ONGC's Growth Strategy
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Case Code : BSTR130
Case Length : 12 Pages
Period : 1999 - 2004
Organization : Oil and Natural Gas Corporation, ONGC
Pub Date : 2004
Teaching Note :Not Available
Countries : India
Industry : Oil and Energy
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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The GoI deregulated the Indian oil industry with effect from April 01, 2002, by doing away with APM. This meant that domestic oil companies could take independent decisions based on import parity and market forces in pricing petroleum products.
It also meant that oil PSUs would lose state protection and would have to face the global competitive business environment. Industry experts felt that deregulation would give an edge to domestic PSUs in marketing their products due to their strong investment base, superior infrastructure and extended distribution network. They felt that dismantling APM would also result in increased profitability for oil companies. As expected, the dismantling of APM benefited ONGC significantly. For the fiscal year 2002-03, ONGC reported a 70 per cent jump in net profits to Rs. 105.293 bn as opposed to Rs. 61.979 bn in the previous year. ONGC's revenues increased from Rs. 225.142 bn in 2001-02 to Rs. 342.773 bn in 2002-03, an increase of 53.4 per cent...
In mid- 2004, ONGC was contemplating forward integration opportunities in gas, petrochemicals and the power sector. It announced plans to set up major power plants using natural gas at Dahej in Gujarat and another plant at Mangalore in Karnataka.
An agreement was entered into with Gujarat Government for setting up a Special Economic Zone (SEZ) for this purpose, including a 2,000 MW power plant based on re-gasified natural gas. In addition, another SEZ was planned in Kakinada, Andhra Pradesh, to establish a power plant and an LNG import terminal. Another 2,000 MW plant was planned adjacent to the company's subsidiary, MRPL, in Karnataka. However, ONGC did not plan to venture into transmission and distribution of electricity or power trading. As gas transportation was uneconomical, power plants were planned at gas fields and the power generated was proposed to be sold to grids or captive users. ONGC also planned to foray into areas like LNG marketing, diesel, naphtha and kerosene, which promised higher realizations...
Exhibit I: World Oil Prices Chronology (1970-2003)
Exhibit II: HR Objectives of ONGC
Exhibit III: Financial Performance of ONGC