Ahmedabad: Oil and Natural Gas Corp. Ltd (ONGC) chairman and managing director Sudhir Vasudeva spoke in an interview in Ahmedabad about plans to enter the city gas distribution centre (CGD) business, deepwater exploration and arresting the decline in output from ageing fields, among other issues. Edited excerpts:

You recently announced a joint venture with ConocoPhillips of the US. What next?

We have signed an MoU (memorandum of understanding) to join us as a partner and share technology for 19 blocks in India. We will also explore the possibility of partnering in the US and other countries. Whenever there will be a policy of shale gas in place in India, ConocoPhillips would be our preferred partner. Deepwater exploration is the future of ONGC and we would want them as our partner. In the next six months, we will be able to chalk out a road map, including future investment plans. We are aiming to recover 1 billion tonnes of oil and oil equivalent from unconventional hydrocarbon sectors like deepwater and shale gas by 2020.

Revival strategy: Vasudeva says ONGC will invest close to Rs 26,000 crore to arrest the decline in output from ageing fields.

Fifteen big fields that are contributing 80% of our production are about 35-40 years old. Through our efforts in IOR/EOR (improved oil recovery/enhanced oil recovery) we are able to recover 8.5 million tonnes (mt) per annum and against the global decline of 4.5-5% per annum, we have been able to arrest it to 1.5-2% levels.

For Bombay High, we must accept that the law of diminishing returns does not work here. The board yesterday (Wednesday) cleared the proposal of 600 crore for first part of phase three redevelopment plan for Bombay High. This is expected to yield 1.03 mt of oil and 213 million cubic metres of gas. We will not be able to take the production from 28% of recoverables to 40% in this phase. Maybe there would be a phase four. As far as a strategic partner is concerned, we are not really looking at one now.

What are your plans for the marginal fields that are not commercially viable?

We will bring together four-five fields that are lying close to each other and build a common platform for them for transporting crude. We will be investing close to 26,000 crore for developing 11 clusters comprising 34 marginal fields and this will help us yield 11 mt of oil and oil equivalent. Thanks to this, we have advanced our target for gas production for 2018 to 2014.

What is the status in the South China Sea where China has opposed a venture between ONGC Videsh Ltd and a Vietnamese oil company for exploration?

It is a very hard bottom and we have removed the rigs as of now. It is for the Vietnamese government to support and protect us. Our investment is a completely commercial one. If there is a political issue, it is for the Indian government to look into it.

ONGC has been battling manpower issues. One out of every three persons at the officer-level and above is going to retire by 2014.

Attrition has been a problem for us. It is also a matter of pride when we see private oil and gas companies flourishing with ex-ONGC employees driving their growth stories. From 46,000 employees at the time of Bombay High’s discovery, our strength is today reduced to 33,000.

To overcome the problem, we are in the process of hiring 7,000 people in the next five-six years. We are thinking of inducting at the middle-level also. We are exploring the option of outsourcing some work at the field-operator level. It is the middle-level people who are going to own this company in future and we have hired McKinsey to work out a strategy.

What is the status of the stake sale offer by British Gas (BG Group Plc) at Gujarat Gas Co. Ltd, where you had bid jointly with Gujarat State Petroleum Corp. (GSPC) and Bharat Petroleum Corp. Ltd (BPCL)? Are you going to sweeten the offer?

We have also roped in Oil India as a JV partner in the consortium. While GSPC will hold 50% equity in the JV, ONGC and BPCL will each give 5% of the equity stake to Oil India Ltd. We are the only bidders for this. British Gas feels that the valuation we have offered is low. It is now a matter of negotiation between us. We’ll see if we can sweeten the bid or not.

Why haven’t you been able to achieve financial closure for the ONGC-Petro Additions Ltd (Opal) petrochemical complex at Dahej after six years? What is the current cost of the project?

The cost of the project is currently 21,440 crore, up from 12,440 crore. This is mainly due to the inclusion of many other products. Also, the project was initially conceived in 2006. Power, which was not considered earlier, has been included in the project. The project will soon achieve financial closure. Currently, ONGC has a 26% stake while GAIL India Ltd and GSPC hold 19% and 5%, respectively. We might go for an IPO (initial public offering of shares) in future.

There were talks of ONGC jointly setting up a refinery project with Cairn India Ltd in Rajasthan. The 680 km crude pipeline project by the Cairn-ONGC venture has been stuck for over a year.

There are so many refineries close to Rajasthan, like the one in Mathura or Bina; so it is for the government to decide if it wants more. Once the government decides that it wants more, the question of who would develop it arises. For the pipeline project, there have been some negotiations recently and we hope to resolve the issue soon.

There has been a lot of controversy regarding the recent stake sale to Life Insurance Corp. (LIC) of India. What are your views on this?

It’s a government decision and I can say nothing on this.

How significant is the Krishna-Godavari onshore discovery that you made recently?

We’ve made a discovery and have drilled one well. However, it is too early to say anything beyond this. We don’t know how big a field it is.