Oil & Natural Gas Corpn Ltd

Dear Members,

It gives me immense pleasure to present, on behalf of the Board of Directors of yourCompany, the 17th Annual Report and Audited Statements of Accounts for the year ended 31stMarch, 2010, together with the Auditors' Report and Comments on the Accounts by theComptroller and Auditor General of India (C & AG).

Your Company continues to achieve excellence in its core area of E & P sphere bothin India as well as abroad, and also continues to win accolades from various quarters.Finance Asia, Hongkong has ranked ONGC as Number-1 Top Blue Chip Company of India (or 2009(December 2009). ONGC is ranked at Second Position in Financial Express FE500 listing ofIndian companies both in terms of Net Worth and Overall Composite Ranking (March 2009).Your Company has been ranked at 155th position in Forbes Global 2000 list of world'sbiggest companies for 2010 (April 2010). ONGC retains number one rank among Indiancompanies and has been ranked 95th among the Forbes Global 2000 biggest companies as perprofit.

Exploration

In recent years, your Company has intensified its exploratory efforts in domestic aswell overseas basins to locate new oil and gas assets. These efforts paid good dividendsin terms of new discoveries and reserve accretion, During FY10. your Company made twentyone (21) discoveries in domestic fields operated by it-14 in onshore and 7 in offshoreareas. Out of 21 discoveries 11 were new prospect discoveries and 10 were new pooldiscoveries.

Highest reserve accretion in last two decades

ONGC accreated 82.98 Million Tonnes of Oil Equivalent (MTOE) of Ultimate Reserves (3P)in domestic operated fields the highest in last two decades. Total reserve accretion indomestic basins has been 87.37 MTOE [including 4.39 MTOE from ONGC's share in JointVentures (JVs)]. Initial In-place reserve accretion in domestic basins was 273.42 MTOEincluding 22.82 MTOE from ONGC's share in JVs.

Reserve Replacement Ratio (RRR)

Reserve Replacement Ratio (RRR) i.e. the ratio of reserve accretion to the productionof ONGC in its own domestic fields in this fiscal has been quite impressive at 1.74 for 3Preserves; again the highest in the last two decades. This is the 5th consecutive year ONGCmaintained RRR of more than 1 against global feature of lower than 1 registered by largenumber of oil companies.

Oil & Gas production levels maintained

ONGC has maintained oil and gas production levels despite global trend of decliningproduction from matured oil fields. During FY'10, the combined Oil and Gas production ofONGC, including OVL and ONGC's share in PSC-JVs, was 60.93 MTOE; marginally lower ascompared to 61.23 MTOE in FY'09. Production from overseas fields registered 8.87 MTOE; thehighest ever.

Largestoil & gas producer in the country

Oil and gas production from domestic fields, including ONGC's share in PSC JVs has been52.06 MTOE during FY'10 against 52.45 MTOE during FY'09. ONGC accounted for 79% of India'scrude oil and 54% of natural gas production during FY'10.

Highest-ever production from overseas assets

ONGC Videsh Limited (OVL), the flagship wholly owned subsidiary for overseas operationshas now footprints across 15 countries with 39 projects. Since its first hydrocarbonrevenue from overseas in 2002-03 from Vietnam, this year OVL registered highest everproduction of 8.87 MTOE of oil and gas.

First oil from RJ-ON-90/1

Your Company holds 30% participating interest in RJ-ON-90/1 pre-NELP block operated byCairn Energy India Pty. Ltd. (CEIL). Till date, 25 discoveries have been made in the blockwith six major discoveries i.e., Mangala, Aishwariya, Raageshwari, Saraswati, Bhagyam andShakti. Out of these discoveries, Mangala commenced production from 24th August, 2009; andit was dedicated to the nation by Hon'ble Prime Minister Dr. Manmohan Singh on 29thAugust, 2009 at Barmer. Rajasthan. Your Company is aggressively pursuing with theGovernment of India for reimbursement of royalty which it is paying on behalf of theoperator.

New Projects

During FY'10 the Board has approved development of various offshore marginal fields vizadditional development of D-1 field (13.962 MMT oil by 2025) at an investment of Rs.21,636.5 Million, developmentof North Taptig as field (4.116 BCM gas by 2021) at aninvestment of Rs. 7,557 Million and development of Cluster-7 fields (9,73 MMt of oil &condensate and 4.52 BCM gas by 2029) at an investment of Rs. 32,410 Million.

Your Company is currently implementing redevelopment projects in major fields ofWestern offshore at an estimated cost of Rs. 182 billion which includes Mumbai High Northredevelopment phase II at Rs. 71 billion, Mumbai High South redevelopment phase II at Rs.88 billion and Heera & South Heera redevelopment at Rs. 23 billion. During FY'10, thefollowing new facilities were completed to enhance production:

• Installation of 4 Well Platforms C-39A, C-24, C-39-1 and C-22, along withassociated modification and pipelines under C-Series development.

• Installation of Process Platform BCPA-2 with 2nd stage booster compressors forBassein field (10MMSCMD) and Vasai East process facilities having liquid handling capacityof 12,000 bopd, Gas compression of 2.0 MMSCMD and water injection facility of 47,000 bwpdalong with associated modifications under Vasai East development project.

• Three new smart wel platforms Rs.-16, Rs.-16 and Rs.-17 along with associatedcables, pipelines and topside modification under Mumbai High South Redevelopment Phase II.

During the fiscal 2009-10, your Company brought 5 new marginal fields to production.With this total, 50 such fields are now on stream and these fields produced 2.0691 MTOE ofoil and gas during 2009-10.

ONGC bags highest number of blocks in NELP-VIII

You would be pleased to note that in NELP-VIII bid round, ONGC in partnership with itsconsortia members, submitted the bids for 25 exploration blocks and won 17 of these. Inthe eight NELP rounds which have been rolled out so far, ONGC has won 50% of the blocksi.e.,121 out of total 242 blocks awarded by the Govt, of India, Your Company now holds 80NELP blocks (70 as operator) and 62 nomination blocks.

CBM production

Your Company is operating in 5 CBM Blocks i.e., Jharia, Bokaro, North Karanpura andSouth Karanpura Blocks in Jharkhand and Raniganj Block in West Bengal, CBM production fromPilot Project at Parbatpur commenced from January, 2010. Final Development Plan (FDP) forJharia block has been submitted for approval of the Government.

Value Added Products

The Hazira Plant of your Company started production of a new product Propane. DuringFY'10,1,316 MT of Propane was sold. During FY'10, revenue from export of 1,568 MTofNaphtha has been Rs. 45,770 mil ion; the highest- ever both in terms of quantity exportedand revenue earned.

Alternate sources of energy

51 MW Wind power farms which your Company hadset up near Bhuj in Gujarat with aninvestment of Rs. 3,080 million in September, 2009 is already operational. The electricitygenerated is wheeled through the Gujarat State Electricity Grid for captive consumption byONGC at Ankleshwar, Ahmedabad, Mehsana and Vadodara.

ONGC Energy Centre set up by your Company for holistic research for new and alternateenergy sources has been pursuing a number of new projects like. Thermo-chemical generationof hydrogen. Bioconversion of coalfoil to methane gas, Uranium exploration, Solid statelighting, Solar PV Energy Farm, etc.

SCOPE Gold Trophy for achievements in CSR and R&D

You will be delighted to know that your Company received the Gold Trophy for 'SCOPEMeritorious Award for Corporate Social Responsibility and Responsiveness for 2007-2008 andGold Trophy for R & D, Technology Development and Innovation for the year 2008-09. Theawards were presented by H.E. the President of India, Smt. Pratibha Devisingh Patil toCMD, ONGC on Public Sector Day i.e. on 10th April, 2010 at Vigyan Bhawan, New Delhi.

1. Financial Results

Despite volatile markets, your Company has earned a Profit After Tax of Rs.167,676million (Rs. 161,263 million in 2008-09), up 3.98%, which is incidentally thehighest-ever.

During the year under review, your Company registered Gross revenue of Rs.619.832million (Rs. 566,357 million in 2008-09), up 9.44%, by netting off the revenue fromtrading of products of Mangalore Refinery & Petrochemicals Limited (MRPL), asubsidiary of your Company, amounting to Rs. Nil (Rs. 85,098 million in 2008-09).

*OID Cess, Excise duty, Royalty, Corporate and Dividend Distribution Tax and Dividendon Government shareholding.

Financial Results

Previous year figures have been regrouped wherever necessary

2. Dividend

Your Company paid an interim dividend of Rs. 18 per share (180%), in December, 2009.The Board of Directors have recommended a final dividend of Rs. 15 per share (150%) makingthe aggregate dividend at Rs. 33 per share (330%) as compared to Rs. 32 per share (320%)paid in 2008-09. The total dividend will absorb Rs. 70,583 million, besides Rs. 11.616million as tax on dividend, which is historically the highest dividend payout by theCompany.

3. Management Discussion and Analysis Report

In terms of Clause 49(IV)(F) of the Listing Agreement with the Stock Exchanges, aManagement Discussion and Analysis Report has been included and forms part of the AnnualReport of the Company.

4. Production and Sales

Highlights of production and sales of Crude Oil. Natural Gas and Value-added products:

* Includes 1.79 MMT (Previous year 1.65 MMT) from Joint Ventures.

** Includes 2.49 BCM (Previous year 2.95 BCM) from Joint Ventures.

*** Sale of electricity of Rs. 131 million (Previous year Rs. 205 million) regrouped toother income.

5. Oil & Gas Reserves

Your Company has made voluntary disclosures in respect of Oil & Gas Reserves,conforming to SPE classification 1994 and US Financial Accounting Standards Board(FASB-S9). ONGC has added 250.60 MTOE of oil and oil- equivalent gas (O+OEG) initialinplace volume with 82.98 MTOE of O+OEG as the ultimate reserve component during FY'10.The ultimate reserves accretion, including its share in joint ventures is 87.37 MTOE ofO+OEG, which is the highest in last two decades.

6. Statement of Reserve Recognition Accounting

The concept of Reserve Recognition Accounting attempts to recognize income at the pointof discovery of reserves and seeks to demonstrate the intrinsic strength of anorganization with reference to its future earning capacity in terms of current prices forincome as well as expenditure. This information is based on the estimated net provedreserves (developed and undeveloped) as determined by the Reserves Estimates Committee.

As per FASB-69 on disclosure about Oil and Gas producing activities, publicly tradedenterprises that have significant Oil and Gas producing activities, are to disclose withcomplete set of annual financial statements, the following supplemental information:

a) Proved Oil and Gas reserve quantities.

b) Capitalized costs relating to Oil and Gas producing activities.

c) Cost incurred for property acquisition, exploration and development activities.

d) Results of operations for Oil and Gas producing activities.

e) A standardized measure of discounted future net cash flows relating to proved Oiland Gas reserve quantities.

Your Company has disclosed information in respect of (a) and (d) above in the AnnualFinancial Statements. Your Company has made voluntary disclosure on standardized measureof discounted future net cash lows relating to proved oil and gas reserve at Annexure-A tothis report as Statement of Reserve Recognition Accounting (RRA).

7. Financial Accounting

The Financial Statements have been prepared in accordance with the Generally AcceptedAccounting Principles (GAAP) and in compliance with all applicable Accounting Standards(AS-1 to AS-29) and Successful Efforts Method as per the Guidance Note on Accounting forOil & Gas Producing Activities issued by The Institute of Chartered Accountants ofIndia (ICAI) and provisions of the Companies Act, 1956.

8. Internal Control System

The Company has well established and efficient internal control system and procedures.Your Company has already implemented SAP R/3 system for integration of various businessprocesses across the organization. The system has now been upgraded from earlier versionof My SAP 4.6C to ECC 6.0. The Company also as well defined financial powers of variousexecutives in its Book of Delegated Powers (BDP). Integrated BDP has recently been revisedto bring further delegation, The Company has m-house Internal Audit Departmentcommensurate with its size of operations. Audit observations are periodically reviewed bythe Audit & Ethics Committee of the Board and necessary directions are issued whereverrequired.

9. Subsidiaries

(i) ONGC Videsh Limited (OVL)

ONGC Videsh Limited, the wholly-owned subsidiary of your Company for overseas E & Pactivities, registered/satisfactory performance during 2009-

The Big Deal

A consortium led by OVL signed a contract on 12r May, 2010 for 40% ownership in thecompany, formed for developing Carabobo-1-Norte and Carabobo-1-Centro heavy oil blocks inVenezuela. The Corporacian Venezolana del Petrleo ('CVP'), a subsidiary of Petr'leos deVenezuela S.A. ('PDVSA'), Venezuela's state oil company, will hold the remaining 60%equity interest. The members of the OVL's Consortium are: OVL (11%), Indian OilCorporation Limited (3.5%), Oil India Limited (3.5%), Repsol YPF (11.0%) and PetroliamNasional Berhad ('PETRONAS') (11%). The company will build heavy oil productionfacilities, upgrading facilities and associated infrastructure. The upstream productionfacilities are expected to produce around 400,000 barrels per day of extra heavy oil ofwhich approximately 200,000 barrels per day will be upgraded into light crude oil in afacility to be located in the Soledad area, Anzo'tegui State. The license term will be for25 years with the potential for a 15 year extension.

Out of 39 projects, OVL is operator in 16 projects and joint operator in 6 projects.OVL is currently producing oil and gas from Greater Nile Oil Project and Block 5A inSudan, Block 06.1 in Vietnam, AI Furat Project in Syria, Sakhalin-I Project and ImperialEnergy in Russia, Mansarovar Energy Project in Colombia and San Cristobal Project inVenezuela. Block BC-10 in Brazil commenced production from 13th July, 2009. Block A-1 andA-3 in Myanmar and Carabobo Project in Venezuela are in development phase. North RamadanBlock, NEMED Project in Egypt and Farsi Offshore Block in Iran have discoveries andappraisal work is being carried out. Development for Abu Khashab and Rashid discovehes inBlock-24, Syria has been approved by the Syrian Government and further exploration work isongoing in the block. OVL had completed the Product Pipeline Project for Sudan Governmentand handed over the pipeline to it in October, 2005 and is currently under lease. Theremaining projects are in exploration phase.

During 2009-10, OVL's consolidated share in production of oil and oil equivalent gas(O+OEG), was 8.87 MMT. OVL's consolidated gross revenue during 2009-10 was Rs. 153,828million (Rs. 184,235 million during 2008-09) down 16.5%. OVL's consolidated Profit AfterTax during 2009-10 was Rs.20,896 million (Rs. 28,067 million during 2008-09) down by25.55%. The reduction in Gross Revenue and Profit After Tax is mainly on account of fallin crude oil prices in the international markets during 2009-10.

a) ONGC Nile Ganga B.V. (ONGBV):

• ONGBV, a subsidiary of OVL, is engaged in E&P activities in Sudan, Syria,Venezuela and Brazil. ONGBV holds 25% Participating Interest (PI) in Greater Nile OilProject (GNOP), Sudan with its share of oil production of about 2.126 MMT during 2009-10.

• It has 16.66% to 18.75% participative interest in four Production SharingContracts (PSCs) in AI Furat Project (AFPC), Syria with its share of oil and gasproduction of about 0.718 MMTOE during 2009-10.

• ONGBV also holds 40% PI in San Cristobal Project in Venezuela with its share ofoil production of about 0.704 MMT during 2009-10.

• Further ONGBV has 15% PI in BC-10 Project in Offshore Brazil which has commencedproduction in 2009-10 contributing to OVL's share of 0.192 MMt oil during the year. Thecurrent total production of the project is about 80,000 barrels of oil per day.

• ONGBV also has 100% PI and is the operator of exploratory blocks BM-S-73 andBM-ES-42 and holds 25% PI in exploratory blocks Block BM-SEAL-4 and Block BM-BAR-1 alllocated in Deepwater Offshore, Brazil.

b) ONGC Narmada Limited (ONL):

ONL, a wholly-owned subsidiary of OVL is engaged n E&P activities n Nigeria-SaoTome & Principe, Jo it Development Zone: JDZ) with' 3.5% D in deepwater explor at onBlock-2

c) ONGC Amazon Alaknanda Limited (OAAL):

OAAL, a wholly-owned subsidiary of OVL, holds stake in E & P projects in Colombia,through Mansarovar Aiakaranda Energy Colombia Limited (MECL), a 50:50 joint venturecompany with Sinopec of China. During 2009-10, OVL's share of production in MECL was about0.409 MMT of oil.

d) Jarpeno Limited:

Jarpeno Limited, a wholly-owned subsidiary of OVL incorporated in Cyprus, Jarpenoacquired Imperial Energy Corporation pic, a UK listed Limited upstream oil exploration andproduction entity with its main activities in Tomsk region of Western Siberia in Russia,in January, 2009. During 2009-

e) AB Startkapitalet nr 5636 {name changed to Carabobo One AB):

OVL holds 11% in Carabobo project through a mixed company AB Startkapitalet nr 5636(name changed to Carabobo One AB). Joint Venture of OVL:

f) ONGC Mittal Energy Limited (OMEL)

OVL along with Mittal Investments Sari (MIS) promoted OMEL a joint venture companyincorporated in Cyprus OVL and MIS hold 98% equity shares of OMEL in the ratio of 49(OVL): 49 (MIS) with balance 2% shares held by SBI Capital Markets Ltd. OMEL holds45 5%and 64.33% PI in exploration Blocks OPL 279 and OPL 285 respectively in Nigeria. OMEL alsoholds 1.11% Class-C shares in ONGBV exclusively for AFPC Syrian Assets, such inveslmentbeing financed by Class-C Preference Shares; Issued by OMEL in the ratio of 51:49 to OVLand MIS respectively.

(g) Mangalore Refinery & Petrochemicals Limited (MRPL)

Your Company contin ues to hold 71.62% equity stake in MRPL, which has put in acommendable all-round performance, despite downturn during 2009-10.

Highlights

• Refinery crudethruput-12 50MMT.

• Turnover-Rs. 360,809 million.

• Profit After Tax-Rs. 11,124 million.

Keeping in view its plans to make investments in various projects, a dividend of 12%has been recommended by its Board. MRPL has successfully completed the turnaround of the6MMTPA unit as per schedule and also revamp of Gas Oil Desulphurisation unit. Thedistil.ate yield was highest ever 72.8% at an operating level of 12.5 MMTPA The domesticdispatches were highest during the FY 2009-10. MRPL received the first parcel of 'Mangala'crude from the Rajasthan oil field of ONGC and Cairn on 9th October, 2009. MRPL hasachieved 'Excellent' performance results under the MOU with ONGC, its holding company.MRPL achieved its lowest ever energy index in terms of MBTU/BBL/MRGF (MBN) of 58.27 duringthe year. The excellent operating, production and safety standards maintained by itsRefinery have enabled MRPL to achieve remarkable energy saving and also an accident-freeyear. ICRA has reaffi rmed their Issuer rating of or AAA' to MRPL for lowest credit nsk.CRISIL issued rating of 'Cr AAA' to MRPL indicating highest safety.

It bagged the following awards and accreditations during the year:

• Winner in the 'Most Safe Refinery' in last three years and runner up in'Refineries' categories of OISD awards for the year 2008-09.

• Jawahartal Nehru Centenary Award 2008-09 - Joint 1st Prize in Specific EnergyConsumption Performance amongst all Refineries in Public Sector.

• Superstar Achiever Award-2008 for best export performance from Kanara Chamber ofCommerce and also State Level Export Award for the Year 2005-06 and 2006-07 from Govt, ofKamataka.

Direct Marketing

Direct marketing sales of MRPL registered an overall growth of 3% covering productsBitumen, Furnace Oil, Naphtha, Mixed Xylene, LSHS and Sulphur, with sales of 800 TMT in2009-10. MRPL Shell Aviation Fuel Services Private Limited (a Joint Venture Company ofMRPL and Shell Global) has made good progress in marketing of ATF to domestic airlines atBangalore and Hyderabad airports and is likely to commence operation at Mangalore airportshortly.

Implementation of the Phase III Refinery Project with a project cost of Rs.121,600million, was on schedule during the year 2009-10. With a view to add value to thepropylene, implementation of Polypropylene unit at a cost of Rs. 18,030 million has beenapproved. A contract for construction of ISBL facility has been placed on EIL forexecution under open book execution method. Your Company has approved to extend a loanfacility of Rs. 50,000 million for part financing the projects. OIDB has also sanctioned aloan of Rs. 2,000 million for the projects.

10. Exemption in respect of Annual Report of Subsidiaries and Consolidated FinancialStatement

In terms of approval granted by the Central Government under Section 212(8) of theCompanies Act, 1956 copies of the Balance Sheets, Profit and Loss Accounts, Reports of theBoard of the Directors and Reports of the Auditors of the subsidiary companies have notbeen attached to the Accounts of the Company. The Company will make thesedocuments/details available upon request by any member of the Company interested inobtaining the same. Annual Reports of MRPL and OVL are available on website www.mrpl.co.inand www.ongcvidesh.com respectively.

In accordance with the Accounting Standard (AS)-21 on 'Consolidated FinancialStatements' read with AS-23 on 'Accounting for Investments in Associates' and AS-27 on'Financial Reporting of Interests in Joint Ventures', audited Consolidated FinancialStatements for the year ended 31st March, 2010 of the Company and its subsidiaries formpart of the Annual Report.

(i) ONGC Tripura Power Company Limited (OTPC)

ONGC has promoted OTPC with envisaged equity stake of 50% along with Govt of Tripura(0.5%) and IL & FS (26%) to set-up 726.6 MW (363.3x2) gas based Combined Cycle PowerPlant (CCPP) at Pallatana in Tripura to monetize its idle gas assets in Tnpura. Variouslinkages like gas supply by ONGC and power off-take by NE states have been finalized. TheJV company has also tied updebt forthe project with Power Finance Corporation LimitedBharat Heavy Electricals Limited has been engaged as EPC agency for completion ofGeneration Project on turnkey basis. The first phase of the project is likely to becompleted by December, 2011.

(ii) ONGC Petro-additions Limited (OPaL)

Your Company has promoted a JV company 'ONGC Petro-additions Limited' (OPaL) with 26%equity stake along with GAIL (19%) and Gujarat State Petroleum Corporation Ltd (GSPCL)(5%) to implement a mega petrochemical complex comprising of 1.1 MMTPA ethylene Crackerand global scale polymer units within Dahej SEZ as a step towards downstream integration.A map-statutory approvals like Environmental Clearance from MoEF, SEZ Unit approval etchave been ootamed and major LSTK contracts relating to site infrastructure development,dual feed cracker contract, technology licensors) for downstream polymer units have beenawarded. M/s EIL has been engaged as the PMC of the project.

(iii) Mangalore Special Economic Zone Limited (MSEZ)

ONGC with 26% equity stake in MSEZ along with KIADB (23%) and IL & FS+KCCI (51%),is promoting another SEZ in coastal Mangalore. Ministry of Commerce & Industry hasformally notified to set up a Petro-chemical Specific SEZ in 1453 acres of land. MSEZ hasalloted requisite land to ONGC Mangalore Petrochemical Ltd, a company promoted by ONGC,for setting up an aromatic based petrochemical unit. MSEZ has signed a Co-developeragreement with Indian Strategic Petroleum Reserves Limited (ISPRL) to develop a free tradezone for warehousing of Strategic Crude Reserve. Resettlement and Rehabilitation work ofProject Displaced People is in progress over 136 acres of land. Requisite infrastructurelike water supply system, pipe-line corridor etc. is under implementation.

(iv) ONGC Mangalore Petrochemicals Limited (OMPL)

ONGC has promoted OMPL with 46% equity participation, along with MRPL (3%) for settingup manufacturing facilities for 0 92 MMTPA Para-Xylene and 0.14 MMTPA Benzene from MRPL'saromatic streams in Mangalore SEZ as value addition project The project is underimplementation Contracts relating to project management, technology licenser and sitegrading have been awarded while LSTK contract for process packages are under finalization.Debt syndication process has been completed and Rupee term loan agreement with bankerssigned.

(v) ONGC TERI Biotech Limited (OTBL)

OTBL is Joint Venture company of ONGC. incorporated on 26th March, 2007, with theEnergy and Research if in Institute (TERI) The JV has been promoted for addressing therequirement of Berenice at on of oily sludges Microbial Enhanced Oil Recovery, preventionof wax deposition bacteria in tubulars, flow assurance of line pipes for E & Poperations. Apart from ONGC. OTBL is bagging contracts for application of abovetechnologies from other companies like Oil India Limited, Railways, Refinance, privatecompanies etc.

(vi) Petronet MHB Limited (PMHBL)

PMHBL is a JV company of ONGC (28.766%), HPCL (28.766%) and PIL (7.898%). Balance34.57% of equity is held by the leading banks. It owns and operates a multi productpipeline to transport MRPL's products to hinterland of Kamataka. Maintaining itsturnaround trend, PMHBL, as per unaudited results for the year 2009-10, has made a netprofit of Rs.50 million on a throughput of 2.53 MMT against Net profit of Rs. 20 millionwith throthghput of 2.45 MMT during the year 2008-09.

(vii) Petronet LNG Limited (PLL)

ONGC has 12.5% equity stake in PLL, identical to similar stake by other Oil PSUsco-promoters viz., IOCL, GAIL and BPCL. PLL has started commissioning of Dahej LNGterminal of 10 MMTPA capacity and also commenced construction of LNG Receiving andRe-gasification Terminal of 5.0 MMTPA at Kochi The turnover of during 2009-10 was Rs.106.491 million (previous year Rs.84,287 million) and net profit was Rs. 4,045 million(previous year Rs.5,184 million). PLL has declared a dividend of 17.5%, same as theprevious year.

(viii) Pawan Hans Helicopters Limited (PHHL)

The Company has 21.5% equity stake in PHHL with balance 78.5% equity with theGovernment of India. PHHL is one of the Asia's largest helicopter operators having a wellbalanced operational fleet of 36 helicopters. It provides helicopter support for ONGC'soffshore operations. PHHL was successful in providing all the 12 Dauphin N and N3helicopters fully compliant with AS-4 as per the new contract with ONGC. The net profit ofPHHL for the year 2008-09 was Rs. 251 20 million and it paid a dividend of 10%. Theaccounts of PHHL for 2009-10 are under finalisation.

(ix) Dahej SEZ Limited (DSL)

Your Company with 23% equity stake along with Gujarat Industrial DevelopmentCorporation (26%) is developing a multi-product SEZ at Dahej in coastal Gujarat over 1717hectares of land through an SPV 'Dahej Special Economic Zone Ltd'. SEZ has formally beenapproved by Ministry of Commerce & Industry and Gazette notification issued. This SEZ,now declared as Petroleum, Chemical, Petrochemical Investment Region (PCPIR) by Governmentof India, is operational since September 2009. Environment clearance from Ministry ofEnvironment & Forest (MoEF) was received on 17th March 2010. About 90% of the saleableland has been allotted to prospective unit holders.

(a) C2-C3-C4 Extraction Plant;

ONGC is setting up a C2-C3-C4 Extraction Plant at Dahej using LNG from PLL as feedstock. The plant is nearing mechanical completion with overall progress of 98.24% as on31st March, 2010.

(i) ONGC led Consortium signs agreements for sourcing LNG from Iran

ONGC/OVL, in association with Hinduja Group and Petronet LNG have entered intoagreements with Iranian authorities on 1st December, 2009 at New Delhi for participationin development of gas fields and liquefaction facilities in Iran. Indian participationwould entitle supply of LNG up to a minimum of 6 MMTPA on long-term basis.

(ii) Moll with M/s Sistema, Russia

OVL entered into a non-exclusive Memorandum of Understanding (MoU) on 8th December,2009 at Moscow with M/s Sistema, a leading diversified industrial group of Russia toexplore the possibilities of jointly studying and participating in attractive oil and gasassets in Russia and third countries.

(iii) MoU with ENARSA, NOC of Argentina

OVL signed an MoU with ENARSA, the national oil company of Argentina for cooperation inE&P ventures in Argentina, India and other countries on 14th October, 2009 in NewDelhi in presence of H.E Dr. Cristina Fernandez de Kirchner,President of Argentina andHon'ble Prime Minister of India, Dr. Manmohan Singh.

(iv) MoU with Bfiarat Petroleum Corporation Limited (BPCL)

ONGC executed an MoU with BPCL\on 23rd February. 2010 for exploring /opportunities indownstream gas business such as participation in CGD networks, laying natural gaspipelines, marketing of natural gas and CNG compression for developing CNG corridorsacross the state and national highways and for other mutually agreed business.

(v) MoU with GAIL India Limited

The MoU executed with GAIL for mutual co-operation In the areas of Natural GasPipelines, Transmission and Marketing business has been extended for two years w.e.f. 24thJuly 2009

(vi) MoU with FMC Technologies (8) Pte Ltd, Singapore

ONGC and FMC Technologies (S) Pte Ltd, Singapore signed an MoU on 14th July, 2009 atNew Delhi to pursue collaboration and competence enhancement in area ofdeepwaterdevelopment.

Project ICE

Project ICE, the ERP based business portal of ONGC was upgraded from My SAP 4.6c to ECC6.0 to leverage the new functionalities of the latest ERP system consisting of ProductionRevenue Accounting (PRA), Governance, Risk & Compliance (GRC). Master Data Management(MDM), Identity Management (IDM). Occupation Health (OH). Mobile Asset Management. Systembased processes for Performance Related Pay (PRP), Perquisites and Online Claims andre-imbursements have now been enabled in totality.

E & P Disaster Recovery Server

E & P Document Management Disaster Recovery Server established at Vadodara wasinaugurated on 10th November, 2009. With this, ONGC's efforts to create an online CentralRepository of all accumulated intellectual assets has now been completed.

14. Health, Safety & Environment (HSE)

Your Company has implemented globally recognized QHSE management systems conforming torequirements of ISO 9001, OHSAS 18001 and ISO 14001 at ONGC facilities and certified byreputed certification agencies at all its operational units. Surveillance Audits forsustaining HSE accreditation was carried out in 402 units during the year. Corporateguidelines on incident reporting, investigation and monitoring of recommendations wasdeveloped and implemented for maintaining uniformity through out the organization in linewith international practice.

Corporate Disaster Management Plan (CDMP) and guidelines have been developed foruniform disaster management all across ONGC. Your Company has also developed OccupationalHealth physical fitness criteria for employees deployed for offshore operations.Occupational Health (OH) module has now been populated on SAP system.

Ringal Plantation: Sustaining fragile ecosystem of Himalayas is one of the objectivesunderlined in National Action Plan on Climate Change launched by Hon'ble Prime Minister.Ringal has high carbon sequestration potential, is fodder for musk deer and has potentialto provide employment opportunity to local people. In the first phase. 338,000 ringalplants have been planted in Joshimath and Kedamath forest area in 125 hectare land during2008-09. In the second phase, plantation of another 400,000 ringal saplings are envisagedin 160 hectares area of upper Himalayas.

Mangrove Plantation: Mangrove plantation has been under taken by ONGC along the Dhadarriver estuary in Gandhar area of Gujarat to protect flooding of water and degeneration ofnear by land are as Mangrove plantation on the shore line of Dhadar River in Gandhar areahas been intensified One of the important components of this project is spreadingawareness about mangrove plantation in urban and coastal rural areas of Gujarat andMaharastra.

15. Clean Development Mechanism (CDM)

ONGC's 5th and 6th Clean Development Mechanism (CDM) projects namely- Energy Efficiencyin Amine circulation pumps al Hazira and 51 MW wind power project at Gujarat, wereregistered with United Nations Framework Convention on Climate Change (UNFCCC) on 23rdSept 2009 and 1st March 2010 respectively. The projects are estimated to earn annualCertified Emission Reduction (CER) of 85,762 and 4,043 respectively. Expected annual CERsearned by ONGC is about 210.000. In addition, two more CDM projects, viz Gas FlaringReduction at Jorhat and Green Building project at Delhi have been successfully validatedduring the year The total expected CERs from these two projects will be around 28,000 perannum.

ONGC's first CDM project, 'Waste heat Recovery Project at Mumbai High' has beensuccessfully verified and the United Nations Framework Convention on Climate Change(UNFCCC) issued the first set of Certified Emission Reduction (CERs) for this project on18th March 2010. With this issuance, the decks are clear for ONGC to trade and earnrevenues from CDM projects.

16. Human Resources

You are aware that your Company has vast pool of skilled and talentedprofessionals-trie most valuable asset for the company. Your Company continued to extendseveral welfare benefits to its employees and their families by way of comprehensivemedical care, education, housing and social security. During the year 2009-10. yourCompany implemented various new and revised welfare policies for its employees. 75employees were released under the Voluntary Retirement Scheme during the year The HumanResource value of the employees based on 'Lev and Schwartz' model is enclosed at Annexure'B'.

Pay Revision of Executives

Ministry of Petroleum and Natura Gas issued Presidential Directives to implementrevision of pay and allowances of Board level and below Board level executives in yourCompany dated, 24th Apr. 2009 Subsecjently revison of pay scales for executives w.e.f. 1stJanuary, 2007 and revision of perquisites and allowances for executives w.e.f. 26thNovember, 2008 were implemented in your Company in June, schematic representation of the2009 and February, 2010 respectively.

Wage revision of unionised staff

The Unions had submitted their charter of demands in 2007 and a working groupcomprising representatives of Unions and the Management was constituted. The working groupheld three meetings before pay revision guidelines for executives were issued by DPE.Thereafter, the Unions submitted the modified charter of demands in October, 2009. Thenegotiations on the modified charter of demands have started and two meetings of theworking group took place thereafter where issues have been discussed threadbare andcertain issues have been clarified.

17. Employee Welfare Trusts

Your Company has established the following major Trusts for welfare of the employees:

• Employees Contributory Provident Fund (ECPF) Trust, managing Provident Fundaccounts of employees of your Company.

• The Post Retirement Benefit Scheme (PRBS) Trust of your Company manages thepension scheme of the employees.

• The Composite Social Security Scheme (CSSS) formulated by your Company providesan assured ex-gratia payment in the event of unfortunate death or permanent disability ofan employee in service. Families of deceased employees get a financial assistance underthe scheme ranging between Rs.1.5 million to Rs. 2.0 million.

• ONGC Sahayag Trust has been created for welfare of secondary workforce or theirheirs, who are in financial distress. Gratuity Fund Trust has been created for payment ofgratuity with provision of Gratuity Rules.

• Your Company implemented the Employees Pension Scheme (EPS 1995),retrospectively w.e.f. 16th November, 1995.

Your Company implemented a single integrated seamless computerised accounting systemfor all welfare trusts pertaining to investments, accounts, settlement and contributionetc. Employee accounts are now maintained on the new system, duly reconciled and updated,and can be viewed by the employees themselves on Company's intranet. Almost all paymentsare made to the members through e-payment mechanism.

Implementation Of Government Directives For Priority Section

Your Company complies with the Government directives for Priority Section of thesociety. The percentage of Scheduled Caste (SC) and Scheduled Tribe (ST) employees were15.80% and 8.53% respectively as on 1st April, 2010.

Your Company is fully committed for the welfare of SC and ST communities. The followingwelfare activities are carried out by your Company for their upliftment in and around itsoperational areas:

i) Annual component plan:

An amount of Rs. 30 million is distributed to various work centres of ONGC forimplementation of welfare schemes. This fund is especially meant for providing help andsupport in areas like Education and training. Community development, Health care, etc.

ii) Scholarship to SC and ST meritorious students:

Your Company spent Rs.4.92 million for supporting 100 students of the SC and STcommunity for pursuing higher professional courses at different recognized institutes anduniversities.

18. Industrial Relations

Your Company took structured initiatives to maintain harmonious Industrial Relations inthe organization. Pursuant to the strike resorted to by the office bearers of ASTO(Association of Scientific and Technical Officers) in January, 2009, the recognition toASTO was withdrawn. A Code of Conduct was framed and adopted for regulating the relationsbetween the Officers Association and the Management of your Company, which inter-alia,lays down aframework for bilateral resolution of all issues and disputes. Further, a newpolicy on recognition of Officers' Association incorporating the Code of Conduct wasissued with the aim to bring in reforms through administrative decisions.

19. Grievance Management System

Your Company provides an easily accessible mechanism to the employees for red ressal oftheir grievances, either through informal or formal channels. All key executives of yourCompany have designated a publicized time slot, thrice a week, to meet publicrepresentatives for speedy redressal of their grievances. Your Company has also approvedcreation of a 'single window front office' at all work-centres. An officer not below ChiefManager level is responsible for ensuing accessibility and responsiveness to publicgrievances.

20. Right to Information Act, 2005 (RTI Act)

An elaborate mechanism has been set up throughout the organisation to deal with therequests received under the RTI Act. Dunng the year, 701 requests were received, out ofwhich information was provided in respect of 600 requests and 2 cases were transferred toother public authorities. 91 requests were rejected 8 applications were pending for supplyof information as on 31st March, 2010 and these have been processed later on. Further,against a total of 152 appeals dealt with during the Geophysical field personnel carryingout survey work year, 68 were rejected and the balance 54 appeals were accepted and 30appeals were pending as on 31st March, 2010 which have been dealt with later on.

21. Implementation of Official Language Policy

During the year, a series of initiatives were undertaken for promotion and propagationof Rajbhasha in official communication, Literary works in official language continued tobe financially supported by your Company. In addition, all inductees at the executivelevel were exposed to the Official Language Policy of the Govt. of India. Your Companyalso contributed actively in publishing the bilingual Petroleum Terminology, an initiativeof the Ministry of Petroleum and Natural Gas and in effective implementation of the HindiTeaching Scheme of Govt, of India at all its regional work centres. Your company receivedappreciation from the Government of India for excellent progress of implementation ofOfficial language directives.

22. Human Resource Development

32,978 ONGCians (as on 31st March, 2010) dedicated themselves for the excellentperformance of your company during the year Your Company believes in and acts on thepremise thai human capital is the vital source of competitive advantage Toward this end,your Company initiated several path breaking measures listed below to foster developmentof its human capital.

a. Performance Management System and Performance Related Pay

Your Company, in line with the DPE Guidelines is devising a robust performancemanagement system which is effective in identifying and rewarding high performers. As partof the process, the performance appraisal system has been completely e-enabled. Tostrengthen transparency in the system performance ratings of the executives have beendisclosed to them. Incentive payments for the year 2007-08 and 2008-09 were made duringthe year to the executives of your Company based on the MoU rating of the Company and theindividual's performance.

b. Training

During the year, ONGC conducted various training programmes for its executives andstaff spanning 140,510 training man days. His Excellency Dr. A.P.J. Abdul Kalam, FormerPresident of India launched triel Centre for Creative Leadership at ONGC Academy, Dehradunon 30th May, 2009.12 'Orientation Programme on Creative Leadership' involving 309 officershave been conducted at different work centres targeting young corporate level officersthrough reputed management institutes of the country such as Indian Institute ofManagement and Administrative Staff College of India, Hyderabad. In addition, leadershipdevelopment is the focus of a continuing programme for senior officers through IndianSchool of Business, Hyderabad.

c. New Initiatives

• An Employee Engagement Survey was carried out in your Company during the yearwith the help of a globally renowned consultant in which over 7,000 employeesparticipated.

• To embed the guru-shishya ethos in your Company, a total of 36 senior levelexecutives were trained as 'Coaches' and 45 as 'Mentors' during the year. Fresh joininginductees are being provided the guidance of such mentors for their seamless integrationinto your Company.

• Your Company is utilizing Assessment and Development Centres as an evaluatingtool to assess potential of middle level managers and utilizing the assessment to impartAdvanced Management Training to the high potential executives. During the year, 240 DGMswere assessed utilizing this methodology.

• Multi-Disciplinary Team working, which is the essence of functioning of yourcompany, was strengthened during the year with the aim to make it more effective andproductive by engaging globally reputed consultants. Several recommendations of theconsultants have been implemented with promising results and the effort is on to motivatemore and more employees to adapt to these systems.

23. Accolades

Consistent with the trend in preceding years, your Company, its various operating unitsand its senior management officials have been in receipt of various awards andrecognitions. Details of such accolades are placed at Annexure 'C'.

24. Sports

Your Company presently has around 170 sports persons, including 123 international levelperformers, on its rolls who represent the Company in different games in addition toaround 100 sports persons on scholarship. Your Company sponsored mega sporting events like2nd ONGC Nehru Cup International Tournament 2009 and World Snooker Championship. ONGCianShri Pankaj Advaniwon his third Asian Billiards title in April, 2009 and created historyby winning his maiden World Professional Billiards Championship in 2009. ONGCians Ms.Sinimole Poulose and Shri Gautam Gambhir were conferred with Arjuna Award in recognitionof their achievements in athletics and cricket respectively. Shri Gautam Gambhirwas alsoranked No. 1 batsman in ICC Test world rankings. Shri Chetan Anand won the Dutch OpenGrand Prix badminton Tournament in October, 2009and also the Gold medal in SAF Games heldat Dhaka, Bangladesh in February, 2010. Shri Rupesh Kumar finished Runners up in AustraliaOpen Grand Prix badminton Tournament held in July, 2009. Shri K. Sasikiran was the memberof the Chess team that won Bronze medal in World Team Championship at Bursa in January,2010. Ms. Koneru Humpy won the 1st place in Fide World Women's Grand Prix Cycle event atTurkey in March, 2010.

Your Company maintained its supremacy in Petroleum Sports Promotion Board tournaments.During the year 2009-10, it has accumulated record breaking 176 points way ahead of othermember companies.

25. Women Empowerment

Women employees constituted 6.1% of ONGC's workforce. During the year, programmes forempowerment and development, including programme on gender sensitization was organized.Your Company actively supported and nominated its lady employees for programmes organisedby 'Women in Public Sector' (WIPS) and 'Women in Leadership Role's.

26. Corporate Social Responsibility (CSR)

During the year, your Company operationalised the increase in its commitment from 0.75%to 2% of net profit for its Corporate Social Responsibilities (CSR) and focused onreaching out to the society through sustainable projects with active participation of thestakeholders. Twelve major focus areas of CSR activities were identified. Your Company iscommitted to follow the Guidelines on CSR issued by the Department of Public Enterprises.Major CSR Projects launched during the year are as follows:

• Greening Initiative of the Southern Ridge, New Delhi: The initiative envisagesgreening an approximate area of 15 sq.kms in and around the upcoming ONGC building (RajivGandhi Urja Bhavan) and TERI university campus situated at Institutional Area, VasantKunj, New Delhi.

• TERI-ONGC 'Soldiers of the Earth' project: The Soldiers of the Earth campaign isan all encompassing, environmental awareness generation programme. The campaign is aimedat sensitizing children and young adults towards a greener future.

• Skill based vocational computer training: Setting up and running of five centresnamed as Gandhi Institute of Computer Education & Information

• Technology at ONGC work centres at Dehradun, Sibsagar, Mehsana, Karaikal andRajahmundry, for provision of free job/entrepreneurship oriented computer education toyouth belonging to marginalized sections of the society through institutes run byBharatiya vidya Bhavan.

• Asmita: Educating youth, rediscovering pride in India's heritage': Production ofa series of 13 films of 45-miniutes duration each every year (for the next 5 years) onselect topics of India's cultural heritage jointly with Surabhi Foundation and TERI forconnecting the audience to India's cultural roots to evoke a sense of national made.

• 'Ashadeep'-Girl child education programme: Aimed to ensure continued schoolingof the girl students belonging to economically weaker sections of society, with observableimproved learning levels of the support receiving students. This is a unique and laudableinitiative taken by ONGC Officers Mahila Samiti.

• Multi-specialty hospitals: Two multi-specialty hospital on P-P-P model proposedat Sivasagar, Assam and Ankleshwar, Gujarat.

• Support to Hemophilia Federation (India): Providing support for education ofchildren with Hemophilia. Hemophilia is a genetically transmitted, life-long, lifethreatening bleeding disorder.

• Mobile Medicare Units: Implementation of Mobile Medicare Unit Project throughHelp-Age India for community based health care services to destitute older persons andother vulnerable citizens in 20 locations across the country.

• Renewable energy for solar water pumping and home lighting: Providing lightingand water to poor households in Gujarat and Tamil Nadu.

• Mokshda Green Cremation System: Setting up energy efficient and environmentalfriendly green cremation system in association with local municipal bodies at work centersof ONGC.

• Conservation of ancient monuments: To support Archaeological Survey of India inits endeavour for the conservation and development of the Ahom monuments at SivasagarAssam.

27. Directors' Responsibility Statement

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, withrespect to Directors' Responsibility Statement, it is hereby confirmed that:

(i) In the preparation of the annual accounts, the applicable accounting standards havebeen followed and there are no material departures from the same;

(ii) The Director share selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent, so as to give a true andfair view of the state of affairs of the Company as at 31st March, 2010 and of the profitof the Company for the year ended on that date;

(iii) The Directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act, 1956,for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities; and

(iv) The Directors have prepared the annual accounts of the Company on a 'goingconcern' basis.

28. Corporate Governance

Your Company has taken structured initiatives towards Corporate Governance and itspractices are valued by the various stakeholders. The practices evolve round multi-layeredchecks and balances to ensure transparency.

In terms of Clause 49 of the Listing Agreement, a report on Corporate Governance forthe year ended 31.03.2010, supported by a certificate from the Company's Auditorsconfirming compliance of conditions, forms part of this Report.

Guidelines of Department of Public Enterprises (DPE), Government of India, on CorporateGovernance which were earlier voluntary, have been made mandatory from May, 2010. ONGC hasimplemented the DPE guidelines to the maximum extent possible except with regard toappointment of requisite number of Independent Directors, which is being followed up withthe Ministry of Petroleums Natural Gas. Your Company has voluntarily got its SecretarialCompliance Audit conducted for the financial year ended 31st March, 2010 from M/s A.N.Kukreja & Co., Company Secretaries in whole-time practice; their report forms part ofthis Annual Report.

In line with global practices, your Company has made all information, required byinvestors, available on the Company's corporate websitewww.ongcindia.com/investercenter.asp.

Apart from the mandatory measures required to be implemented as a part of CorporateGovernance, ONGC has gone the extra mile in this regard for the benefit of thestakeholders:

(a) Whistle Blower Policy: A Whistle Blower Policy has been implemented as a voluntaryinitiative and is functional from 1st December, 2009. The policy ensures that a genuineWhistle Blower is granted due protection from any victimization. The Policy is availableto all employees of the Company and has been uploaded on the intranet of the Company.

(b) Annual Report on working of the Audit & Ethics Committee: With a view toapprise the Board of the working of the Audit & Ethics Committee during the year, anelaborate annual report on the working of the Audit & Ethics Committee for FY'10 hasbeen prepared and will be put up to Board for its information. This is in line with therecommendation of the C&AG. The first Annual Report of the Audit& Ethics Committeefor the FY'09 was compiled and approved by the Committee.

(c) MCA Voluntary Guidelines on Corporate Governance: ONGC has implemented thevoluntary guidelines on Corporate Governance issued by Ministry of Corporate Affairs tothe extent feasible and within the competency domain of the management.

(d) Enterprise-wide Risk Management (ERM) framework: In response to the increasing needfor corporate governance in the wake of several corporate disasters and decline instakeholder confidence, SEBI set out requirements for Companies, under Clause 49 (of thelisting agreement), to create an oversight mechanism to address risks. Accordingly yourCompany has developed a comprehensive Enterprise-wide Risk Management (ERM) framework.Under the framework Risk Register portfolio has been compiled and an ERM Policy has beenfirmed up. Risk Management process on pilot scale has been initiated in six representativelocations i.e., Mumbai High, Rajahmundry and Assam Assets, Western Onshore Basin, KeshavDev Malviya Institute of Petroleum Exploration (KDMIPE) and Hazira Plant.

You would be pleased to know that your Company has received 'Nil' comments from C &AG and Statutory Auditors for the year 2009-10. This is the fourth time in a row thattheorganization has received 'Nil' comments and six times in last seven years.

29. Statutory Disclosures

Section 274(1)(g) of the Companies Act, 1956 is not applicable to the GovernmentCompanies. Your Directors have made necessary disclosures, as required under variousprovisions of the Act and Clause 49 of the Listing Agreement.

Particulars of Employees

In terms of the provisions of Section 217(2A) of the Companies Act, 1956, read with theCompanies (Particulars of Employees) Rules, 1975, the names and other particulars of theemployees are set out in the annexure to the Directors' Report. However, having regard tothe provisions of section 219(1)(b)(iv) of the said Act, the Annual Report excluding theaforesaid information is being sent to all the members of the Company and others entitledthereto. Any member interested in obtaining such particulars may write to the CompanySecretary at the registered office of the Company.

30. Energy Conservation

The information required under section 217(1)(e) of the Companies Act, 1956, read withthe Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988,is annexed as Annexure-'D'.

31. Auditors

The Statutory Auditors of your Company are appointed by the Comptroller & AuditorGeneral of India (C & AG). M/s PSD & Associates, M/s. Padmanabhan Ramani &Ramanujam, M/s Singhi & Co., M/s Kalyaniwalla & Mistry and M/s Arun K.Agarwal& Associates, Chartered Accountants were appointed as joint Statutory Auditorsfor the financial year 2009-10. The remuneration of the Statutory Auditors for annualaudit assignments has been fixed at Rs. 11.75 million. Further a fee ranging between Rs.10,000 to Rs. 40,000 for each Block (depending upon ho quantum of activity in theaggregating to 2.08 million is being pa d to the Statutory Auditors to certification ofthe accounts of Joint Venture NEIP Blocks. In addition million Rs.0.75 being paid forcertification of compliance of conditions of Corporate Governance.

The above fees are exclusive of applicable service tax and reimbursement of reasonabletravelling and out of pocket expenses actually incurred.

32. Auditors' Report on the Accounts

The comments of the C & AG form part of this Report as Annexure-'E'. There is noqualification in the Auditors' Report and there are no supplementary comments by C&AGunder Section 619(4) of the Companies Act, 1956 Chartered Accounts referred to in theAuditors' Report are self- explanatory and therefore do not call for any further comments.

33. Cost Audit

Pursuant to the directions of the Central Government for audit of Cost Accounts, theproposal for appointment of 7 firms of Cost Accountants as Cost Auditors for auditing thecost accounts of your Company for the year ended 31st March, 2010 was approved by theCentral Government and they have accordingly been appointed.

34. Directors

During the year under report, Shri S. Sundareshan on taking over the charge asSecretary in the Ministry of Petroleum to Natural Gas (MOPBING) submitted resignation fromthe Board of ONGC on 4th February, 2010. Subsequently, Shri Sudhir Bhargava, AdditionalSecretary, Mo P & NG, Government of India was appointed as Government director on theBoard of ONGC w.e.f. 15th March, 2010. Your Directors place on record their deepappreciation for the valuable contributions made by Shri S. Sundareshan during his tenure.

Dr. A.K. Balyan, Director (HR) on his appointment as MD & CEO of Petronet LNGLimited, resigned from the Board of ONGC aid was relieved on 15th July, 2010. YourDirectors place on record their deep appreciation for the valuable contributions made byDr. A.K. Balyan during his tenure as Director(HR) and in various capacities in ONGC.

The strength of the Board of Directors of ONGC as on 31st July, 2010 was 12 Directors,comprising 6 Executive Directors (Functional Directors including Chairman and ManagingDirector) and 6 Non-Executive Directors comprising 2 Government nominees and 4 IndependentDirectors.

Pursuant to the provisions of Section 255 and 256 of the Companies Act, 1956 and Clause104(1) of the Articles of Association of the Company, Shri. A.K. Hazarika, Shri D K Pandeand Shri D K Sarraf retire by rotation at the 17th Annual General Meeting (AGM) and beingeligible, offer themselves for reappointment.

Shri Sudhir Bhargava, who was appointed as Additional Director after the last AGM,holds office up to the 17th AGM. The Company has received notice in writing from a memberpursuant to the provisions of Section 257 of the Companies Act, 1956, proposing hiscandidature for appointmentas Director of the Company liable to retire by rotation.

Brief resume of the Directors seeking Appointment/Re-appointment, together with thenature of their expertise in specific functional areas and names of the companies in whichthey hold the directorship, number of shares held and the membership/chairmanship ofcommittees of the Board, as stipulated under Clause 49 of the Listing Agreement with theStock Exchanges are given in the notice convening the 17th AGM of the Company, and formpart of the Annual Report.

35. Acknowledgement

Your Directors are highly grateful for all the help, guidance and support received fromthe Ministry of Petroleum and Natural Gas, Ministry of Finance, DPE, MCA, MEA, and otheragencies in Central and State Governments. Your Directors acknowledge the constructivesuggestions received from Statutory Auditors and Comptroller & Auditor General ofIndia and are grateful for their continued support and cooperation.

Your Directors thank all share-owners, business partners and members of the ONGC Familyfor their faith, trust and confidence reposed in ONGC.

Your Directors wish to place on record their sincere appreciation for the unstintingefforts and dedicated contributions put in by the ONGCians at all levels, to ensure thatthe Company continues to grow and excel.

STATEMENT OF RESERVE RECOGNITION ACCOUNTING

Standardised measure of Discounted Future Net Cash Flows relating to Proved Oil and GasReserve quantities as on 31st March, 2010.

Notes:

1) The Revenues on account of crude oil have been worked out on the basis of averageprice for the year 2009-10. The average price for crude oils net of Subsidy Discount. TheRevenue of the Gas has been worked out on the basis of latest Price fixed (US$ 4.2/mmbtuincluding royalty) by MoPNG vide order dated 31st May, 2010.

2) Expenditure on Development, Acquisition of capital assets, Abandonment costs andOperating Expenditure have been considered at current costs i.e. as on 31.03.2010. Taxesand Leaves have been considered at prevailing rates as on 31.03.2010. In computing futuretax expenditure as on 31.03.2010, the Survey & Dry Well expenditure have beenexcluded.

3) The reserves have been estimated by ONGC's Reserve Estimates Committee following thestandard International reserve or engineering practices.

4) Only Proved reserves have been considered. Probable or Possible reserves have notbeen considered. These reserves exclude ONGC's share of foreign JV Assets.

5) Both revenues and costs have been discounted to present value using 10% discountingfactor. The Net future earnings, therefore, represent the net expected future cash inflows from production of recoverable reserves of crude oil and gas.

6) However, nether the estimated net reserves nor the related present value should betaken as a forecast of future cash flows or value of these reserves because (a) futureestimated production schedules used n the valuation process are subject to change, (b)up-graduation of Probable and Possible reserves would significantly affect the gross andnet present value of the expected future cash flows, (c) future crude oil and natural gasprices are subject to change and (d) future expenditure on production (operating),development, acquisition cost of capital assets, abandonment costs and rates of taxes andlevel, which may be at variance from those assumed hereon.