X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
A look at ONGC-V - Views on News from Equitymaster
StockSelect
  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

A look at ONGC-V
Oct 11, 2007

In the previous article we profiled the location, answering the question “where”, of ONGC’s international upstream assets. In this article, we shall answer the question “how much” and look at oil and gas reserves that the company holds in its international upstream assets. How much?
Reserves are the oil and natural gas contained in underground rock formations. Quantities of reserves are estimated using geologic and engineering data keeping existing economic and operating conditions in mind. Reserve estimates change as additional information becomes available.

It may be noted that for the purpose of bringing natural gas and oil into a common unit of measurement, natural gas is measured in oil equivalent gas (OEG). OEG is the volume of natural gas that can be burnt to give the same amount of heat as a barrel of oil (6,000 cubic feet of gas = one barrel of oil. Alternatively, 100 cubic meter = 1 ton of oil)

Reserves are classified in 3 ways: Proved (1P), Proved + Probable (2P), and the Proved + Probable + Possible (3P).

Proved Reserves (1P): Oil and gas reserves, which have a reasonable certainty to be produced, using current technology at current prices and government consent are called proved reserves. It is also called as P90, i.e., having a 90% certainty of being produced in the foreseeable future.

ONGC's proved reserves outside India
Particulars Crude Oil (MMT) Gas (BCM) Total OE (MMT)
  March 05 March 06 March 07 March 05 March 06 March 07 March 05 March 06 March 07
Vietnam 1 1 1 18 16 15 19 17 15
Sakhalin 61 61 54 97 97 84 158 158 138
GNOP Sudan 21 23 23 - - - 21 23 23
Block 5a Sudan - 5 5 - - - - 5 5
AFPC, Syria - 2 1 - - - - 2 1
MECL, Columbia - - 11 - - - - - 11
Bc-10, Brazil - - 2 - - - - - 2
Total 83 93 96 115 113 99 198 206 195
* Figures rounded off. Source: Company

Proved reserves are further subdivided into "Proved and Developed" (PD) and "Proved and Undeveloped" (PUD). PD reserves are reserves that can be produced with existing wells or from additional reservoirs with minimal additional investment. PUD reserves require additional capital investment (drilling new wells etc.) to bring the oil and gas to the surface.

ONGC's proved and developed reserves outside India
Particulars Crude Oil (MMT) Gas (BCM) Total OE (MMT)
  March 05 March 06 March 07 March 05 March 06 March 07 March 05 March 06 March 07
Vietnam 1 1 1 15 13 11 15 14 12
Sakhalin - 1 8 - 1 3 0 2 11
GNOP Sudan 18 18 18 - - - 18 18 18
Block 5a Sudan - - 4 - - - - - 4
AFPC, Syria 0 2 1 - - - - 2 1
MECL, Columbia - - 2 - - - - - 2
Total 19 21 34 15 13 14 33 35 47
* Figures rounded off. Source: Company

Probable Reserves (2P): Oil and gas reserves, which are reasonably probable of being produced, using current or likely technology at current prices and government consent, are called probable reserves. It is also called as P50 i.e., having a 50% certainty of being produced in the foreseeable future.

Possible Reserves (3P): Oil and gas reserves, which have a chance of being produced under favorable circumstances only, are called possible reserves. It is also called as P10 i.e., having a 10% certainty of being produced in the foreseeable future.

Recap-"Reserves- So what"?
It is worthwhile to recapitulate the series of articles at this point. We began by adopting the accounting framework to gain an insight into ONGC. We divided the study into 3 areas - Equity & Liabilities, Assets and Expenses & Income. We took up assets first, and within them upstream assets (reserves) first because of their importance in understanding ONGC.

This brings us to the logical question, why are reserves so important? To understand this, we should contrast an activity-dominated business like FMCG or services vis-à-vis an asset-dominated business like oil and gas. In the former, more the activity a company is able to generate i.e., more volumes (of course at increasing margins) the more valuable it is. In the latter, more discoveries a company makes i.e., the more reserves that the company possesses the more valuable it becomes. Of course, how the reserves are then monetised, i.e., the efficiency of operations and finances are important (we shall examine them later in the series). Still, reserves are the largest part of the jigsaw puzzle. Simply put, oil is black gold.

This concludes our profile of ONGC’s upstream assets. We shall continue with the company’s downstream assets from the next article onwards.

To Read the Full Story, Subscribe or Sign In


Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

ONGC SHARE PRICE


Feb 22, 2018 09:13 AM

TRACK ONGC

ONGC - PETROCHINA COMPARISON

COMPARE ONGC WITH

MARKET STATS