. PRINCIPLE 4 PRINCIPLE 5 and PRINCIPLE 6 BUSINESS SHOULD SUPPORT THE ELIMINATION OF ALL FORMS OF FORCED AND COMPULSORY LABOUR, BUSINESS SHOULD SUPPORT THE EFFECTIVE ABOLITION OF CHILD LABOUR BUSINESS SHOULD SUPPORT THE ELIMINATION OF DISCRIMINATION IN RESPECT OF EMPLOYMENT AND OCCUPATION India has ratified the Forced Labour Convention (No.29) and the Abolition of Forced Labour Convention (No.105) of the International Labour Organisation. Further, Parliament has passed the Bonded Labour System (Abolition) Act, 1976, whereby it is envisaged to abolish the bonded labour system and free and discharge the bonded labour from such obligation. ONGC recognises that the work relationship should be freely chosen and free from threats, and therefore it stands committed not to resort to any form of forced or compulsory labour. Even in the area of outsourced services, ONGC has encouraged the formation of workers co-operatives so that the labour force can organise themselves as self-help groups. We have ensured that there is total compliance with Indian Laws in all our operations in the country. ONGC recognises that every child needs to be provided the opportunity to develop physically and mentally to his or her full potential. We support the aim to stop all work by children that jeopardises their education and development. No children are engaged in any operations of ONGC and neither are the service providers permitted to engage child labour in ONGC operations. ONGC strictly follows the minimum age of 18 years for adult recruitment as laid down by the law. ONGC Service Rules provide for verification of age at recruitment through School Leaving Certificate/Birth Certificate. Through its programmes on Corporate Social Responsibility, ONGC is committed to promoting the schooling and educational development of children as a positive step to reduce the incidence of child labour in the local areas of operation.

ONGC ensures that all individuals are accorded equal opportunities to develop fully the knowledge, skills and competencies that are relevant to the job they perform. Discrimination at work that may affect men or women on the basis of their sex, race, colour of skin, social origin, religion, caste or political opinions is not permitted. Eliminating discrimination starts with dismantling barriers and ensuring equality in access to training, education as well as the ability to own and use resources. Gender equality is one area where ONGC has stressed upon leading to strict compliance of the law relating to Equal Remuneration. ONGC introduced the Unnati Prayas Scheme through which unionised employees were sponsored to attend full time degree courses leading to graduation in Engineering Disciplines. Through the implementation of the Presidential Directives and Government instructions, ONGC ensures that scheduled castes and tribes are provided better opportunities for employment and development. Any citizen of this country who fulfills the basic eligibility criteria for employment against specific posts in relation to age and qualification is considered for employment. To ensure elimination of discrimination in respect of persons belonging to the weaker and socially backward classes, the instructions of the Govt. of India, for effectively implementing safeguards enshrined in the Constitution of India are followed in letter and spirit. This policy has resulted in ONGC becoming one of the few organizations in the country to have the mandated representation of Scheduled Castes and Scheduled Tribes in its manpower strength. Majority of ONGCs manpower induction at the executive level is done through a national competetive examination to ensure equal opportunities to get employment in ONGC to any person belonging to any part of the country. ONGC also has 6% women in its strength demonstrating its will to eliminate gender discrimination. ONGC not only complies with all statutory provisions but also extends more liberal health and welfare measures to its employees. Some of the major social security initiatives taken by ONGC are: Composite Social Security Scheme (CSSS) The scheme provides Cash Benefits to the beneficiaries in the event of death of an employee, while in service with ONGC. All Members of this scheme contribute on a monthly basis. The Benefits of Assured Sum under the scheme in the event of death, while in service or illness leading to permanent total disability of the employee causing cessation of employment shall be as under: Category of Employees Executives Non Executives in S Level Non Executives other than S Level Amount of Assured Sum Rs. 20,00,000/Rs. 17,50,000/Rs. 15,00,000/-

In the event of survival of an employee at the time of separation of the employee from the services of ONGC, the member shall be entitled to get back only his portion of the contribution along with simple interest @ 5% per annum. Post Retirement Benefit Scheme (PRBS)

The scheme is effective from 16.11.1995 for non-executives. The scheme is a self contributory post retirement pension scheme in addition to EPS-1995. Post Retirement Medical Benefit Scheme Post retirement medical facility is provided to the employee and his/her spouse. Ongc Sahayog Yojna The next of kin of employees who die while on duty or who suffer disability in the course of duty preventing their adequate gainful vocation and/or who have no other adequate means are provided financial assistance under this scheme. Financial Assistance on Death/Permanent Disablement while on Duty Financial assistance ranging from Rs.1 Lac to Rs.12 Lacs depending on the nature of accident and category of employees is provided in addition to statutory compensation. In addition, through the outreach programmes under the Component Plan, ONGC supports the self employment, educational and welfare activities of the scheduled castes and tribes in our areas of operations. PRINCIPLE 7 & 8 BUSINESS SHOULD SUPPORT A PRECAUTIONARY APPROACH TO ENVIRONMENTAL CHALLENGES & BUSINESS SHOULD UNDERTAKE INITIATIVES TO PROMOTE GREATER ENVIRONMENTAL RESPONSIBILITY A principle of precautionary approach is built into ONGCs environmental management system. Right from the inception of the project development stage, environmental risks are identified and incorporated in the Environmental Impact Assessment report and are monitored during implementation phase. Keeping in view the climate change issues ONGC has embarked upon comprehensive program to review its operations in the light of reduction of maximum carbon foot prints in future. Also, ONGC is certified with ISO 14001 EMS for all of its installations which also ensures appropriate measures are taken for the environmental risks identified under the system. ONGC has embarked upon ambitious initiatiives to manage and reduce GHG emissions, which may be broadly classified into the following categories: Reporting of GHG emissions Energy efficiency / conservation plans Gas Flaring reduction Renewable energy To ensure implementation of its policy framework, ONGC has specially formed the following groups that work full-time towards implementation of the Companys policies : Carbon Management Group

Energy Centre For rearch in non-conventional energy sources Health Safety and Environment Group ONGC is committed to consistent reporting of GHG emissions and follows the Compendium of Greenhouse Gas Emissions Estimations Methodologies for Oil and Gas Industry developed by American Petroleum Institute (API). Carbon dioxide makes up most of our GHG emissions (to the extent of 55-57%) and it comes predominantly from our processing operations, including exhaust from combustion units and flares. Our GHG reporting includes direct emissions associated with the drilling, production and processing of oil & gas and indirect emission from purchased grid electricity for use in our operations. ONGC has taken several initiatives in order to promote greater environmental responsibility which extend beyond regulatory requirements. Brief of these activities are as under; Mangorve Plantation in Gandhar Area: ONGC has taken an ambitious project of Mangrove plantation & education-awareness programme in the gulf of cambay-Gandhar. This project is being implemented in collaboration with the Bombay Natural History Society (BNHS), India. Under the said project, about a million mangroves have been planted. The education & awareness program spreads to coastal areas of Gujrat & Konkan region, where the mangroves are being threatened due to human intervention. This project shall be of immense use in developing mangroves, which will arrest the erosion of coastal areas & support the lively hoods of the coastal people. The education & awareness component of the project will sensitise the stake holders and educate them about the economic & ecological importance of the mangroves.

Initial Plantations of Mangrove

Grown up Plantations of Mangrove

Ringal Plantation: A significant national initiative having international importance has been taken by the company to sustain the fragile Himalayan ecosystem. ONGC joined National Action Plan for Climate change by entering into an agreement with Uttaranchal Bamboo & Fiber Development Board (UBFDB) to support tree plantation in Upper Himalayas region especially those species which can mitigate Climate Change. Under this agreement, ONGC and Uttranchal Bamboo and Fiber development Board (UBFDB) of Uttarakhand is working together and already more than 3, 00,000 Ringals (Bamboo) have been planted in the Upper Himalayas region. These plants are very vital constituents of ecosystem, facilitating carbon sequestration, and hence mitigate adverse impacts on climate due to release of huge quantities of carbon dioxide and other global warming agents. Ringal bamboo is one of the fastest growing, CO2 sequestering plants that are indigenous to the Uttarakhand region. The Ringal, being a flexible and strong bamboo, serve the needs of tribal and local communities for various hand made articles as a forest produce. The project also involves local community as they are integral to the sustainable livelihood in the region. The project is highly beneficial to the local communities in improvement of their economical status. The National Action Plan on Climate Change of India, prepared under the guidance and direction of Prime Ministers Council on Climate Change, has eight priority areas; one of them is Sustaining the Himalayan Ecosystem.

10

Paper Recycling: ONCG has taken initiative to recycle waste papers from its offices to recycle through credible organizations. So far ONGC has been able to ensure more than 60,000 kg of paper is recycled. Drill Cutting Reuse: ONGC has undertaken a research project to study the feasibility of applying drill cuttings in construction of approach roads to operational sites. The findings of the study will be helpful to resolve the problem of disposal of drill cuttings in secured land fills which is cost intensive and occupies the precious land for all the times to come. Waste-to-Energy: In an yet another endeavour, ONGC has initiated a project in which organic waste will be collected from ONGCs residential colony at NOIDA and digested anaerobically to produce biogas. The biogas thus produced will be utilized for cooking activities. Thus load on municipal solid waste sites is minimized and clean energy is derived out of waste Development and diffusion of environmentally friendly technologies Bioremediation: ONGC has been one of the pioneers to apply bioremediation technology to treat oily wastes emanated from oil industry. ONGC has carried out research and pilot projects to develop suitable microbial consortia which can effectively reduce hydrocarbon content from oily waste and render the waste completely non-hazardous.

Application of Bioremediation

11

Before Bioremediation

After Bioremediation

Besides this ONGC has also embarked upon the Microbial enhanced oil recovery (MEOR) where in the use of bulk chemicals in conventional secondary recovery technologies, is reduced to very great extent, thereby this technology will reduce the carbon foot prints to great extent in future. CDM Project Activity ONGC has already registered 5 CDM projects in all with UNFCCC with overall accruable annual CERs of 123698 for ten years. ONGC is the only central Public Sector Undertakings in India to have achieved this feat. Methane to Market (M2M) ONGC has signed MoU with the United States Environment Protection Agency (US EPA) under the Natural Gas Star International Programme for identifying and capturing fugitive methane emission from various operations in ONGC. There has been significant success in this area during 2009-10. 114 Million Cubic feet (Mcf) of fugitive emission has been arrested so far from four of the process installations. Carbon Dioxide Capture and Sequestration (CCS) ONGC is actively pursuing CO2 capture and sequestration/ reformation for its various concentrated sources of CO2. Carbon Disclosure Project (CDP) ONGC has also joined the global initiative on Carbon Disclosure Project (CDP) and has been participating continuously since 2007. ONGCs disclosure has been lauded in 2009 report and ONGC has been ranked above many global oil majors. GHG Accounting ONGC has undertaken GHG accounting in nine of its sample installations in 2009-10. The corporate wide roll out is following shortly. The total accounting is exepcted to be ready by December 2012.

12

Greening Vendor chain ONGC has initiating pioneering initiative towards sustainable development by releasing its corporate policy on greening vendor chain. In this ONGC will try to persuade the vendors to adopt green technology. This is a major step towards mass awareness as well as towards greening our value chain. Sustainability Reporting ONGCs first Sustainability report under GRi-G3 guidelines of ONGC is underway for the year 2009-2010. Energy Conservation During the current year (09-10) following are the highlights of energy conservation activities in ONGC: Honble Minister of Petroleum & Natural Gas handed over the award for outstanding performance during Oil & Gas Conservation Fortnight (OGCF) 2009 to CMD along with Board of Directors Government of Uttarakhand awarded KDMIPE complex Best Energy efficient intuitional Category in the State Trainings on Energy Conservation Techniques through PCRA were conducted at all locations of ONGC successfully with an aim to increase the attentiveness on benefits of energy conservation and more than 18400 employees attended the training. It is expected that this will yield 20% -25% saving in overall energy consumption The following are the main actions / measures taken to conserve energy in ONGC: 1. ONGC 50 MW Wind Power Project at Bhuj in Gujarat This major project will directly save fossil fuels burnt in thermal plants by using wind to meet ONGCs power requirement. As per F/R 99 MU /year would be provided from this plant. The details are given below: 50 MW Wind Farm Project at Motisindoli site, Village Jakhau, Distt. Kutch of Gujarat is an initiative of ONGC towards its commitment for Environment friendly and pollution free energy production through Renewable Sources using 1.5 MW machines installed at 78 meters high towers. Moreover as a Public Sector Enterprise, ONGC is highly conscious of its responsibilities towards ensuring energy security for the nation and meeting the social objectives for the benefit of the society. The best Technology available globally has been used in this project, leading to highest available efficiency. The technology used is near maintenance free & thus the effectiveness of the project is sustainable & continuous. The cost of power generation is increasing every year & the existing sources of energy such as coal, oil & gas have their own hazards by way of emissions. In contrast wind energy is one of the cleanest forms of energy available in plenty.

13

Comparing the technology & the cost of generation, the wind power is cheapest among all the available sources of energy. ONGC shall be saving an amount of Rs. 30 Crores approx. per year on electricity charges in Gujarat, considering the present purchase price of electricity. In addition to above 80% depreciation in capital cost in first year & tax holiday for 10 consecutive years during the any first 15 years on the revenue earned is the added attraction. In future, when cost of power is bound to increase ONGCs profits through this project will increase proportionately. The generated power from this wind power project is being wheeled to 101 locations of our oil field installations/offices/residential quarters in the state of Gujarat. Since commissioning more than 137 MU electricity is generated o far. 2. Bi-Fuel kit installed in Generators in CBM Bokaro to save the diesel. 3. VFDs are installed at de-salter plant, Ahmedabad to save the electrical energy. 4. 9600 LPD capacity of Solar water heating system is added in this year and total capacity installed is 38100 LP 5. During the financial year 2008-09, we have conducted 211 energy audits. 6. Use of Energy efficient engines: As a result of new developments, ONGC has inducted latest fuel efficient engines like CAT 3512, 50G at drilling rigs and so far more than 80 engines are installed. 7. Energy efficient lights: ONGC has EC approved policy on replacement of inefficient lighting system. More than 5000 CFL and 16000 T-5 tube lights are replaced so far in all over ONGC and others are proposed to be replaced in phased manner. HPSV lamps are also being installed. 8. Reduction in gas flaring: Gas flaring is reduced at Uran, Hazira and Rajahmundry in this year & efforts are being made to make zero flaring all across ONGC installations. 9. Power factor improved at Baroda, Ahmedabad, Mehsana and KDMIPE Dehradun. 10. Due to various energy conservation measures, resultant saving in the year 2008-09 is Rs 166 Cr. Efforts to reduce Gas Flaring Mumbai Offshore is the largest production asset of ONGC. Achievement in gas flaring in this asset is as follows: The gas flaring from Mumbai region during 2008-09 and Q1-2009-10, Q2-2009-10 and Q32009-10 is as under:

14

Year 2008-09 Q1 2009-10 Q2 2009-10 Q3 2009-10

Gas Production MMSCM (MMSCMD) 16733.354 (45.845) 4334.200 (47.629) 4426.931 (48.119) 4435.007 ( 48.213)

Gas Flaring MMSCM (MMSCMD) 710.480(1.947) 187.324(2.059) 148.442 (1.614) 108.917 (1.184)

% of Flaring 4.25 % 4.32 % 3.35 % 2.45 %

The total gas flaring has come down substantially from 4.25 %, during 2008-09, to 2.45 % during Q3 2009-10. At present, there is no flaring under Avoidable gas flaring category. The entire gas flared is technical. The Gas flaring from Mumbai region has reduced as a result of various actions/initiatives taken which include commissioning of associated compressor at VEDP Platform in July 09 and improved availability of compression facilities at Mumbai High Asset after repairing / overhauling of one each Power Turbine of compressors at NQG and SH complex in Mumbai High. Gas compression capacity of Neelam enhanced from 4.2 to 5.0 MMSCMD The following are the various short and long term measures being taken to further reduce gas flaring : 1. Providing of Additional Process Gas compressors in the field to further improve compression facilities and better utilization/less flaring during trippings / scheduled maintenance of compressors. One Process gas compressor at NQG (i.e. NQG Train D) has been commissioned for compressing C- Series gas One additional Process gas compressor is planned under ICP-R project under MHS Redevelopment plan in MH Asset. (Completion schedule- by Apr 2011) Three additional Process gas compressors are planned under new MHN complex project. It will help in maintenance / stand by provision there by reducing the gas flare quantity (Completion schedule- by May 2012) 2. Identification of appropriate technology for sub-sea flare at complexes in consultation with IOGPT and other experts is in focus to achieve the bare minimum flaring. 3. Installation of LP compressors at Neelam and Heera process complexes to compress about 62000M3/day LP gas at each complex that will help to reduce the flaring of very low (0.2 Kg/CM2) pressure gas by March 2011.

15

4. As regards, Uran feasibility of hot stand by compressor for Flare gas recovery Project is being examined, keeping in view of up coming Additional Processing Unit which is scheduled for commissioning in May2012. 5. Feasibility study has been assigned to IOGPT for recovery of LP gas for all process complexes of MH Asset. The report is expected in March 2010. 6. OGIP Project Change over from gas lift to ESP is under implementation for few wells (81). Sub sea power grid is being laid from process complexes to well platform/wells. 7. Zero gas flaring scheme has already been implemented at Hazira as a CDM project registered with UNFCCC. 8. Fugitive emission at Uran (from valves and floating roof tanks) are planned to be arrested under Methane to Market scheme of USEPAs star program of which ONGC is a member. PRINCIPLE 9 BUSINESS SHOULD ENCOURAGE THE DEVELOPMENT ENVIRONMENTALLY FRIENDLY TECHNOLOGIES

AND

DIFFUSION

OF

Realizing the importance of development and diffusion of Environmentally friendly technologies, ONGC has integrated the development of such technolgies through the ONGC Energy Centre. ONGC Energy Centre ONGC Energy Center desires to harness science and technology to meet the national energy needs of tomorrow in a clean and sustainable manner. The Centre is constantly scanning advances in the alternate energy sources world-over with the view of their suitability for Indian conditions as well as the scope for research and development in the field. Presently it is pursuing the following projects: 1. GeoBioReactors: The project has progressed well. The Laboratory work has isolated consortium of microbes which convert the coals from specific Indian coal fields to methane. In the next phase the field tests are planned. Laboratory work also continues. On successful pilot test, a commercial scale plant for methane & Humic Acid will be established as JV in Collaboration with coal mine owners 2. Thermo-Chemical generation of Hydrogen: The work with reputed Indian research Institutes is progressing well. Simultaneously two promising processes namely SI process and Cu-Cl process are being pursued. After the study of individual reactions, the close loop test will be planned.

16

On successful completion of pilot, a commercial demonstration plant with solar or nuclear heat will be built as large, scale clean hydrogen source. 3. Solar Thermal Engines: The Energy Center has ordered three Solar Thermal Engines from ISS, USA. These engines consist of solar collector dish which tracks the Sun and a sterling engine. The sterling engine is sealed engine requiring no water or lubrication. It converts the heat directly into 250 Volts, 50 Hz AC electric source with very high efficiency. MNRE are our collaborators for testing the engines. On testing, modifications if any, for Indian conditions will be incorporated, then mass scale production by forming JV in India with ISS will be undertaken for stand alone & Energy farm applications. 4. Solar PV Farm: ONGC Energy center is establishing a 10MWp Solar PV farm on behalf of ONGC to demonstrate and gain experience in this vital field. ONGC Energy Center is in discussions with various established and start-up technological developers in the Solar PV space. Under this project 10 Mwp solar energy farm will be established. 5. SSL Lighting Systems: With the aim to induct the SSL lighting systems in India, OEC plans to form JV to start packaging LEDs in India. These efficient lighting systems are expected to replace current technologies in near future, leading to huge energy savings. To form JV for manufacturing, marketing and subsequently packaging LED, Introduce standard, affordable energy saving lighting and remain of forefront of this revolutionary technology. ONGC TERI Biotech Ltd. (OTBL): OTBL is now established oil field Service Company. The ecologically and environmentally safe methods are practiced to solve the oil field problems. Bio Remediation of the sites, Enhancement of oil Recovery, Prevention of wax Deposits in the tubulars are the three specialized areas. OTBL is giving services to up stream amd down stream oil industries as well as railways. OTBL aspires to work outside India as well by introducing this novel approach. PRINCIPLE 10 BUSINESS SHOULD WORK AGAINST CORRUPTION IN ALL ITS FORMS, INCLUDING EXTORTION AND BRIBERY ONGC firmly believe that busienss should work against corruption and for this has a full fledged vigilance wing headed by Chief Vigilance Officer, generally a working senior Civil/Police Servant. It monitors all the projects and activities of ONGC w.r.t. all the stakeholders of the peoject/activity. It regularly conduct a Vigilance Awareness Week and comes out with a monthly publication to communicate with the employees. Following are the initiative : Integrity pact Installations of document verification system Initiated a study on corruption ONGC has implemented an ERP, SAP, R3 platform for busienss processes using this system e-procurement.

17

Vender meet. ONGC has introduced the Integrity Pact a tool designed by the Transparency International in its contracts, from 1st July 2005. we are the first public undertaking to take this initiative towards ensuring transparency and ethics in our business decisions. The Primary Objectives of this initiative are:(a) Enable Companies to abstain from bribing by providing assurances to them that: Their competitors will also refrain from bribing Government procurement, privatization and licensing agencies will undertake to prevent corruption, including extortion, by their officials and to follow transparent procedures (b) Enable Governments to reduce the high cost and the distortion impact of corruption on public procurement, privatization or licensing (c) Establish mutual contractual rights and obligations Recent introduction of e-procurement and reverse auction has resulted in absolute fair dealing in ONGCs high value tenders. Payments to vendors are now done through electronics gateways, reducing avoidable paperwork and faster clearances. Meetings are held with vendors and investors every year as confidence building measure and to understand their perspective in relation to ONGCs procedures and practices. Most of the issues are addressed during the meet itself and others are included in the Action Taken Report. To ensure complete transparency and to demonstrate a complete commitment to adoption and institutionalizing anti corruption policies in the Company, ONGC has adopted the following Whistle Blower policy to protect the consceince keepers against malafide action of the accused : WHISTLE BLOWER POLICY 1. Preface: 1.1 This policy is formulated to provide an opportunity to employees and an avenue to raise concerns and to access in good faith the Audit & Ethics Committee, to the highest possible standards of ethical, moral and legal business conduct and its commitment to open communication, in case they observe unethical and improper practices or any other wrongful conduct in the Company, to provide necessary safeguards for protection of employees from reprisals or victimization and to prohibit managerial personnel from taking any adverse personnel action against those employees. 1.2 Clause 49 of the Listing Agreement between listed companies and the Stock Exchanges has been amended and is effective from December 31, 2005. Clause 49 inter alia, provides for a non-mandatory requirement for all listed companies to establish a mechanism called Whistle Blower Policy for employees to report to the management instances of unethical behaviour, actual or suspected, fraud or violation of the companys code of conduct or ethics policy.

18

1.3 The objective is to provide necessary safeguards for protection of employees from reprisals or victimization, for whistle blowing in good faith and to provide opportunity to employees to access in good faith, to the Audit Committee in case they observe unethical and improper practices or any other wrongful conduct in the Company and to prohibit managerial personnel from taking any adverse personnel action against those employees. 1.4 However, a disciplinary action against the Whistle Blower which occurs on account of poor job performance or misconduct by the Whistle Blower and which is independent of any disclosure made by the Whistle Blower shall not be protected under this policy. 1.5 For the sake of absolute clarity, it is specified that the Whistle Blower Policy does not tantamount in any manner to dilution of the Vigilance mechanism in ONGC. Rather, over and above the existing Vigilance Mechanism, any Protected Disclosure made by an employee under this policy, if perceived to have a vigilance angle, shall be referred to the Chief Vigilance Officer, ONGC, as per the existing practice. 2. Definitions: 2.1 ONGC means Oil and Natural Gas Corporation Limited.

2.2 Audit & Ethics Committee means the Audit & Ethics Committee of the Board constituted by the Board of Directors of ONGC in accordance with Section 292A of the Companies Act, 1956 and read with Clause 49 of the Listing Agreement with the Stock Exchanges. 2.3 Competent Authority means the Chairman & Managing Director of ONGC and will include any person(s) to whom he may delegate any of his powers as the Competent Authority under this policy from time to time. In case of conflict of interest (CMD being the subject person), Competent Authority means Chairman Audit & Ethics Committee. 2.4 Employee means an employee as defined in the ONGCConduct, Discipline and Appeal Rules, 1994 and does not include contingent employees as defined in the ONGC Standing Orders. 2.5 Improper Activity means unethical behaviour, actual or suspected fraud or violation of the companys general guidelines on conduct or ethics policy by any employee of ONGC. 2.6 Investigators mean those persons authorized, appointed, consulted or approached by the Chairman & Managing Director / Competent Authority in connection with conducting investigation into a protected disclosure and include the Auditors of ONGC. 2.7 Protected Disclosure means any communication made in good faith that discloses or demonstrates information that may be treated as evidence of unethical or Improper Activity. 2.8 Screening Committee means a Committee constituted under Whistle Blower Policy of ONGC, comprising, the Chairman & Managing Director or in his absence, a Functional Director as nominated by CMD AND Chairman, Audit & Ethics Committee or in his absence, a member of the Audit & Ethics Committee as nominated by the Chairman, A&EC.

19

2.9

Service Rules means the ONGCConduct, Discipline and Appeal Rules, 1994.

2.10 Subject means an employee - officer / staff against or in relation to whom a Protected Disclosure has been made or evidence gathered during the course of an investigation. 2.11 Whistle Blower means an Employee making a Protected Disclosure under this policy. 3. Eligibility All employees of ONGC are eligible to make Protected Disclosures 4. Guiding Principles 4.1 4.2 Protected disclosures shall be acted upon in a time bound manner. Complete confidentiality of the Whistle Blower will be maintained.

4.3 The Whistle Blower and / or the person(s) processing the Protected Disclosure will not be subjected to victimization. 4.4 Evidence of the Protected Disclosure will not be concealed and appropriate action including disciplinary action will be taken in case of attempts to conceal or destroy evidence. 4.5 Subject of the Protected Disclosure i.e Employee against or in relation to whom a protected disclosure has been made, will be provided an opportunity of being heard. 4.6 The Whistle Blower should bring to attention of the Competent Authority at the earliest any improper activity or practice. Although they are not required to provide proof, they must have sufficient cause for concern. 4.7 The Whistle Blower shall co-operate with investigating authorities, maintaining full confidentiality. 5. Whistle Blower Role & Protections Role: 5.1 5.2 5.3 5.4 5.5 The Whistle Blowers role is that of a reporting party with reliable information. The Whistle Blower is not required or expected to conduct any investigations on his own. The Whistle Blower may also be associated with the investigations, if the case so warrants. However, he shall not have a right to participate. Protected Disclosure will be appropriately dealt with by the Competent Authority. The Whistle Blower shall have a right to be informed of the disposition of his disclosure except for overriding legal or other reasons.

20

Protections: 5.6 Genuine Whistle Blowers will be accorded protection from any kind of harassment /unfair treatment / victimization. However, motivated and frivolous disclosures shall be discouraged. If the Whistle Blower is required to give evidence in criminal or disciplinary proceedings, arrangements will be made for the Whistle Blower to receive advice about the procedure. Expenses incurred by the Whistle Blower in connection with the above, towards travel etc. will be reimbursed as per normal entitlements. A Whistle Blower may report any violation of clause 5.7 above to the Competent Authority who shall investigate into the same and take corrective action as may be required. Any other Employee assisting in the said investigation shall also be protected to the same extent as the Whistle Blower.

5.7

5.8 5.9

6. Procedures Essentials And Handling of Protected Disclosure: 6.1 The Protected Disclosure / Complaint should be attached to a letter bearing the identity of the whistle blower / complainant i.e. his/her Name, CPF Number and Location, and should be inserted in an envelope which should be closed / secured / sealed. The envelope thus secured / sealed should be addressed to the Competent Authority and should be superscribed Protected Disclosure. (If the envelope is not superscribed and closed /sealed / secured, it will not be possible to provide protection to the whistle blower as specified under this policy). If the Whistle Blower believes that there is a conflict of interest between the Competent Authority and the whistle blower, he may send his protected disclosure directly to the Audit & Ethics Committee, c/o the Company Secretary, ONGC. Anonymous or pseudonymous Protected Disclosure shall not be entertained. Protected Disclosure should either be typed or written in legible hand writing in English, Hindi or Regional language of the place of employment of the whistle blower and should provide a clear understanding of the Improper Activity involved or issue / concern raised. The reporting should be factual and not speculative in nature. It must contain as much relevant information as possible to allow for preliminary review and proper assessment. Investigations into any Improper Activity which is the subject matter of an inquiry or order under the Public Servants Inquiries Act, 1850 or under the Commissions of Inquiry Act, 1952 will not come under the purview of this policy. The contact details of the Competent Authority for addressing and sending the Protected Disclosure is as follows: The Chairman & Managing Director, Competent Authority,

6.2

6.3 6.4

6.5

6.6

21

Whistle Blower Mechanism Oil And Natural Gas Corporation Ltd 6th Floor, Tower II, Jeevan Bharati, Indira Chowk, New Delhi 110 001 6.7 The contact details for addressing a protected disclosure to the Chairman Audit Committee are as follows: Chairman, Audit & Ethics Committee C/o Company Secretary, Oil And Natural Gas Corporation Ltd 8th Floor, Tower II, Jeevan Bharati, Indira Chowk, New Delhi -110 001 6.8 The Competent Authority shall mark the envelope containing the Protected Disclosure to a dedicated Confidential Section, which shall maintain a record thereof and shall submit the same to the Screening Committee. The Screening Committee shall weed out frivolous complaints and the Protected Disclosure(s) which require further investigation shall be forwarded to the investigator(s) nominated for this purpose, through the Confidential Section. The Screening Committee shall endeavour to meet as early as possible, preferably within 15 days of receipt of a Protected Disclosure.

6.9

6.10

7. Investigations and Role of Investigators: Investigation: 7.1 (a) (b) Investigations shall be launched if the Screening Committee is satisfied after preliminary review that: The alleged act constitutes an improper or unethical activity or conduct, and The allegation is supported by information and specific enough to be investigated or in cases where the allegation is not supported by specific information, it is felt that the concerned matter deserves investigation. The decision taken by the Screening Committee to conduct an investigation is by itself not to be construed as an accusation and is to be treated as a neutral fact finding process. The identity of the Subject(s) and the Whistle Blower will be kept confidential. Subject(s) will normally be informed of the allegations at the commencement of a formal investigation and will be given opportunities for providing their inputs during the investigation.

7.2 7.3 7.4

22

7.5

Subject(s) shall have a duty to co-operate with the Investigator(s) during investigation to the extent that such co-operation will not compromise self-incrimination protections available under the applicable laws. Subject(s) have a responsibility not to interfere with the investigation. Evidence shall not be withheld, destroyed or tampered with, and witnesses shall not be influenced, coached, threatened or intimidated by the Subject(s). Unless there are compelling reasons not to do so, Subject(s) will be given the opportunity to respond to material findings contained in an investigation report. No allegation of wrongdoing against a Subject(s) shall be considered as maintainable unless there is good evidence in support of the allegation. The investigation shall be completed normally within 45 days of the date of receipt of the protected disclosure or such extended period as the Competent Authority may permit for reasons to be recorded. Subject(s) have a right to be informed of the outcome of the investigation.

7.6

7.7

7.8

7.9

Role of Investigator(s): 7.10 Investigator(s) are required to conduct a process towards fact-finding and analysis. Investigator(s) shall derive their authority from Competent Authority when acting within the course and scope of their investigation. The Investigator(s) shall submit his / their report to the Competent Authority. All Investigators shall perform their role in an independent and unbiased manner. Investigators have a duty of fairness, objectivity, thoroughness, ethical behaviour and observance of professional standards.

7.11

8. Action 8.1 If the Competent Authority is of the opinion that the investigation discloses the existence of improper activity which is an offence punishable in law, the Competent Authority may direct the concerned authority to take disciplinary action under applicable statutory provisions including referring the matter to Chief Vigilance Officer of ONGC for appropriate action. The Competent Authority shall take such other remedial action as deemed fit to remedy the improper activity mentioned in the protected disclosure and /or to prevent the re-occurrence of such improper activity. If the investigation discloses that no further action on the protected disclosure is warranted, the report shall be filed in the Confidential Section. 9. Reporting and Review The Competent Authority shall submit a quarterly report of the protected disclosures, received and of the investigation conducted, and of the action taken to the Audit & Ethics Committee for review.

8.2

8.3

23

10. Notification All Executive Directors / Asset Managers / Basin Managers / General Managers / Departmental Heads etc. are required to notify & communicate the existence and contents of this policy to the employees of their department. The Whistle Blower Policy shall be prominently displayed on all Notice Boards of the Company, circulated to all recognised unions. This policy, including amendments thereof, shall also be made available on ongcreports.net. 11. Annual Affirmation The Company shall annually affirm that it has not denied any employee access to the Audit Committee and that it has provided protection to the Whistle Blower from adverse action. The affirmation shall form part of Corporate Governance report as attached to the Annual Report of the Company. 12. Amendments: This policy can be modified at any time by the Executive Committee of ONGC. Such modifications shall also be reported to the Audit & Ethics Committee.

24