final report on petrolium sector, jitesh, pathik

7/31/2019 Final Report on Petrolium Sector, Jitesh, Pathik

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A

Comprehensive Project

On

PETROLEUM SECTOR

FOR

OIL AND NATURAL GAS CORPORATION

UNDER THE GUIDANCE OF:

Ms. GAYATRI MOHANTY

(FACULTY- GUIDE)

PREPARED BY :

PATEL JITESH M.

MODI PATHIK D.

MBA - SEMESTER IV

ENROLLMENT NO. 107110592163

ENROLLMENT NO. : 107110592032

SUBMITTED TO :

Dr. J.K.PATEL INSTITUTE OF MANAGEMENT

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Dr. J. K. Patel Institute of Management

CERTIFICATE

Certified that this Comprehensive Project Report Titled The Petroleum

Sector In India With Special Focus On Oil and Natural Gas Corporation

Limited is the bonafide work of Mr. Jitesh Patel (Enrollment No.

107110592163) And Mr. Pathik Modi (Enrollment No. 107110592032), who

carried out the research under my supervision. I also certify further, that to the

best of my knowledge the work reported herein does not form part of any other

project report or dissertation on the basis of which a degree or award was

conferred on an earlier occasion on this or any other candidate.

Prof. Gayatri Mohanty Dr. P.G.K. Murthy

Faculty Guide Director

Date:

Place:

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PREFACE

Practice makes more perfect

In the field of management every time there is a requirement of understanding or

practical aspect of the organization with managerial mind. There is requirement to go

for practical knowledge of any subject supplement to the theoretical knowledge and

clarified concept.

It is more applicable in the field of the management especially a professional course

like M.B.A. Gujarat technological University has prescribed project report during the

4th Sem. as a part of M.B.A programmers at the Reliance Industries Limited is to

comply with this requirements also.

The project report on Petroleum sector, which provide perfect direction of invest the

money. The data collections were by annual report of the different companies,

magazines related to the cement association and discussion with concerned

employees and experts.

At the end findings and suggestions are reported.

I hope this serves the Purpose.

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ACKNOWLEDGEMENT

It is almost a ritual to begin the project report with an ACKNOWLEDGEMENT and

our heartfelt to all those who directly or indirectly made our project a great learning

experience, indicating me the values and importing the skills and hard work required

for project.

Many have contributed to the successful preparation of this report. We would like to

place on record our grateful thanks to each one of them. We have great pleasure in

submitting this report on PETROLEUM SECTOR as part of our 4TH semester

project work.

I am thankful to Dr. P.G.K.Murthy the Director of our institute and my mentor Prof.Gayatri

Mohanty and all the faculty members of our institute.

At last but not the least, I take an opportunity to appeal my profound gratitude to my family

& friends for their everlasting love, strong moral support, encouragement and personal

sacrifice without which it may not have been possible to reach the present status of

education.

JITESH PATEL

PATHIK MODI

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DECLARATION

I hereby declare that Report entitled PETROLEUM SECTORIN ONGC which

is submitted by me in partial fulfillment of the requirement for the award of MBA to

SGPIMS, GTU, under the guidance of Prof. Gayatri Mohanty, comprises only my

original work and has not been submitted for the award of any other degree.

JITESH PATEL.

PATHIK MODI

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EXECUTIVE SUMMARY

Oil & Natural Gas Corporation Limited (ONGC) is the premier company in the

Indian upstream of Petroleum Sector and it constantly thrives to retain this position.

Born in 1956 this corporation produces more than 1 million barrels daily holding a

reserve base of 6 billion tons of oil and oil-equivalent gas in India. The company

undertakes various activities like drilling, discovering, producing, transporting,

processing and now refining, retailing and marketing of hydrocarbons.

The new budget system, in ONGC is prepared with reference to the CRC

(Corporate Rejuvenation Campaign) structure.

The budget exercise has to begin from June-July keeping in view stringent

compliance to the various milestones in between the starting to final approval like:

Submitting the physical targets and obtaining the approval of the concerned

directors.

Submitting the activity wise financial outlays corresponding to the physical

targets.

Examination of activity wise outlays submitted by the corporate budget

section and communication of level of indicative financial outlays to the virtual

corporates.

Submission of item wise budget by virtual Corporate within the limits of

indicative financial outlays.

Approval of financial outlays by EC, PAC and Board.

The following budgets are prepared every year:

Revised estimates (RE) for current year

Budget Estimates (BE) for next year

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There are two types of budgets classified on basis of depth of planning required to

estimate the outlays required. They are:

Planned Budget

Non-Planned Budget

In ONGC the budget is prepared under 5 natural heads: --

1. Capital

2. Stores & Spares

3. Contractual

4. Manpower

5. Other charges

In ONGC Budget Monitoring is done by way of generation ofMonthly Cash

Expenditure report for each unit/service of a location and comparing it with the

Budget to determine the level of budget utilizations. Budgetary Control is exercised

in SAP System by ensuring that actual payment does not exceed the approved

budget.

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TABLE OF CONTENTS

SR. NO CONTENTS PAGENO.

1 Industry information 9

2 Corporate Profile 12

2.1 Company History 15

2.2 Basic Information 18

2.3 Vision and Mission 21

2.4 Milestone since Inception 22

2.5 Broad Functions 24

3 RESEARCH METHODOLOGY &ORGANISATION

REARCH

29

4 SWOT analysis of ONGC 33

5 Financial overview 35

6 Problem Identification 38

7 Impact on Indian Economy 39

8 Conclusion 41

9 Recommendation 43

10 Bibliography 45

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[1]INDUSTRY

INFORMATION

Pe

tro

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leum is the single largest source of energy used in the United States. The nation

uses two times more petroleum than either coal or natural gas and four times more

than nuclear power or renewable energy sources. Before petroleum can be used it is

sent to a refinery where it is physically, thermally, and chemically separated into

fractions and then converted into finished products. About 90 percent of these

products are fuels such as gasoline, aviation fuels, distillate and residual oil,

liquefied petroleum gas (LPG), coke, and kerosene. Refineries also produce non-

fuel products, including petrochemicals, asphalt, road oil, lubricants, solvents, and

wax. Petrochemicals (ethylene, propylene, benzene, and others) are shipped to

chemical plants, where they are used to manufacture chemicals and plastics. [DOE

1998]

The United States is the largest producer of refined petroleum products in the

world, with 25 percent of global production and 163 operating refineries. In 1997

refineries supplied more than 6 billion barrels of finished products and employed

about 65,000 people [DOE 1998, DOC 1997]. U.S. refineries are also the largest

energy consumers in manufacturing and spend $5-$6 billion annually in pollution

abatement costs [MECS 1994, DOE 1998]. The broad Standard Industrial

Classification (SIC) for refining is SIC 29; oil and gas exploration falls under SIC 13.

TOP 5 OIL & GAS COMPANIES

10
http://www.eia.doe.gov/emeu/mecs/iab/petroleum/page6.htmlhttp://www.eia.doe.gov/emeu/mecs/iab/petroleum/page6.htmlhttp://www.eia.doe.gov/emeu/mecs/iab/petroleum/page6.htmlhttp://www.eia.doe.gov/emeu/mecs/iab/petroleum/page6.htmlhttp://www.eia.doe.gov/emeu/mecs/iab/petroleum/sic.htmlhttp://www.eia.doe.gov/emeu/mecs/iab/petroleum/sic.htmlhttp://www.eia.doe.gov/emeu/mecs/iab/petroleum/page6.htmlhttp://www.eia.doe.gov/emeu/mecs/iab/petroleum/page6.htmlhttp://www.eia.doe.gov/emeu/mecs/iab/petroleum/page6.htmlhttp://www.eia.doe.gov/emeu/mecs/iab/petroleum/page6.htmlhttp://www.eia.doe.gov/emeu/mecs/iab/petroleum/sic.htmlhttp://www.eia.doe.gov/emeu/mecs/iab/petroleum/sic.html


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11

Symbol

NAME OF COMPANIES

INDIAN OIL CORPORATION LIMITED (IOC)

OIL AND NATURAL GAS CORPORATION(ONGC)

BHARAT PETROLEUM CORPORATIONLIMITED(BPCL)

RELIANCE PETROLEUM LIMITED (RPL)

ESSAR OIL LIMITED (EOL)


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[2]

CORPORATE

PROFILE

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PROFILE

Oil and Natural Gas Corporation Limited

Type PSU

Founded 1956

Headquarters Dehradun, India

Key people R S Sharma, Chairman and MD

Industry Petroleum and Gas

Website http://www.ongcindia.com

COMPANY PROFILE

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http://en.wikipedia.org/wiki/Category:Types_of_companieshttp://en.wikipedia.org/wiki/Public_Sector_Undertakinghttp://en.wikipedia.org/wiki/Dehradunhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Chairmanhttp://en.wikipedia.org/wiki/Managing_Directorhttp://en.wikipedia.org/wiki/Industryhttp://en.wikipedia.org/wiki/Petroleumhttp://en.wikipedia.org/wiki/Gashttp://en.wikipedia.org/wiki/Websitehttp://www.ongcindia.com/http://en.wikipedia.org/wiki/Image:Flag_of_India.svghttp://en.wikipedia.org/wiki/Category:Types_of_companieshttp://en.wikipedia.org/wiki/Public_Sector_Undertakinghttp://en.wikipedia.org/wiki/Dehradunhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Chairmanhttp://en.wikipedia.org/wiki/Managing_Directorhttp://en.wikipedia.org/wiki/Industryhttp://en.wikipedia.org/wiki/Petroleumhttp://en.wikipedia.org/wiki/Gashttp://en.wikipedia.org/wiki/Websitehttp://www.ongcindia.com/


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During the pre-independence period, the Assam Oil Company in

the northeastern and attock Oil company in northwestern part of the undivided India

were the only oil companies producing oil in the country, with minimal exploration

input.

After independence, the national Government realized the importance oil

and gas for rapid industrial development and its strategic role in defense.

Consequently, while framing the Industrial Policy Statement of 1948, the

development of petroleum industry in the country was considered to be of utmost

necessity.

Until 1955, private oil companies mainly carried out exploration of

hydrocarbon resources of India. In Assam, the Assam Oil Company was producing

oil at Digboi (discovered in 1889) and the Oil India Ltd. (a 50% joint venture between

Government of India and Burmah Oil Company) was engaged in developing two

newly discovered large fields Naharkatiya and Moran in Assam. In West Bengal, the

Indo-Stanvac Petroleum project (a joint venture between Government of India and

Standard Vacuum Oil Company of USA) was engaged in exploration work. The vast

sedimentary tract in other parts of India and adjoining offshore remained largely

unexplored.In 1955, Government of India decided to develop the oil and natural gas

resources in the various regions of the country as part of the Public Sector

development.

With this objective, an Oil and Natural Gas Directorate was set up towards the end

of 1955, as a subordinate office under the then Ministry of Natural Resources and

Scientific Research.

[2.1] Company History

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1947 - 1960

During the pre-independence period, the Assam Oil Company in the north eastern

and Attock Oil company in northwestern part of the undivided India were the only oil

companies producing oil in the country, with minimal exploration input. The major

part of Indian sedimentary basins was deemed to be unfit for development of oil and

gas resources.

After independence, the national Government realized the importance oil and gas for

rapid industrial development and its strategic role in defense. Consequently, while

framing the Industrial Policy Statement of 1948, the development of petroleum

industry in the country was considered to be of utmost necessity.

Until 1955, private oil companies mainly carried out exploration of hydrocarbon

resources of India. In Assam, the Assam Oil Company was producing oil at Digboi

(discovered in 1889) and the Oil India Ltd. (a 50% joint venture between

Government of India and Burmah Oil Company) was engaged in developing two

newly discovered large fields Naharkatiya and Moran in Assam. In West Bengal, the

Indo-Stanvac Petroleum project (a joint venture between Government of India and

Standard Vacuum Oil Company of USA) was engaged in exploration work. The vast

sedimentary tract in other parts of India and adjoining offshore remained largely

unexplored.

In 1955, Government of India decided to develop the oil and natural gas resources in

the various regions of the country as part of the Public Sector development. With this

objective, an Oil and Natural Gas Directorate was set up towards the end of 1955,

as a subordinate office under the then Ministry of Natural Resources and Scientific

Research. The department was constituted with a nucleus of geoscientists from the

Geological survey of India.

A delegation under the leadership of Mr. K D Malviya, the then Minister of Natural

Resources, visited several European countries to study the status of oil industry in

those countries and to facilitate the training of Indian professionals for exploring

potential oil and gas reserves. Foreign experts from USA, West Germany, Romania

and erstwhile U.S.S.R visited India and helped the government with their expertise.

Finally, the visiting Soviet experts drew up a detailed plan for geological and

geophysical surveys and drilling operations to be carried out in the 2nd Five Year

Plan (1956-57 to 1960-61).

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In April 1956, the Government of India adopted the Industrial Policy Resolution,

which placed mineral oil industry among the schedule 'A' industries, the future

development of which was to be the sole and exclusive responsibility of the state.

Soon, after the formation of the Oil and Natural Gas Directorate, it became apparent

that it would not be possible for the Directorate with its limited financial and

administrative powers as subordinate office of the Government, to function

efficiently. So in August, 1956, the Directorate was raised to the status of a

commission with enhanced powers, although it continued to be under the

government. In October 1959, the Commission was converted into a statutory body

by an act of the Indian Parliament, which enhanced powers of the commission

further. The main functions of the Oil and Natural Gas Commission subject to the

provisions of the Act, were "to plan, promote, organize and implement programmes

for development of Petroleum Resources and the production and sale of petroleum

and petroleum products produced by it, and to perform such other functions as the

Central Government may, from time to time, assign to it ". The act further outlined

the activities and steps to be taken by ONGC in fulfilling its mandate

1961 1960

Since its inception, ONGC has been instrumental in transforming the country's

limited upstream sector into a large viable playing field, with its activities spread

throughout India and significantly in overseas territories. In the inland areas, ONGC

not only found new resources in Assam but also established new oil province in

Cambay basin (Gujarat), while adding new petroliferous areas in the Assam-Arakan

Fold Belt and East coast basins (both inland and offshore).

ONGC went offshore in early 70's and discovered a giant oil field in the form of

Bombay High, now known as Mumbai High. This discovery, along with subsequent

discoveries of huge oil and gas fields in Western offshore changed the oil scenario

of the country. Subsequently, over 5 billion tonnes of hydrocarbons, which were

present in the country, were discovered. The most important contribution of ONGC,

however, is its self-reliance and development of core competence in E&P activities

at a globally competitive level.

After 1990

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The liberalized economic policy, adopted by the Government of India in July 1991,

sought to deregulate and de-license the core sectors (including petroleum sector)

with partial disinvestments of government equity in Public Sector Undertakings and

other measures. As a consequence thereof, ONGC was re-organized as a limited

Company under the Company's Act, 1956 in February 1994.

After the conversion of business of the erstwhile Oil & Natural Gas Commission to

that of Oil & Natural Gas Corporation Limited in 1993, the Government disinvested 2

per cent of its shares through competitive bidding. Subsequently, ONGC expanded

its equity by another 2 per cent by offering shares to its employees.

During March 1999, ONGC, Indian Oil Corporation (IOC) - a downstream giant and

Gas Authority of India Limited (GAIL) - the only gas marketing company, agreed to

have cross holding in each other's stock. This paved the way for long-term strategic

alliances both for the domestic and overseas business opportunities in the energy

value chain, amongst themselves. Consequent to this the Government sold off 10

per cent of its share holding in ONGC to IOC and 2.5 per cent to GAIL. With this, the

Government holding in ONGC came down to 84.11 per cent.

In the year 2002-03, after taking over MRPL from the A V Birla Group, ONGC

diversified into the downstream sector. ONGC will soon be entering into the retailing

business. ONGC has also entered the global field through its subsidiary, ONGC

Videsh Ltd. (OVL). ONGC has made major investments in Vietnam, Sakhalin and

Sudan and earned its first hydrocarbon revenue from its investment in Vietnam.

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[2.2] BASIC INFORMATION

Oil & Natural Gas Corporation Limited.

Incorporation year : 1959

Ownership : Central Govt. Commercial Enterprises.

Main Activity : exploration & production of Oil and Gas

Subsidiaries : Mangalore Refinery & Petrochemical Ltd.

ONGC Videsh Ltd.

BOARD OF DIRECTORS

R S Sharma : Chairman & managing Director

Dr. A K Balyan : Director ( Human resource)

A K Hazarika : Director ( Onshore)

D K Pande : Director ( Exploration)

U N Bose : Director (Technology & Field services

D K Sarraf : Director ( Finance)

S Vasudeva : Director ( Offshore)

R S Butola : Manging Director ( ONGC VIDESH LTD)

Non Functional Directors:

L M Vas

S S Rajsekar

S Balachanran

Santosh Nautiyal

Anita Das

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Motto

Provide quality services with efficiency and transparency.

Quality Objective

ONGC is committed to provide quality service at optimum cost with efficiency and

Transparency within time frame.

ONGC strategies to

Understands Customers needs expectation and continuously improve the

services to enhance the level of satisfaction of customers with as minimum

cause or complaints.

Ensure that when complaints are received, they are well attended to in a

timely manner within the framework of applicable department rules and

regulations with a view to eliminate root Cause and prevent recurrence.

Maintain a healthy constructive work environment by promoting the

employees competency through training and motivation that enables to give

optimal output.

Comply with the requirements of applicable statutory and corporate office

requirement.

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ORGANISATIONAL CHART:

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[2.3] VISION AND MISSION

To be a world-class Oil and Gas Company integrated in energy business withdominant Indian leadership and global presence.

1) World Class

Dedicated to excellence by leveraging competitive advantages in R&D andtechnology with involved people.

Imbibe high standards of business ethics and organizational values.

Abiding commitment to safety, health and environment to enrich quality ofcommunity life.

Foster a culture of trust, openness and mutual concern to make working astimulating and challenging experience for our people.

Strive for customer delight through quality products and services.

2) Integrated In Energy Business

Focus on domestic and international oil and gas exploration and production businessopportunities.

Provide value linkages in other sectors of energy business.

Create growth opportunities and maximize shareholder value

3) Dominant Indian Lead

Retain dominant position in Indian ership petroleum sector and enhance India'senergy availability.

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[2.4] MILESTONE SINCE INCEPTION

August 1956 Formation of Oil and Natural Gas Commission

April 1957 First well drilled in Jawalamukhi

September 1958 Discovery of oil in Lunej at Cambay

May 1960 Discovery of major oilfield in Ankleshwar

1962 Started Offshore exploration

1965 Formation of Hydrocarbons India Ltd.-OVL precursor

March 1970 First foray into offshore drilling at Aliabet and first offshore

drilling rig Sagar Samrat ordered

November 1973 ONGC got a contract to work in Iraq

February 1974 Bombay High discovered

March 1984 Giant onshore field Gandhar discovered

1988 HIL rechristened as ONGC Videsh Limited

1992 5 producing fields of ONGC handed over to multinational combines

June 1993 ONGC incorporated as a company

1998 Phased dismantling of Administered Price Mechanism (APM) starts

August 2001 Corporate Rejuvenation Campaign (CRC) rolls

January 2003 First commercial production in Vietnam

March 2003 OVL acquired 25% participating Interest in Greater Nile OilProject

ONGC acquired stake in MRPL

August 2003 Launching of Deepwater Exploration Campaign Sagar

Samriddhi

March 2004 10% equity of ONGC disinvested; offer oversubscribed in 11

minutes.

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ONGC DISCOVERED IN INDIA

[2.5] BROAD FUNCTIONS

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1889: Assam Shelf*

1973: Assam &Assam Arakand Basin

1980: Krishna

Godavari Basin

1985: CauveryBasin

1967:

RajasthanBasin

1958: CambayBasin

1974: MumbaiOffshore


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Following are the broad functions of Cambay Forward Base under CRC Structure:

1. Stacking of released locations and Handing over Drilling & Oil Mining.

2. Land acquisition.

3. preparation of approach roads and drill sites.

4. preparation of GTO (Geological Technical Order) and other related

technical data.

5. collection of subsurface geological data during drilling.

6. monitoring of day to day drilling operations for health/ timely well

completion.

7. Planning ,provisioning and inventory control of casing, well heads,

floating equipments, centralizers etc.

8. Co-ordination with other services such as Logging, WSS, Cementing,

Logistics.

9. Planning and monitoring production testing

10.Planning and execution of work over jobs.

11.documentation of data for each jobs

12.Budget preparation

13.Well Completion reports

14.Cost reduction planning

15.Other miscellaneous jobs related to exploratory and development

drilling and work over jobs in Cambay Forward Base.

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PRODUCT DETAILS

ONGC Ltd. has following product profile

a. Crude oil

b. Gas

c. LPG

d. Naphtha

e. Electricity-Wheeling & Sale

f. Crude Oil Processing & Transporting

g. Gas Compression

ONGC Ltd., Cambay involves in production of Crude Oil, Natural Gas and Crude Oil

Processing & Transportation. Their customers are.

1. IOCL (Crude Oil)

2. GAIL (Natural Gas)

3. GSPC/NIKO (Processing of Crude Oil)

4. Heramec Ltd. (Processing Of Crude Oil)

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In 2009, India was the 6th largest net importer of oil in the world, importing

nearly 2.1 million barrels perday, or about 70 %, of its oil needs as compared with 44 %

in 1995 .Nearly 70 % of Indias crude oil imports come from the Middle East,

primarily from Saudi Arabia, followed by Iran.

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[3]

RESEARCH

METHODOLOGY

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O B J E C T I V E O F T H E S T U D Y

The study is oriented with the following objectives.

To know the financial passion of Oil &natural gas corporation ltd.

To know the liquidity posit ion of Oil &natural gas corporation ltd.

To understand the cash management system of Oi l &natural gas

corporation ltd.

To understand the sales account ing and debtors managementsys tem o f O il &natura l gas corpora tion l td . To understand the

budgeting system of Oil &natural gas corporation ltd.

To know the posit ion of current assets and current l iabil i t ies of Oil

&natural gas corporation ltd.

Methodology is a systematic procedure of collecting informationin order to analyze and verify a phenomenon. The collection of

information is done two principle sources, viz

1. Secondary data

Secondary data:-

The secondary data was col lected from already publ ished

sources such as, pamphlets of annual reports, returns and internal

records.

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The data collection includes:-

(a) Collection of required data from annual records of Oi l &natural

gas corporation ltd.

(b) Reference f rom textbooks and journals rela ting to f inanc ial

management.

(c) Electronics based data such as internet d ownloaded data.

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DATA

SOURCES

SECONDARYSOURCES

SECONDARY

SOURCES

PRIMARYSOURCES

INSIDE THE

COMPANY

OUTSIDE THECOMPANY

MANAGEMENT

RESPONDENTS

ANNUAL

REORT /

RECORDS

TEST BOOK/JOURNALS/

WEBSITE

PERSONALOBSERVANCE

PERSONALOBSERVANCE


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Research design

This project is basically on descriptive type of research design.

Descriptive study:

In descr ip ti ve resea rch des ign t he main focus i s on

describing the project. Here in this project I take detail study of

the ratio analys is & budge ting sys tem o f O il &natural gas

corporat ion l td. I gathered comprehensive data collected about

the ratio & budgeting.

Limitations

The response of the employees in giving information was

lukewarm.

Organizations resistance to share the internal information.

Company uses account without in tally so that I dont collect

sufficient data.

Companys employee cannot provide those data which is compulsory to

keep secret.

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[4]SWOT

Analysis ofONGC

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Strengths

Market leader in oil and gas sector in India

Strong and visionary leadership Strong financial position of the company with huge oil and gas reserves Existing product of value added products like kerosene ,Neptha , Diesel ,etc Owns equity of oil and gas abroad. ONGC has ISO-9001 and ISO 14001 registration.

Weakness

State owned

No major exploration except Bombay High. It needs to find out more sourceslike Bombay High. Average age of regular employees is 50+. Young manpower is needed. Manpower is more than required. No experience in retail marketing of petroleum products.

Opportunities

Possible mergers with smaller companies.

Finding alternative fuels before fuels before competitors. Expanding into more areas. Increase in Oil and Gas equity abroad through its overseas subsidiary, OVL. Entry into Energy sector through power generation.

Threats

Increase competitor activity in the oil and gas business in India andemergence of other integrated like RIL.

Backward integration by Oil refining companies like IOCL, Gas and powergenerating companies like Gail and NTPC.

Limited availability of fossil reserves. Continued subsidy to be provided by ONGC. Government policy affect long term planning

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[5]

FINANCIAL

OVERVIEW OF

ONGC

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NET SALES TURNOVER OF ONGC FROM THE YEAR 2006-11

FINANCIAL PERFORMANCE

Particulars 2010-11 2009 10 2008 09 2007 08 2006-07

Turnover 661,516 602, 061 639,493 601,373 569037

Profit After Tax

(PAT)

189,240 167,676 161,263 167,016 156429

Dividend 136888.3 70583.3 68,444 68,444 60108

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MILLIONS


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NET PROFIT OF ONGC FROM THE YEAR 2006-11

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[6] Problem Indentification

a) RISE IN COST OF IMPORTS: The first victim of rise in crude oil prices is thestate exchequer. Every increase of $1 per barrel in Indian crude basket pricespushes up the annual oil import bill by $1.2 billion. It also leads to a fasterdepletion of Indias Foreign Exchange (FOREX) Reserves.

b) INFLATION:Rise in fuel prices has a direct impact on the prevailing inflationrate in the economy. Higher fuel prices (in particular Diesel) lead to increasein transportation costs across the country. As a result of which the price ofessential commodities (such as food items, cement, coal etc) shoots up.Inflationary expectations among traders lead to hoarding which pushes the

spiraling inflation rate further up.

c) HIKE IN INTEREST RATES: The Reserve Bank of India (RBI) is entrustedwith the responsibility of containing inflation in the Indian economy throughperiodic Monetary Policy review. In case of inflation zooming beyond thecomfort zone, the RBI steps in to bring it down to an acceptable level. It doesso by increasing the Cash Reserve Ratio (a portion of deposits which bankshave to keep with the RBI), Repo Rate (the rate at which banks borrow fundsfrom the RBI) & Reverse Repo Rate (the rate at which RBI borrows moneyfrom the banks)

d) SLOWDOWN IN ECONOMIC GROWTH:A sustained rise in interest rates inthe economy begins to hurt the economic growth. Reduced investment, lowerspending on infrastructure & fall in domestic consumption of goods & servicesputs a break on the growth of the economy.

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[7] Impact on Indian economy

a) Indias crude oil import bill may cross USD100 billion if the global price staysfirm at USD 100-USD 120 a barrel. If that happens, it will upset the delicatefiscal balance, expand deficit, increase the subsidy bill that continues to bloatyear after year and fuel inflationary expectations. Rising crude oil prices willimpact inflation whether the government absorbs the burden or passes it tothe consumer by increasing prices of petroleum products. If the governmentacts as a buffer, the oil subsidy bill will rise and affect fiscal deficit. This willindirectly fan inflation. India's oil import bill in the first 11 months of 2010-11was USD 85 billion. For the whole year, it is reported to have reached USD

90 billion. India, which imports nearly 80 percent of its crude oil requirement,spent USD 79.55 billion in 2009-10.

b) The recent strengthening of crude oil prices could impact economic growthmomentum in the country for the current fiscal. The main factors that wouldbe responsible for economic growth moderation in 2011-12 would be crude oilprices and RBI's tightening of monetary policy in response to oil prices. Risingcrude price will lead higher inflation and higher inflation attracts monetarytightening. Monetary tightening would lead to a squeeze on aggregatedemand, impacting economic growth.

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Impact on world economy

It is estimated that over a year, USD 100 oil would reduce U.S. economic growth by

0.2 or 0.3 of a percentage point. So rather than grow an estimated 3.7 percent thisyear, the economy would expand 3.4 percent or 3.5 percent. That would likely meanless hiring and higher unemployment. The global economy wouldn't be affected asmuch. In part, that's because emerging economies consume less oil, per person,than industrialized countries do. In addition, many developing countries regulate orsubsidize the cost of gas. Global growth would slip about 0.1 percentage points,economists estimate. But rising oil prices could threaten European economies, manyof which are net importers of oil and gas, haven't fully recovered from the financialcrisis and face heavy debt loads. Spain and Italy, where gas at the pump alreadygoes for about USD 8 a gallon, face years of a slow, grinding recovery. A spike in oilwould deal their economies another setback.

Rising oil price would also push up inflation in Europe, where it already exceedsofficial targets, and in countries with surging food prices, like China, Brazil and India.Those countries might then have to raise interest rates to cool inflation. Doing so, inturn, would slow growth in Latin America and Asia.

How Crude Oil Prices Affects People:

For this reason, higher oil prices increase the cost of everything people buy,especially food. That's because a lot of food costs depends on transportation. Highoil prices will ultimately increase inflation.

Crude oil prices most directly affect you in higher gasoline prices and higher homeheating oil prices (primarily for those of you who live in the Northeast U.S.) Crude oilaccounts for 55% of the price of gasoline, while distribution and taxes influence theremaining 45%.

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http://useconomy.about.com/od/pricing/f/Inflation.htmhttp://useconomy.about.com/od/commoditiesmarketfaq/p/high_gas_prices.htmhttp://useconomy.about.com/od/pricing/f/Inflation.htmhttp://useconomy.about.com/od/commoditiesmarketfaq/p/high_gas_prices.htm


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[8]CONCLUSION

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Participation: The budget system in ONGC involves as many people aspossible. In drawing up a budget, budget coordinators are appointed at everywork centers.

Comprehensiveness: Since budget is prepared at cost center level to reapthe benefit of accuracy. In this way ONGC embrace the whole organization in

budget preparation.

Flexibility: Though the corporate budget section passes the budget for the

total requirement of fund centre, internal adjustments can be made if one or

the other cost centers need for funds exceeds the estimated expenditure so it

allow enough flexibility to deal with changing circumstances or newrequirements.

First BE is prepared for any year and thereafter RE is prepared. As BE is

prepared in advance by a year there may be some limiting internal and

external factors in an effective manner RE is prepared for that BE during the

month of June.

Feedback: Monthly utilization report facilitates constant monitoring of

performance.

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[9]RECOMMENDATION

It was a great experience during my summer training that I have got an opportunity

to work with a company like ONGC which is the only Indian company having crossedfirst time the profit of Rs. Ten thousand Crore. I have discussed about the modules

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of budgeting briefly so that anyone can get the idea about the budgetary control of

ONGC.

Actual figures. These figures serve as the basis for preparing budget for current

year. On the contrary it is advisable to consider past few years data, this enables

one to get an idea as to what are the requirements every year, thus a standard

can be made. This standard can thus be used as tool for accurately estimating

budgetary requirements.

Funds that are allocated, as budgetary requirements to the funds centers remain

unutilized either for the need of placing an order or for want of fulfillment of the

placed order on time. These are accounted as throw forward items in the

succeeding budget. Allocated funds should be utilized in respective year itself so

that the budget is consumed in the respective year.

Here the Revised Budget (RE) is prepared for current year and Budgeted

Estimate (BE) is prepared for following year. In addition to this a consolidated

/comprehensive budget for five years should be prepared to know long-term

budget requirements.

The costing records are maintained under the SAP (system application

programming). The actual cost have to be downloaded from SAP and uploaded

in Budget Software, this is time consuming Instead a provision wherein budget

can also be prepared under SAP itself should be introduced.

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[10]BIBLOGRAPHY

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REFERENCES

Prasanna Chandra, Financial Management, Tata McGraw Hill, New Delhi

Budget Circular

Annual Reports for the Year 08-09

COMPANY MAGAZINES:

Corporate Finance, ONGC,

ONGC Reports, May & June, 2010

Internet:

www.ongcindia.com

http://jade-1.ongcl.com/DirectoryServices/index.jsp

www.ongc videsh.com

O.N.G.C LTD. Annual Report (20010-11)

Intranet:

http://10.205.55.5
http://www.ongcindia.com/http://jade-1.ongcl.com/DirectoryServices/index.jsphttp://www.ongcvidesh.com/http://www.ongcvidesh.com/http://10.205.55.5/http://www.ongcindia.com/http://jade-1.ongcl.com/DirectoryServices/index.jsphttp://www.ongcvidesh.com/http://10.205.55.5/

final report on petrolium sector, jitesh, pathik

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