The crude oil price collapse has made the job of ONGC Videsh executives in dealing with partners across several countries harder as the firm strains to keep costs lower and cash flow positive. ONGC Videsh, the overseas arm of state-run Oil and Natural Gas Corporation, has stakes in 36 oil and gas assets in 17 countries, requiring it to deal with a diverse range of partners with interests that may not always converge.
ONGC is mostly a junior partner in its overseas fields, with national oil companies of the respective countries or large private companies mostly in the lead. This further necessitates a pro-active role for the firm to make sure its views are heard and accepted.
“We need to balance multiple interests,” said PK Rao, director (operations) at ONGC Videsh. The partners’ interests vary on several issues ranging from investment to production plan and to whom the service contracts are awarded. “When oil prices are high, it doesn’t matter. But with low oil prices, it is important to convince partners on many things,” said Rao.
As the operations chief, Rao travels the world through the year, figuring out the dynamics of the global oil and gas market, comprehending the nuances of specific countries in which the company’s blocks are located and persistently negotiating with partners for better terms.
“That courage we should have to tell them what’s wrong. If we don’t agree with the budget, we tell them and they would revise it,” said Rao. With low oil prices, every penny counts and all decisions must be closely watched, he said.
Oil and gas prices have plunged to about a third in the past two years. The Brent crude was trading at about $41 a barrel on Monday. In 2015-16, ONGC Videsh produced 8.9 million metric tonne of oil equivalent (mmtoe), compared to 8.87 mmtoe in the previous year. The output is expected to marginally slip to 8.4 mmtoe in 2016-17 on falling production at ageing fields.
This, however, doesn’t include the acquisitions such as Vankor fields, whose contribution can dramatically boost the company’s total output. “The company’s cash flow should not go negative. Rs 100-crore loss is always more visible than Rs 2,000-crore profit,” said Rao. ONGC Videsh continues to invest in projects where cash flow can be maintained, he said.Share This