MANAGEMENT DISCUSSION 1.0 Industry Review
The Economy
The global economy which was facing its worst crisis showed signs of some recoveryduring the year. Despite the projected GDP growth of 2.5% in 2010 emerging economies likeIndia will spear-head the growth and particularly in our nation due to sound fiscalpolicies we are projected to be on a growth trajectory of 6.5%.(Source IMF-WEO-2009)against our 6.7% growth rate achieved in 2008-09. It would be a real challenge to meet thetarget growth of 9% towards which the resilience has been shown by the growth in thecorporate sector ( both Public & Private). The real challenge is however to deepen andbroaden the agenda for inclusive development towards which we, as one of the corporates,are truly committed and poised to undertake investments both for organic and inorganicgrowth in order to ensure the energy security of the nation. Though ours may be a smallcontribution in accordance with the availability of our resources, nevertheless everyeffort counts.
The Energy Sector
The global economic recession had driven the energy consumption lower by 1.1% in 2009in comparison to 2008. Consumption of oil, natural gas and nuclear power declined, whilecoal consumption was essentially fl at; only hydroelectric output and other emissions fromenergy use fell for the first time renewable forms of energy increased in 2009. On thepositive side, global CO2 since 1998. Consequently, the prices for all forms of tradedenergy fell, with the sharpest declines seen for traded natural gas and coal in thenorth-western hemisphere. Nevertheless Asian coal prices fell less sharply largely due torobust Chinese import growth.
Crude oil
Crude oil prices per barrel for Brent began the year below $40, peaked at $78 andaveraged $61.67 per barrel in 2009. Sustained OPEC production cuts and improving economicprospects as the year progressed, stabilized prices. Global oil consumption declined by1.2 million barrels per day (by 1.7%) though China, India and Middle Eastern countriesaccounted for all of the non-OECD growth. Global oil production dropped even more rapidlythan consumption, falling by 2 million barrels per day, or 2.6%. In OPEC countriesproduction declined by 7.3% during 2009 as compared to 2008.
In India, crude oil production increased modestly from 33.51 MMT in fiscal 2009 to33.69 MMT in fiscal 2010. Refinery throughput declined from 160.77 MMT in fiscal 2009 to160.00 MMT in fiscal 2010. On the other hand consumption recorded a growth of 3.4% as itincreased from 143.6 MMT in 2008 to 148.5 in 2009. In terms of consumption, India nowstands at fourth place after USA, China and Russian Federation (3.8% of worldConsumption).India has a share of 0.9% of the total world production.
Natural Gas
Natural gas experienced a more rapid decline in consumption, which fell by 2.1% in allregions globally except the Middle East and Asia Pacific. India registered a consumptiongrowth of 25.9%, which was the highest among major countries in percentage terms. Globalgas production during 2009 declined by 2.1% over 2008 worldwide for the first time onrecord. India registered a production growth of 44.84% from 32.85 BCM in fiscal 2009 to47.57 BCM in fiscal 2010. India registered 1.3% of world’s production of Natural Gasin 2009. The consumption also recorded an increase of 25.9% as it increased to 51.9 BCM in2009 from 41.3 BCM in 2008 representing 1.8% of world’s consumption.
In fiscal 2010 your company made a humble contribution of 10.60% to the nationsproduction of crude oil and 5.08% of the nations production of natural gas.
2.0 Risks and Concerns
It is an accepted fact that the days of easy oil are over. As such, managing theE&P sector has become a challenging job as it is coupled with uncertainty at eachstep. The current scenario shows that to achieve oil & gas production, one has toexplore in logistically difficult areas with state of the art technology. It requires hugeinputs owing to the capital intensive nature of the investments.
As per the Govt. of India directives, Oil India Limited is also required to share thesubsidy (under-recovery) burden. Though it has been decided that Upstream companies willnot share the under recovery on account of transportation fuel, it remains an area ofconcern as it directly impacts the cash flows of the company.
In the E&P Industry, Health, Safety and Environment issues are always an area ofconcern since the operations are in difficult terrain and carry the risks of unknown downhole problems. Current events in the wake of the Louisiana oil spill may lead to morestringent environmental legislations thereby increasing both operating and insurancecosts.
The fl uctuations in the crude oil prices directly impact the prices and availabilityof goods and services required in the E&P sector.
Crude oil prices too are dependent on economic recovery, despite their inelasticity.
Investments in improved recovery drive up the marginal costs and lower success ratiostend to hit the bottom-lines.
3.0 Opportunities & Threats
The economic recession offered opportunities for inorganic growth through M&Aactivities at competitive prices. However due to our relatively smaller size as also dueto a number of other countries supporting such opportunities through sovereign funds itwould be a challenge to compete for producing properties overseas. The probability ofsuccess in our exploration ventures would require incremental resources for investment indevelopment and since the Company is presently inadequately geared, these would be met atthe appropriate time from other sources of funding, if necessary.
4.0 Internal Control Systems
E&P operations need infallible and stringent control systems. Your Company hasalways set high standards and effective processes for monitoring its operations forensuring transparency and risk mitigation. Internal and external audits are conducted on aregular basis to ensure transparency, statutory safety and other government guidelineswhich are being regularly followed. Though the internal control systems have been auditedtwice in the past, we are envisaging testing of the same for further augmentation &upgradation.
5.0 Corporate Governance
We have robust and transparent processes and structures in place through which ourobjectives are set, and effective planning for facilitating the means for attaining thesame and for monitoring the performance. These ensure accountability, independence andeffective and timely disclosures/reporting. The effectiveness is evident since the Companyhas clean audit reports.
6.0 Key Performance Indicators
Our operating results are furnished in Table-I.
Fiscal 2010 compared with Fiscal 2009 Revenues
Our total revenues increased by 8.87% to Rs. 885973 lakhs in fiscal 2010 from Rs.813788 lakhs in fiscal 2009. The increase was primarily due to an increase in salesrevenue from crude oil.
Sales Revenues
Our sales revenues increased by 8.53% to Rs. 774856 lakhs in fiscal 2010 from Rs.713972 lakhs in fiscal 2009. The increase was primarily due to an increase of 8.56% incrude oil sales revenue to Rs. 715870 lakhs in fiscal 2010 from Rs. 659422 lakhs in fiscal2009. This was primarily due to -
• A 4.21% increase in the sales volume of crude oil to 25.76 million barrelsin fiscal 2010 from 24.72 million barrels in fiscal 2009.
• Though the average internationally traded price per barrel for the relevantbasket of crude decreased by 16.11% from US$ 81.69(revised)in fiscal 2009 to US$ 68.53 infiscal 2010, due to the decrease in the subsidy. There was a 4.36% increase in our netrealized price after subsidy per barrel of crude oil to Rs. 2,666.60 for fiscal 2010 fromRs.2555.20 (revised) for fiscal 2009 resulting from a net increase in price by 1.17% andan appreciation of 3.15% in the average exchange rate of the Indian Rupee against the U.S.Dollar for fiscal 2010, as compared to fiscal 2009. There was a decrease in ourcontribution toward sharing of the under-recoveries of the public sector oil marketingcompanies in respect of our crude oil sales to Rs. 584.46 per barrel for fiscal 2010, ascompared to Rs. 1,201.72 (revised)per barrel for fiscal 2009. Our total contributiontoward sharing of the under-recoveries of the public sector oil marketing companies inrespect of our crude oil sales decreased by 49.47% to Rs. 148991 lakhs in fiscal 2010 fromRs. 294853 lakhs in fiscal 2009 as the same were limited to auto-fuels only in fiscal 2009as compared to fiscal 2008 where the under-recoveries included both domestic andauto-fuels. The revisions in the prices for fiscal 2009 were necessitated upon resolutionof the differences with the refineries on the new assay of the new basket of crudesintroduced in fiscal 2009.
• Our natural gas sales revenue before subsidy increased by 8.33% to Rs.48568lakhs in fiscal 2010 from Rs.44835 lakhs in fiscal 2009. This increase was primarily dueto a 2.50% increase in the price before subsidy of natural gas to Rs. 2094.90 per thousandstandard cubic meters in fiscal 2010 from Rs. 2043.90 per thousand cubic meters in fiscal2009, and due to a 7.21% increase in the sales volume of natural gas to 1862.53 millioncubic meters for fiscal 2010 from 1737.33 million cubic meters for fiscal 2009.
• Our LPG sales revenue decreased by 15.45% to Rs. 7631 lakhs in fiscal 2010from Rs. 9025 lakhs in fiscal 2009. This decrease was primarily due to a 10.43% decreasein the realized price after subsidy for LPG to Rs. 16993.39 per ton for fiscal 2010 fromRs. 18,971.95 per ton for fiscal 2009 and due to a 5.50% decrease in the sales volume ofLPG to 44,934 tons for fiscal 2010 from 47,572 tons for fiscal 2009 due to higher plannedshut-down days in fiscal 2010 for maintenance & modification of the Plant. Our totalcontribution toward sharing of the under-recoveries of the public sector oil marketingcompanies in respect of our LPG sales decreased by 21.20% to Rs. 5891 lakhs in fiscal 2010from Rs. 7475 lakhs in fiscal 2009.
Revenues from Transportation
Our revenues from transportation increased by 54.32% to Rs. 15699 lakhs in fiscal 2010from Rs. 10173 lakhs in fiscal 2009. The increase was primarily from the additionalrevenue of Rs. 5530 lakhs which resulted from an increase in the transportation of 1.003million kiloliters of refined petroleum products through our new product pipeline infiscal 2010. against 0.0345 million kiloliters in fiscal 2009 as the same was commissionedin August 2008 and the operations picked up during fiscal 2010. Our crude oil pipelinetransported 39.72 million barrels of crude oil in fiscal 2010, which was an increase of2.08% over fiscal 2009.
Other Revenues
Our other revenues marginally remained at the same level at Rs. 93713 lakhs in fiscal2010, as compared to Rs. 93718 lakhs in fiscal 2009. This was primarily due to:
• A 9.49% increase in our budgetary allocation from the Government of Indiafor gas sales to Rs. 15632 lakhs for fiscal 2010 from Rs. 14277 lakhs in fiscal 2009 .
• A 51.31% increase in dividends received from our downstream and otherinvestments to Rs. 6709 lakhs in fiscal 2010 from Rs. 4434 lakhs in fiscal 2009 due toincreased dividends from our new investments. This increase was partially offset by:
• A 19.07% decrease in other income to Rs. 9980 lakhs for fiscal 2010 from Rs.12331 lakhs in fiscal 2009.
• A 2.05% decrease in interest income to Rs. 61392 lakhs for fiscal 2010 fromRs. 62676 lakhs in fiscal 2009 due to reinvestment of surplus funds in higher yieldingdividend bearing securities.
Expenditure
Our total expenditure increased by 4.48% to Rs. 495878 lakhs for the fiscal 2010 fromRs. 474628 lakhs for fiscal 2009. This increase was primarily due to increase in quantityof crude oil production and sales, depletion, depreciation and write-offs.
Production, Transportation and Other Expenditure.
Our production, transportation and other expenditure increased by 2.82% to Rs. 407290lakhs for the fiscal 2010 from Rs. 396125 lakhs for the fiscal 2009. For the fiscal 2010,our production, transportation and other expenditure was 45.97% of total revenues, ascompared to 48.68% for fiscal 2009.
Operating Costs.
Our operating costs increased by 1.59% to Rs. 100450 lakhs for fiscal 2010 from Rs.98875 lakhs for fiscal 2009. Our operating costs increased primarily due to an increase of16.56% in expenditure on operation and maintainence of production installations to Rs.65787 lakhs for the fiscal 2010 from Rs. 56439 lakhs for fiscal 2009. This was primarilydue to a new EPS, FGS and water injection station being commissioned and expansion of theSCADA.For the fiscal 2010, operating expenses were 11.34% of total revenues, as comparedto 12.15% for the fiscal 2009.
Geological and Geophysical Expenditure.
Our geological and geophysical expenditure decreased by 21.32% to Rs. 37049 lakhs forthe fiscal 2010 from Rs. 47087 lakhs for the fiscal 2009 mainly due to 71.83% decrease in3D survey activities and decrease in cost of geological studies for field redevelopmentetc. in fiscal 2010 in comparison to fiscal 2009.The geological and geophysicalexpenditure was 4.18% of total revenues, as compared to 5.79% for the fiscal 2009.
Statutory Levies.
The statutory duties increased by Rs. 6.37% to Rs.235727 lakhs in fiscal 2010 fromRs.221611 lakhs in fiscal 2009 due to a corresponding increase in quantity of crude oilproduction and sales.For the fiscal 2010, statutory levies were 26.61% of total revenues,as compared to 27.23% for the fiscal 2009.
Other Expenses.
Our other expenses increased by 19.31% to Rs. 34065 lakhs for the fiscal 2010 from Rs.28552 lakhs for fiscal 2009. For the fiscal 2010, other expenses were 3.84% of totalrevenues, as compared to 3.51% for the fiscal 2009.
Provisions against Debts, Advances and other Provisions and Write-offs
Provisions made against debts, advances and other provisions and write-offs decreasedto Rs. 28272 lakhs for the fiscal 2010 from Rs. 37120 lakhs for the fiscal 2009, primarilyas a result of write back of provision for expenditure against the ten expired PELS. Forthe fiscal 2010, provisions made against debts, advances and other provisions andwrite-offs were 3.19% of total revenues, as compared to 4.56% for the fiscal 2009.
Depletion
Our total depletion charges increased by 25.88% to Rs. 26281 lakhs for the fiscal 2010from Rs. 20877 lakhs for the fiscal 2009 due to an increase in the wells capitalized inthe fiscal 2010. For the fiscal 2010, depletion charges were 2.97% of total revenues, ascompared to 2.57% for the fiscal 2009.
Depreciation
Our depreciation charges increased by 29.86% to Rs. 21827 lakhs for the fiscal 2010from Rs.16808 lakhs for the fiscal 2009, primarily due to higher additions to fixed assetswhich depreciate at a higher rate. For the fiscal 2010, depreciation charges were 2.46% oftotal revenues, as compared to 2.07% for the fiscal 2009.
Interest and Debt Charges
Our interest and debt charges decreased by 58.24% to Rs. 365 lakhs for the fiscal 2010from Rs.874 lakhs for the fiscal 2009, primarily due to lower short term borrowings andlower balance of OIDB Loan. For fiscal 2010, interest and debt charges were 0.04% of totalrevenues, as compared to 0.11% for fiscal 2009.
Exchange [Gain/Loss]
Our exchange gain due to foreign currency translation decreased to Rs. 478 lakhs forthe fiscal 2010 from Rs. 615 lakhs for the fiscal 2009 primarily due to appreciation ofthe Rupee in respect of the currencies of denomination of our existing foreigninvestments. For the fiscal 2010, our exchange gain was 0.05% of total revenues, ascompared to 0.08% exchange gain for the fiscal 2009.
Other Adjustments
Our other adjustments increased by 427% to Rs. 11262 lakhs for the fiscal 2010 from Rs.2139 lakhs for fiscal 2009, primarily resulting from provision for Rs.13159 lakhs due toadoption of accounting standard AS-15 (Revised). For the fiscal 2010, other adjustmentswere 1.27% of total revenues as compared to 0.26% for fiscal 2009.
Profit before Tax
Our profit before tax increased by 15% to Rs. 389509 for the fiscal 2010 from Rs.338697 lakhs for the fiscal 2009, primarily as a result of increase in revenue from crudeoil and natural gas sold and marginal increase in rupee realization. Profit before tax asa percentage of total revenues was 43.96% for the fiscal 2010, as compared to 41.62% forthe fiscal 2009.
Provision for Taxation
Our provision for taxation increased by 4.84% to Rs. 128457 lakhs for the fiscal 2010from Rs. 122529 lakhs for the fiscal 2009 due to higher taxable income. Our effective taxrate for the fiscal 2010 and 2009 was 33.99%.
Net Profit after Tax
Our net profit after tax increased by 20.76% to Rs. 261052 lakhs for the fiscal 2010from Rs. 216168 lakhs for the fiscal 2009. Our net profit after tax was 29.47% of totalrevenues for the fiscal 2010, as compared to 26.56 % for the fiscal 2009.
Liquidity & Capital Resources
Historically, to fund our liquidity requirements for capital expenditures, we haveprimarily relied on internal accruals of cash flows from operations. However in September2009, in order to raise funds to meet its future exploration, developmental and productionactivities and also to unlock its potential, the Company ventured for a maiden IPO in aprice band of Rs.950-Rs.1050 per share for 2.64 crore shares representing 11% of postissue capital and a disinvestment of 10% of pre-issue capital. The IPO had an overwhelmingresponse and at the cut off price of Rs.1050 per share , it was over subscribed by thirtyone times. Your Company accordingly raised Rs.2777.25 crore.
Dividends
Your Company’s dividend payout was as follows:-
| Fiscal 2010 | Fiscal 2009 |
| Dividend per Equity Share (Rs.) | 34.0 | 30.50 |
| Dividend Payout Ratio (%) | 31.32 | 30.19 |
Cash Flows
The table below summarizes our cash flows for fiscal 2010 and 2009.
| Fiscal 2010 | Fiscal 2009 |
| (Rs.lakhs) | (Rs.lakhs) |
| Net Cash from Operating Activities | 144969 | 317012 |
| Net Cash used in Investment Activities | (84175) | (49649) |
| Net Cash from Financing Activities | 186497 | (88445) |
| Net Increase (Decrease) in Cash and Cash equivalents | 247290 | 178918 |
Our main source for cash flows is funds from operations. Changes in our funds fromoperations are primarily determined by the changes in the prices we receive for ourproducts and our production volumes.
Net Cash Flows from Operating activities
Our net cash flows from operating activities decreased to Rs 144969 lakhs in fiscal2010 from Rs.317012 lakhs in fiscal 2009. This was primarily due to the following workingcapital adjustments:-- increase in debtors by Rs.25493 lakhs due to the higher sales anddetermination of the transportation tariff & sales tax at the end of the year.
- Increase in loans & advances by Rs. 117978 lakhs primarily due to increase ininter company deposits with PSUs by Rs.78067 lakhs, increase in advances in cash or inkind for goods & services for value to be received by Rs.25802 lakhs and an increasein loans to employees by Rs.21949 lakhs; and - decrease in current liabilities andprovisions by Rs 47581 lakhs The aforesaid increases were partially offset by thefollowing;-- decrease in inventories by Rs.4762 lakhs
- increase in cash flows from operating activities before working capital adjustmentsby Rs.31197 lakhs due to incremental sales and increase in net prices of our products.
Net Cash used in Investing Activities
Our net cash used in investing activities increased to Rs 84175 lakhs in fiscal 2010from Rs. 49649 lakhs in fiscal 2009. Our primary use of cash for investment activities infiscal 2010 was Rs.114852 lakhs for purchase of fixed assets and exploration anddevelopment activities, which was an increase of 10.07%by Rs.10504 lakhs from fiscal 2009.Our cash used in investment activities also included Rs.10000 lakhs towards ICDs placedand Rs.32006 lakhs towards investments in mutual funds. These outfl ows were partiallyoffset by receipt of Rs.72683 lakhs in interest and dividend in fiscal 2010 which was anincrease of 32.88% by Rs.17983 lakhs from fiscal 2009.
Net Cash Flows from Financing Activities
Out net cash used in financing activities resulted in an infl ow of Rs.186497 lakhs infiscal 2010 against an outfl ow of Rs.88445 lakhs in fiscal 2009 primarily due to increasein infl ows due to net proceeds realised from the public issue of equity shares byRs.277725 lakhs and decrease in repayment of loans by Rs.9948 lakhs. Our primary use ofcash for financing activities in fiscal 2010 was Rs.89445 lakhs towards dividend anddividend tax, which was an increase of 19.08% by Rs.14333 lakhs from fiscal 2009.
Operating unit costs
During fiscal 2008 we had revisited the budgeting process in order to ensure costoptimization as also to augment the controlling & monitoring procedures. As a resultthereof, the budgets for fiscal 2010 were matrix based and were interfaced for closermonitoring, which resulted in cost optimization as follows:-
Finding costs per barrel
Our finding costs per barrel decreased by 5.69% to US$ 2.82 per barrel in fiscal 2010from US$2.99 per barrel in fiscal 2009.
Finding & development costs per barrel
Due to a 25% increase in drilling activities,our finding & development costs perbarrel increased by 2.68% to US$ 4.22 per barrel in fiscal 2010 from US$ 4.11 per barrelin fiscal 2009.
Lifting cost per barrel
Lifting costs per barrel increased by 6.31% to US$ 7.24 per barrel in fiscal 2010 fromUS$ 6.81 per barrel in fiscal 2009 primarily due to higher depreciation and depletioncharges as aforesaid.
All unit costs were below the budgets.
Segment Results
The segment results per unit of sales are furnished in the Table below:-
| Fiscal | Fiscal | %increase/ |
| 2010 | 2009 | (decrease) |
| Crude oil | | | |
| Profit after tax (Rs./bbl) | 988.27 | 872.46 | 13.27 |
| EBITDA(Rs./bbl) | 1570.11 | 1445.45 | 8.62 |
| Profit after tax (US$./bbl) | 20.83 | 18.97 | 9.80 |
| EBITDA(US$./bbl) | 33.10 | 31.43 | 5.31 |
| Sales(Mbbls) | 25.76 | 24.73 | 4.21 |
| Gross price received(US$/bbl) | 68.53 | 81.69 | -16.11 |
| Net price received post subsidy(Rs/bbl) | 2666.6 | 2555.2 | 4.36 |
| PAT/Net price(%) | 37.25 | 34.14 | |
| N.Gas(N.E.Basin) | | | |
| Profit after tax (Rs./000 scum) | 708.48 | 527.05 | 34.42 |
| EBITDA(Rs./000 scum) | 1583.71 | 1275.76 | 24.14 |
| Sales(Bcm) | 1663.04 | 1540.10 | 7.98 |
| Sales price received including subsidy(Rs/000 scum) | 3094.22 | 3028.20 | 2.18 |
| PAT/Net price(%) | 22.89 | 17.40 | |
| N.Gas(Rajasthan Basin) | | | |
| Profit after tax (Rs./000 scum) | -261.00 | 282.13 | -192.51 |
| EBITDA(Rs./000 scum) | 401.77 | 1054.07 | -61.88 |
| Fiscal | Fiscal | %increase/ |
| 2010 | 2009 | (decrease) |
| Sales (Bcm) | 199.49 | 197.22 | 1.15 |
| Sales price received(Rs/000 scum) | 1600.00 | 1596.66 | 0.21 |
| PAT/Net price(%) | -16.31 | 17.67 | |
| N.Gas | | | |
| Profit after tax (Rs./000 scum) | 603.88 | 500.35 | 20.69 |
| EBITDA(Rs./000 scum) | 1458.30 | 1254.71 | 16.23 |
| Sales(Bcm) | 1862.531 | 1737.328 | 7.21 |
| Sales price received including subsidy(Rs/000 scum) | 2934.17 | 2865.69 | 2.39 |
| PAT/Net price(%) | 20.58 | 17.46 | |
| LPG | | | |
| Profit after tax (Rs./Tonne) | 6008.73 | 7582.36 | -20.75 |
| EBITDA(Rs./Tonne) | 9257.32 | 12119.31 | -23.62 |
| Sales (tonnes) | 44933.95 | 47572.00 | -5.55 |
| Net price received post subsidy(Rs/Tonne) | 16993.39 | 18971.95 | -10.43 |
| PAT/Net price(%) | 35.36 | 39.97 | |
| Transportation | | | |
| Profit after tax (Rs./kl) | -83.19 | -127.91 | 34.96 |
| EBITDA(Rs./kl) | 30.44 | -52.71 | |
| Sales(kl) | 7314431.45 | 6217437.8 | 17.64 |
| Average price/kl | 214.63 | 163.62 | 31.18 |
| PAT/Average price(%) | -38.76 | -78.17 | |
The Crude oil and natural gas segments in the North Eastern Region continued to reflect improved profitability due to incremental sales and optimization of operating costs.In the Lpg segment, the sales were less due to lower production owing to planned shut-downof the plant for maintenance and upgradation, which however was 3.10% above the plannedtarget for the year and the operating expenses were 6.45% above the previous year.
In the Natural gas (Rajasthan segment) the operating & maintenance costs werehigher due to higher contractual rates paid for outsourced services.
In the transportation segment, tariff rates for the crude oil transportation & forreverse pumping were fixed by PPAC in 2001-02 and 2006-07 respectively towards whichrepresentations have been made for revision. The product pipeline is however profitableand since the same was fully operational during the year it contributed to the decrease inlosses.
7.0 Human Resource Development
Emphasis on integration of HR practices with organisational vision is eloquently reflected in the HR Strategy where a number of initiatives have been taken in the recent yearsto integrate the HR practices with long term organisational goals. Based on the OIL’sLong Term Vision, HR-Strategy has been realigned to meet the challenging demands of theE&P business by focussing change in work culture for building competencies by:-
a) Creating an environment of mutual faith, trust and respect, fostering for team workand pride to be an Oil Indian.
b) Developing internal coaches & subsequently leadership at all levels for theperformance breakthrough.
c) Redeployment and rotation for maximum utilisation of HR potential.
d) Capability enhancement through on the job learning and overcoming job challenge.
e) Developing leadership at higher levels by periodic assessment and designingdevelopment programmes.
Some of the HR initiatives are outlined below: -
(i) A Reward & Recognition Scheme (R&R) has been devised to foster and nurturea culture of recognition and celebrate the achievements, as also to enhance the motivationat all levels. In order to bring about change management, a series of interactiveawareness programs were held across the organisation for creating a culture of excellencethrough value actualisation and demonstration of leadership.
(ii) Based on an employee opinion survey with special attention to critical disciplinesin Geosciences, Production and Drilling Groups, a Retention Strategy has been formulatedin order to achieve a reduction in the attrition rate.
(iii) The process for undertaking an HR audit has been initiated
(iv) The process for obtaining ISO 9001-QMS certification for our Employee RelationsDepartment has also been initiated, the first stage whereof involving review, modificationetc. has been completed and the audit by the certification body will be undertakenshortly.
(v) In our pursuit for performance excellence the employees in HR discipline wereimparted training and certified in Six Sigma Yellow belt, Green belt & Black Belt,with an objective to ensure efficiency in providing services and enhancing satisfactionlevel at an optimum cost.
(vi) To augment the existing Performance Management System (PMS) of the Company anonline KPI based PMS on Balance Score Card approach has been designed whereunder a numberof workshops were held across the organisation with the subject matter experts (SME) ofall departments. Accordingly, a strategy map of the organisation using five perspectiveshas been prepared based on which a Corporate Score Card was also devised. The illustrativeKRAs of level 1 executives are being compiled. The software for online PMS has been testedand finalised. Meanwhile, the Department of Public Enterprises (DPE) has released newguidelines in this regard in April, 2010 in accordance with which the process is beingrealigned and is scheduled to be completed shortly.
Recruitment in Executive Category:-
18 nos. (Gen – 14, SC – 02, OBC – 02) of direct recruitments were madeand 49 nos. (Gen – 26, SC – 05, ST – 05, OBC – 13) of recruitmentagainst executive trainees were completed during the year.
As on 31.03.2010, 38 (Gen – 23, SC – 03, ST – 03 and OBC - 9) ExecutiveTrainees are undergoing training, who would be absorbed in permanent Executive cadre aftersuccessful completion of one year training.
22 executives are on deputation to various petroleum organizations in the country. Atotal of 19 work persons have been promoted to Executive cadre during the year
Recruitment in Workmen Category
In accordance with Government directives, company has taken steps in recruitingcandidates belonging to SC, ST and OBC categories. A total of 84 (SC-09, ST-22 and OBC-53)candidates have been appointed during the year.
Employment Of Women Employees
As on 31.03.2010 there are 332 women employees (78 in officer category and 254 are innon-officer category) out of the total manpower of 8347 (1296 in officer category and 7051in non-officer category) constituting 3.98% (3.86 % previous year) of the total workforce.Training Continuing our efforts to improve the learning curve in the organization thefollowing initiatives were undertaken during the year:-
| Programmes | Number | Number of Employees |
| In-House | 115 | 2771 |
| In-country | 298 | 752 |
| Overseas | 102 | 193 |
| Total | 515 | 3716 |
Apart from the foregoing, the Break through Performance(BP) coaches conducted 36programmes in-house.
OIL continues to sponsor two executives every year for the National Management ProgramPGDM course of one and a half years duration at MDI, Gurgaon. The fourth batch wasnominated during the year. Under the provisions of the Apprenticeship Act, 77 Tradeapprentices and 30 Diploma apprentices were trained during the year 2009-10. Apart fromthis 510 (previous year 364) students from different institutions were given opportunityfor summer training / Project work in their relevant branches of study.
Centre of Excellence (CoE)
In the global E&P industry, knowledge-base in its entire value chain is the key tosuccess in discovery and production of oil and natural gas. In exploration, the challengeis oriented towards identification of subtle traps and exploration in frontier areas.Similarly, the development of reservoirs and production on the other hand requireconsiderable expertise in reservoir characterization, simulation and analysis. It has,therefore, become necessary to keep pace with developments in knowledge and technology,and then harness them to achieve business goals. The excellence in the core E&Pactivities is the only way forward and the same is believed to be achieved through theworking in dedicated knowledge based teams. It is envisaged that creation of a full fledged Centre of Excellence, will be a catalyst in OIL’s E&P venturesthrough scientific and technological excellence. As OIL has an ambitious plan to be thefastest growing E&P Company, it is envisaged to set up a CoE, which will play animportant role in carrying out multidisciplinary studies to improve our explorationsuccess ratio, development of green fields and redevelopment of brown fields, as well asalternative energy sources. The proposed CoE will facilitate multi-disciplinary studiesbetween geophysicists, geologists, reservoir engineers and members of other keydisciplines in order to advance state of the art in exploration, appraisal/development andreservoir management. There were no incidences of mandays loss by unionized employees dueto industrial relations problems.
8.0 Safety, Environment And Pollution Control HSE management system:
During the year, as a part of the HSE management system, safety audits as well asreview audits of its installations were carried out to check the level of safety andrecommend for further improvement. In order to continue the HSE awareness amongst itsworkforce, on-site HSE awareness training of workers have been intensified. An offsiteDisaster Mock Drill was carried out in December’2009 at OIL’s Intermediate TankFarm (ITF), Tengakhat, Assam.
Crisis Management Team (CMT)
A core CMT group has been functional to handle, co-ordinate and manage crisissituations arising out of the oil / gas well blow-outs in a more effective andprofessional manner. Audit of High Pressure wells in a few areas have been carried out tomake an assessment of water resources, accessibility and vulnerability in the event of adisaster. Well Kick control at one location, well killing operation at one location,Blowout control at one location, Well Control Operation and repairing of well-head at twolocations were successfully carried out.
ISO & OHSAS Accreditation:
The General workshop within the Industrial area at Duliajan has been accredited andawarded ISO 9001:2008 Certificate on Quality Management System (QMS). TransportMaintenance workshop has also been accredited ISO certification on [ISO 9001:2008 (QualityManagement System), ISO 14001:2004 (Environment Management System) & OHSAS 18001:2007(Occupational Health & Safety Assessment System)] during the year.
HDPE lining for all effl uent pits
Use of impervious HDPE lining has been implemented for all effl uent pits in drillinglocations to prevent seepage of effl uent to the surrounding areas.
Bioremediation of Oily Sludge & Phytoremediation
This technology has been successfully implemented at five locations containing oilysludge in fields.
Tree Plantation
1691 nos. of saplings were planted [Plantation through Civil Engineering Department 922and Supply of other Department 769] since April ‘2009 to March ‘2010.
Solid Waste Disposal: OIL has set up a solid waste processing unit during October,2009 complying with all the applicable statutory norms. This environmental friendlyprocessing unit will convert daily waste into useful products and by-products.
Disposal of Junk Explosives: Disposal of unusable oil well explosives accumulatedwith the Well Logging Department was carried out in an abandoned oil well and successfullyexecuted in the well, NHK -467.
Disposal of unusable Radio-active sources: Radioactive sources used in logging weredisposed as per permission of the Atomic Energy Regulatory Board at their Central WasteManagement Facility of BARC.
Handling of Hazardous Materials: Use of explosives and radioactive sources inoperations demand strict adherence to safety norms, which were observed withoutcompromise.
Occupational Health: Occupational Health monitoring for work persons is done in aregular and continuous manner. OIL conducts health checkups of every employee once in ablock of 5 years. Besides periodic Medical examination, Pre-retirement medicalexamination, participation in the Occupational Health activities, Maintenance ofOccupational health records, Health Education is part of a continuous process in OIL.
Abatement of green gas emissions
A CDM project on Shift of transportation medium of petroleum products fromrailways to pipeline(NSPL Multi-product Pipeline) is awaiting methodology validationfrom DOE. At present Methodology for the project is under consideration with UNFCCC.Accounting of carbon emission (Carbon Foot Printing) in the entire operational areas ofOIL in India is being undertaken. EOI was invited in January 2010 and the bids are underexamination
9.0 CORPORATE SOCIAL RESPONSIBILITY
The Company has recently enhanced the budgetary allocation for CSR activities with anobjective to spend up to 2% of the net profit of the previous year through its variouscontinuing welfare schemes for the benefit of the society as a whole with particular focuson the under-privileged and economically deprived sections of the society as the ultimatebeneficiaries. The plans and the programmes are implemented through the following ongoingschemes :
• Social Welfare Programmes for developing rural education, building roads andbridges, sports promotion and providing street illumination.
• Educational development through grants of scholarships, grants to educationalinstitutions for building/upgrading schools, grants for promotion of research forpetroleum.
• Rural entrepreneurial development and promotion of agro-based projects jointlywith SIRD for training and promoting entrepreneurship in weaving, tailoring, embroidery,knitting, bamboo cultivation, fl oriculture, fishing, sericulture, organic farming etc.and promoting entrepreneurship development through self-help groups.
• Women empowerment through gender budgeting for the relevant employees forproviding training in handicrafts, general nursing and midwifery, family welfare andproviding hostel facilities.
• Medical and healthcare services through our OIL hospital and mobile dispensaryunits for servicing the employees and rural areas and providing grants for promotion ofcancer research.
• Promotion of sports and culture by sponsoring tournaments and supportingathletes and artists.
We are continuing to put our best efforts in CSR activities. In this regard, kindlyrecall that we had been awarded in the past with the CSR Award by TERI and the GoldenPeacock award for corporate social responsibility by the Federation of Indian Chambers ofCommerce and Industry.
10.0 Technology Upgradation Productivity Improvement
The GPS tracking & central monitoring system being procured, for effective dailymanagement of large number of crude oil transportation browsers in field areas especiallyfor effective evacuation of crude oil from logistically difficult, remote and scatteredarea, is expected to improve productivity in the near future.
State of the art mass flow meters for accurate measurement of mass flow along withother critical parameters of dispatched crude from various installations to Central TankFarm (CTF) were successfully commissioned. Optimization of gas lift wells after thoroughanalysis of dynamics of various well parameters by using state of the art software likeWell Flow was initiated.
Extended trial of Merus Ring technology for flow line gelling treatment has started andis showing encouraging results. Induction of software S-Rod for design and optimization ofsucker rod pump wells was undertaken.
Passive Seismic
This is a new technique of seismic data acquisition used world over as a directHydrocarbon Indicator. Preparation is underway to execute a pilot scale project during2010-11.
Solar Appliances
As an alternative source of energy solar appliances have been inducted in feasibleareas. During the year such appliances were inducted for: (1) Water Heating System in 2residential houses at Duliajan on an experimental basis, (2) Emergency lighting system atJorajan Explosive Megazine House and (3) Distilled water plant at the newly commissionedICE-workshop. A promotional programme on Solar Energy was also organized under theexpertise of TRA International.
Use of RBI Grade-81:
RBI Grade-81, an internationally acclaimed soil stabilizer, was used in soils toeliminate use of aggregate up to the sub-base level to enhance strength and durability ofthe layers constructed. Treated layers attain engineering properties of the desiredquality. The thickness of layers in the RBI Grade-81 design gets reduced because of higherequivalency factor of the stabilized layers. Treated layers thus use less material forroad construction resulting in reduction of material, transportation and labour costs.
Vibratory Soil Compactors:
Vibratory Soil Compactors were inducted for compaction of soil in various civil worksinvolving huge earth works in well plinth & approach road is expected to givesatisfactory results in increasing the bearing capacity, stability and other relatedparameters of soil.
State-of-the-art PLC control technology incorporated in the new DCPCR of S-1 rig:
With this new technology, operational as well as protection/alarm diagnostic parameterswill be readily available in the touch-screen HMI (Human Machine Interface). This featurewould immensely help in troubleshooting; thereby reducing downtime. Also, use of PLCinterface has greatly reduced the number of cables (from 7 nos. to just 1 cable) byswitching to Driller’s control panel. This has in turn reduced the rig-up time byalmost 4/6 hours. In addition, problems arising out of hard wired cables like looseconnection, bad contact, heating etc. are also reduced to a great extent.
Introduction of Dissolved Gas Analyzer Testing Instrument:
Certain gases are produced by decomposition of oil/paper insulation when transformerundergoes abnormal thermal or electrical stresses that dissolve in oil. DissolvedGas Analyser has been procured for analysing of the dissolved gases in transformeroil. This equipment is an essential and effective tool for condition monitoring andextension of the life of transformers.
Use of maintenance free Vacuum Circuit Breakers (VCB):
The old problematic Bulk Oil Circuit Breakers of the Water Injection Station-208 andGCS-8 have been replaced with almost maintenance free Vacuum Circuit Breakers. Due toretrofit of the breakers, not only the inconvenient maintenance works could be obviatedbut maintenance costs were also reduced.
Disaster recovery Data center:
This was established at the Corporate office at NOIDA during September, 2009 withstorage & Host based replications.
High performance Computing facility:
Actions are underway to upgrade the existing SGI origin processing system by state ofthe art high end performance facility with capability of carrying out advance processingof conventional and multi-component 2D, 3D and 4D projects. Once in place, the new systemis expected to lead a paradigm shift in analysing and extracting information from datasetsunder study. The facility will significantly reduce computing time and project timelines.Geoscientific Software Four new Geo-scientific software viz., KINGDOM SUITE, FASTRTA,GREAT and WATERFLOOD were acquired and installed during the year. Initiatives were takenfor setting up of VRC at Duliajan and Centre of Excellence at Guwahati.
Geoscientific Studies
A total of 36 Notes / Reports and 45 nos Well data Note / Depth Data policies werepublished from G&R department during the year 2009-10. Out of these 36 notes /reports, 12 Dev G Notes and 9 EG Notes covers review of various areas. Proposal of 80 (60Exploratory and 20 Development) locations for drilling, yearly assessment of Reserves ofUpper Assam Basin, Mining Lease wise status of wells, locations, reserves gas availabilitystudies of Assam & AP etc., various simulation studies carried out in different areasof Upper Assam Basin and work over performance were presented in total 8 nos of PRE Notespublished during the year. Also, 2 nos of Sediment logical Notes and 4 nos of CG Noteswere published during the year. Identification of APM and Non-APM Gas Reservoirs / Fields,Assam & AP was published as a report. Apart from the above notes, five Letters (4 EGL& 1 DGL) were also published during the year. In addition to the in-house studiesmentioned above, a consultancy study on integrated IOR/EOR application for Greater Dikom /Chabua / Kathaloni and Tengakhat Field by M/S HOSI and a consultancy on MicroPalaeontological & Palynological studies of core samples by M/S KDMIPE, ONGCL DehraDun is in progress.
Collaborative Studies through work association
Prospect evaluation of the Borhat Sapekhati and Deohal West Makum areas in Upper Assambasin were carried out through Fugro Robertson Ltd, UK. The final report is being awaited.
A Consultancy study on Integrated IOR/EOR Application for Greater Dikom / Chabua/Kathaloni and Tengakhat Fields was carried out by M/s Halliburton Offshore Services, Inc.
11.0 Future Outlook
The Company is committed to sustain its organic growth in production and requisiteplans and investments have been ear-marked towards the same. Towards its inorganic growththe Company is also aggressively pursuing M&A activities. With world demand projectedto increase by 2%, there is sufficient capacity available to meet the same. The capacityfor inventories is over-saturated; as such, in order to ensure a sustainable recovery fromthe ongoing recession, the probability of any wide fl uctuation in prices is remote in theshort term, unless over-speculation in this commodity upsets the balance. Higher oilprices ahead are required in order to sustain demand growth and motivate the developmentof higher-cost projects and offset the spiraling marginal costs on improved recovery orsustain the risk appetites.
12.0 Long term strategic Plan
A Strategic and Corporate plan for the organisation was prepared a few years ago. Theimplementation process began by co-creating long term vision with assigned ownership.Meanwhile, since the business environment in general and E&P Industry in particularhave undergone considerable changes, to realise the Company’s co-created vision andthe aspirations associated with, it was imperative to revisit the strategy for the future,towards which a high level committee has reviewed the Company’s exploration,development, diversification and growth strategy and suggested new directions and wayforward for the future. This report is presently under examination.