Untitled Document
Dear Shareholders,
On behalf of the Board of Directors of your Company, Oil India Limited, it is my pleasure to extend a very warm welcome to all of you to the 52nd Annual General Meeting. I would like to convey my sincere personal gratitude to all the members
of the extended OIL family, who are with us this morning.
The Annual Report for the year ending 31st March 2011, along with the Report of the Directors and Audited Accounts for the year ending 31st March 2011, have already been circulated and are with you. With your permission,
I take them as read.
The Fiscal 2010-11 for your Company has been marked with a number of significant
achievements. These include:
- Highest ever annual production of Crude oil and Condensate in the history
of the Company at 3.62 MMT. More importantly, it has been possible to maintain
the growth rate in production over the last four years.
- Production of Natural Gas and LPG was 2352.71 MMSCM and 45010 Tonnes respectively.
- Highest sales turnover of
 8113.22
Crores.
- Highest ever Profit after Tax (PAT) of 2887.73
crores, an increase of 10.62% over previous year.
- Earnings per Share (EPS) had increased to 120.09
in 2010-11 compared to 113.78
in 2009-10.
- Highest ever Dividend payment of 375%.
- In a survey of more than 3000 listed companies, Economic Times (Wealth –
3rd September, 2011 issue) adjudged OIL to be the 3rd best company in terms
of Physical and Financial performance.
- Your Company is now a Navratna PSE since first quarter of the 2010. The
grant of Navratna status is in recognition of the tireless efforts and contribution
of all Oil Indians.
- 250 Km long Duliajan – Numaligarh gas pipeline was commissioned and regular
gas supply to NRL started in March, 2011.
- Six new hydrocarbon discoveries in Upper Assam basin.
- Hydrocarbon reserve accretion during the year 2010-11 was 8.43 MMTOE against
the target of 8.40 MMTOE leading to a healthy Reserve / Replacement Ratio
of 1.42.
- Based on its excellent physical and financial performance, your Company
was rated “Excellent” in the MOU with GoI for the year 2009-10 and is expected
to be rated at the same level during 2010-11.
- A flagship CSR initiative “Utkarsh – Superb 30” was started to arrange free
IIT coaching for needy meritorious students.
PERFORMANCE RECOGNITION
You will be happy to learn that your Company received a large number of appreciations and recognitions, for its achievements in different fields during the year, from different organisations /agencies.
These awards and recognitions demonstrate total dedication and concerted efforts of all Oil Indians. Salient amongst these are:
- First Prize for Oil Industry Safety Award in Oil & Gas Assets (Onshore) Category.
- 360 Degree Growth award amongst all PSUs by Dalal Street Investment Journal.
- Oil & Gas Pipeline Transportation Company of the year award from Petrofed.
- Special Commendation award for Innovator of the Year-Team from Petrofed.
- Greentech Environment Excellence Award for the year 2010.
- Golden Peacock Global Award for CSR for the year 2010 by World Council for Corporate Governance in Lisbon, Portugal.
- Motivational Leadership Award at the Global HR Excellence Awards 2010-11.
- Best CFO award for Director (Finance) conferred by ‘CFO 100 Forum'.
- HR Leadership Award honouring Director (HR&BD) of your Company at the 5th Employee Brand award ceremony.
- Group General Manager (F&A), Oil India Limited, received the Special Commendation Award for Woman of the Year in the Oil & Gas Industry from Petrofed.
- Our sportspersons brought laurels by winning performances in the following prestigious events :
- Men and Women events (Table Tennis) in Commonwealth Games, 2010
- Asian Games, 2010 (Golf)
- PSPB Golf and Bridge tournaments
- Surveys done by Economic Times and Dalal Street Investment Journal adjudged OIL’s stock as one of the best performing stocks with least financial risks. All the leading Financial Analysts corroborated this recognition through Investor Reports at various points of time.
Let me now focus on looking at the issues of larger perspective and how they are shaping our priorities and overall strategy for growth.
ECONOMY
The year 2010-11 was significant as the world economy was hit by another recession causing serious economic slowdown especially in the West. Recent downgrading of US credit rating is another pointer towards a fragile global economic scenario. Under such a gloomy scenario, the Indian economy has been in a position to demonstrate remarkable resilience. High oil prices, rising prices of the commodities, double digit inflation and higher interest rates, however, are expected to pose bigger challenges to growth momentum. For ensuring that the Indian economy continues to scale new heights and emerges as an economic superpower, it is imperative for PSU’s like your Company to continue to demonstrate global competitiveness.
INDIAN E&P INDUSTRY
During the year 2010-11, domestic crude oil production was 37.69 MMT. The country imported around 80% of its crude requirement. The total Natural Gas production was around 52.2 billion cubic meters, a significant increase over previous year, largely due to contribution from the East Coast fields. In the domestic scenario your Company’s contributions stand at around 8% for crude oil production and around 5% for natural gas. While the average crude oil price for Indian basket hovered around US $85 per barrel, the net realization for your Company was of the order of US $57/bbl, in view of the need to share a portion of the under recoveries made by oil marketing companies.
COMPANY SCENARIO
Your Company continues to be the second largest national oil and gas Company in India in terms of total proved plus probable oil and natural gas reserves and production for the year 2010-11.
In the first eight rounds of NELP bidding your Company had acquired thirty blocks, either alone or in partnership with other national or international companies with operatorship in twelve blocks. In the recently concluded NELP IX round your Company has successfully competed for ten more strategically located blocks with operatorship in three of them and joint operatorship in two deepwater blocks. Formal award of these ten blocks is expected shortly. With north-east as its core area of operation, your Company, now, has a pan-India presence with selected global footprints.
PHYSICAL PERFORMANCE
It is indeed a pleasure to inform you all that during 2010-2011, your Company achieved the highest ever production of crude oil at 3.62 MMT. This achievement is more creditable in view of the fact that there was a loss of around 0.130 MMT due to longer than planned shut down of Numaligarh Refinery which affected our crude oil production.
The terminal crude oil production rate as on 31st March 2011 was 3.80 MTPA. Maintaining this growth trend, it has been possible to reach the current production rate of around 3.93 MTPA. You will appreciate that this is a very noteworthy achievement since most of our production comes from ageing fields in the North East.
Production of natural gas during the year was 2352 MMSCM. While your Company has a higher potential for natural gas production, the same was adversely affected by the shut down of Numligarh refinery and lower than committed upliftment by consumers in Assam and Rajasthan.
As of March 31, 2011, the Company’s 2P reserves stands at approximately 1 billion barrels of Oil + OEG. Your Company made six new oil and gas discoveries during the year in the State of Assam. These discoveries have opened up new avenues for further exploration and development activities.
FINANCIAL PERFORMANCE
With such excellent performance on the crude oil and gas production / sales front, your Company earned Profit after tax of 2887.73 crores compared to 2610.52 crores last year and this is the highest ever. This achievement is in spite of having to provide subsidy discounts to the tune of 3293 crore to Oil Marketing Companies to compensate for their under recoveries in line with Government poicy. Improved financial performance has helped your Company
increase its net worth to 15602 crores as against 13745 crore during the previous fiscal.
REDUCTION IN SHARE-OUT OF SUBSIDY
Hitherto prior to 2010-11, the share-out Subsidy among upstream companies was based on previous year’s average profits after tax ratio, which was proving to be adverse to OIL in view of substantial growth in PAT compared to ONGC & GAIL. The matter was represented strongly and based on our logical representation and justification, MOP&NG revised the share-out Ratio to previous three years’ PAT instead of one year. This has resulted in reduction in our Subsidy share-out in 2010-11 by approx. 470 Crores.
DIVIDEND AND CONTRIBUTION TO EXCHEQUER
Your Company paid an interim dividend @ 180%, based on the provisional financial trend of the Company. The Board of Directors is now pleased to recommend a final dividend @ 195% on the paid up capital making the total dividend 375% (last year 340%) for the year, subject to approval of shareholders.
Your Company also made substantial contribution both to the State and Central exchequer in terms of Cess, Royalty, Sales Tax etc. The contribution to the State Exchequer during the year was 1515.46 crore and that to the Central Government was
3136.07 crore. It is also a matter of great pride that your Company’s audited annual accounts have “Nil” comments from the Comptroller and Auditor General of India for the seventh year in succession.
STRATEGY FOR GROWTH
Growth is central to our core purpose and vision. Growth remains the primary business agenda with key focus on Exploration and Production activities. Quest for growth, however, has to be through activities undertaken within the best laid down practices and policies in the fields of HSE, Corporate governance, Sustainable development measuring up to international standards. The key focus areas for growth of your Company broadly cover the following :
- Intensive Exploration to enhance reserves base;
- Acquisition of discovered / producing properties for inorganic growth;
- Intensification of IOR – EOR activities;
- Highest emphasis in the areas of HRD, HSE and Corporate Governance;
- Selected diversification in the E&P value chain and non-conventional energy (CBM, Shale Gas, Oil Shale and renewable energy).
In order to ensure competitiveness vis-à-vis industry players, your Company has undertaken growth initiatives towards streamlining the business process and practices with focus on the following :
- Investing in state-of-the-art technology;
- Adopting Integrated IT System, including ERP packages to enhance efficiency in decision-making;
- Establishing a cutting edge VRC (Virtual Reality Centre) for improved exploration efficiency;
- Addressing the challenge of integrating risk with corporate strategy and business plans.
EXPLORATION AND PRODUCTION:
Your Company continues to pursue its aggressive Exploration, Development and Production activities. Optimal reservoir management to enhance recovery through extensive technology interventions in the existing mature fields remains the top priority of your Company.
Your Company is actively pursuing planned exploration activities in all the NELP and other blocks spread throughout the country in a time bound manner. As I have already mentioned earlier, your Company has been maintaining an increasing trend in crude oil and gas production over the last few years. This has been primarily possible due to following measures:
- Prioritization of development / infill drilling
- Debottlenecking of production infrastructure
- Well Stimulation and servicing
- IOR/EOR
- New discoveries brought on stream early
PRODUCTION OF NATURAL GAS
Natural Gas is another area of priority for your Company. Your Company’s present production potential is around 7.93 MMSCUMD of which 7.00 MMSCUMD is from N.E Region and 0.93 MMSCUMD is from the fields in Rajasthan. Actions are in hand for furtherance of gas production potential and creation of additional infrastructure.
The Gas produced from your Company’s Jaisalmer field is supplied to RRVUNL through GAIL (India) Limited’s pipeline for generation of electricity. The existing gas supply agreement to the customer is 0.7 MMSCUMD and actions are in hand to revise the same for additional supply.
A few important gas related initiatives are as follows:
- LNG – Project : Your Company has drawn up a plan for monetizing the associated gas available in its isolated production areas, not connected by gas transportation network through liquefaction and transportation of the same. This initiative is expected to bring down gas flare in the fields considerably.
- Outsourcing gas compression facilities : This has been implemented in a few isolated low pressure installations which has brought down flaring.
- CBM: In the last bid round for CBM your Company won a CBM block along with M/s Arrow Energy (now Dart Energy Ltd), who will act as the operator. Work is in progress in the block as per work programme.
- Shale Gas: Your Company has undertaken a strategic project to assess the resource potential of shale gas / Tight gas in the operational areas in Assam-Arakan and Rajasthan basins. The results of the study will be available by around end October, 2011.
RESEARCH & DEVELOPMENT
Given the fact that the days of easy oil are over, your Company gives great importance in continuous up-gradation of technologies and expertise in different areas of operation through its in-house Research & Development Centre. In its well equipped R&D centre, your Company continues to undertake applied research activities to find solutions to different field problems.
OVERSEAS PARTICIPATION
Your Company now has overseas presence in nine countries, with acreage of 38605 Sq kms. In Areas 86 and 102/4 in Libya (comprising of 5 Blocks), where your Company has 50% Participating Interest (PI) as operator, three exploratory wells have been drilled. While there was evidence of hydrocarbon in these wells, commercial discoveries could not be established. Since minimum work programme (MWP) has been completed in both the blocks, actions are in hand for relinquishment of the same. In the other non-operated blocks 95/96 work is held up due to political unrest.
In Gabon, your Company has completed processing and interpretation of 1000 LKM of 2D seismic and acquisition and processing of about 140 SQKM of 3D seismic data.
Interpretation of the 3D seismic data is in final stages. One exploratory well is planned by first Quarter of Fiscal 2012.
In Timor Leste, where your Company has non operated participating interest, the MWP including drilling of well has been completed. No commercial hydrocarbon was encountered in the well. Consortium is planning to relinquish the block.
In Yemen, physical activities related to seismic survey commenced on the blocks and are currently suspended due to civil unrest in the country. In Nigeria the JV is now planning to undertake 3D seismic followed by drilling of one well. In Egypt the Consortium is waiting for execution of the PSC after formation of new government in the country. Civil unrest in the MENA region has affected operational activities in some of the overseas assets of your Company.
Your Company had recently acquired 3.5% Participating Interest in a Mixed Company formed with Corporation Venezolana del Petroleo (“CVP”), a subsidiary of state oil company Petroleos de Venezuela S.A. (“PDVSA”) of Bolivarian Republic of Venezuela for exploitation of discovered heavy oil reserves in the Orinoco belt. The other members of the mixed company are Repsol of Spain (11%), Petronas of Malaysia (11%), OVL (11%) and IOCL (3.5%). Considerable progress has been made against the committed work programme and first oil is expected by later part of 2012.
PIPELINE TRANSPORTATION
The crude oil pipeline operations ensured uninterrupted operation achieving throughput of 99.5% of off take in fiscal 2011 against 99.19% in fiscal 2010. Intelligent pigging Survey of 16" main pipeline from PS-1(Naharkatia) to PS 5 (Noonmati) was completed in fiscal 2011 to ensure integrity management of the pipeline.
SALES TAX ON SUPPLIES TO REFINERIES
Your Company’s Sales Tax claims from Refineries were hitherto being approved in the past four years prior to 2009-10, on year to year basis causing some uncertainty in our estimation of Profits. In this context, the matter was taken up strongly with justification and MOP&NG gave approval to include Sales Tax on regular basis in Billing to our Refineries and include it in COSA accordingly. This decision also helped us in having a permanent solution to the Sales Tax Issue, which on annualized basis, is around 270 Crores.
REVISION IN TRANSPORTATION TARIFF
Your Company’s Transportation Tariff, both forward and reverse segments, was taken up for upward revision with MOP&NG. Our continuous follow-up with MOP&NG & PPAC helped us in getting both the Reverse Segment & Forward Segment Transportation Tariff revised upwards from the year 2008-09. This decision also helped us in generating additional yearly revenue of around 80 Crores and, in turn, making our Pipeline business profitable.
HUMAN RESOURCE – OUR ASSET
I am proud to say that your Company has a great team of employees, who, through their competence and commitment, are giving shape to our dreams and building a new future for your Company. The Company’s Human Resources philosophy is to establish, build and retain a strong performance and competency driven culture with greater sense of accountability and responsibility. Maintaining a healthy worklife balance has helped your Company retain its employees even at the face of fierce competition from other employers.
A few of the important HR policy initiatives undertaken are as follows :
- Creation and implementation of a new On-line Performance Management System to bring in transparency and objectivity to the entire process.
- Creation of an on-line training data base for the organization.
- Introduction of a knowledge portal for preservation of unique knowledge and experience for use by prosperity.
- ISO certification of ER function, the first in the industry.
- Completion of Six Sigma certification of the ER executives.
- Introduction of HOPE : Help Our People Excel – a reward and recognition Policy for the organization.
- Moving ahead with young brains : Structured brain storming sessions for young executives to work out organizational strategy.
HEALTH, SAFETY, ENVIRONMENT AND CSR INITIATIVES
Your Company has always committed itself to conducting business with a strong commitment for environment preservation, sustainable development, safe workplaces and enrichment of the quality of life of its stakeholders and the community at large. Your Company with its deep conviction as a responsible corporate citizen adheres to the following three basic principles :-
- Production without pollution;
- All injuries and accidents are preventable; and
- Care and protection of Mother Earth is a responsibility of each individual.
I firmly believe that the purpose of any business can not be driven by profit alone. Each one of us has to commit to building a better world. With this perspective, your Company’s social welfare and community development initiatives focus on the key areas of education, healthcare and the overall development of basic infrastructure in and around its operational areas. Presently, over 1400 villages in Assam and Arunachal Pradesh have been covered under our welfare schemes.
Under various CSR schemes your Company continues to provide assistance to educational institutions for buildings, libraries, scholarships to meritorious students, sponsoring sportspersons and tournaments etc. Most noteworthy were aid for setting up Centre of Management Studies (CMS) at the Dibrugarh University, aid for setting up an IT Centre at Duliajan College and sponsorship of Educational and Career Fair.
You will be happy to learn about our most recent initiative in the field of education named “Superb 30’. Under this scheme, we fully sponsor 30 students of the region, from economically challenged background, for one year to undergo rigorous coaching at Guwahati for taking competitive examinations for entrance to eminent Engineering establishments. In the first year, 25 students got into different Engineering colleges of the country including IIT / NIT / ISRO. In view of such good performance, this year, we have opened another centre at Jorhat, in addition to the Guwahati centre, where 30 more students are being coached.
GROWTH VISION
With India’s energy needs projected to grow by 30% in the next five years, the future is indeed exciting and full of promise for your Company. As per our growth strategy, we are committed to enhance oil and gas production on a sustainable basis. Shale-gas prospects are being examined in the Nominated areas and will be exploited depending upon feasibility. Your Company promised and has delivered an excellent all round performance with a steady long-term growth potential with substantial upsides.
Success in our exploration ventures under NELP and overseas will augment the production potential further. Down-stream integration, City-Gas distribution, new Pipeline business and entry into the non-conventional energy sector are new horizons to be conquered as the opportunities arise.
CARBON FOOTPRINT AND CLIMATE CHANGE
There is an urgent need to restructure the business from the ‘business as usual’ scenario of a carbon intensive economy to one that pragmatically reduces and offsets the emission levels. OIL has anticipated the implications of climate change impacts and, therefore, has taken steps to collaborate with stakeholders, and make environmental sustainability one of your Company’s business principles.
Your Company has already completed the mapping of its carbon footprint and GHG emission level in various spheres of its operations. The findings of the study will help OIL in taking proactive measures to cut down its carbon footprint.
CORPORATE GOVERNANCE
I would like to take this opportunity to reiterate your Company’s commitment towards pursuing the highest standards of Corporate Governance. We have always been proud of our robust and transparent processes and structures in place. These progressive systems ensure proper accountability and effective timely disclosures/reporting. The effectiveness is evident from the fact that the Company has consistently had clean audit reports. Our Corporate Governance practices meet the stipulations of Regulators including the DPE Guidelines.
CONCLUDING REMARKS
It has been my privilege to preside over this AGM. The listing of Company’s shares in the BSE and the NSE post a highly successful IPO was a landmark event in your Company’s corporate history. The excellent performance of the Company in various fronts has been recognized by the market and your efforts have been duly rewarded by sustained positive market sentiments and a high grade corporate visibility, – both domestic as well as overseas. Your belief and faith in OIL shall surely help your Company to scale new heights in coming years. My best wishes to you all.
ACKNOWLEDGEMENT
In conclusion, on behalf of the Board of Directors of your Company I thank all our stakeholders for their continued support, whose trust and confidence are pillars of strength in all our endeavors.
The Board wishes to thank the Government of India, various State Governments, Ministry of Petroleum and Natural Gas and other related ministries and the Governments of all the countries where OIL operates for their valuable support and guidance in your Company’s business.
I also take this opportunity to thank all Shareholders, Investors, Bankers, Financial Institutions, Suppliers, Customers and other stakeholders for their consistent and resolute support.
Finally, I would like to specially acknowledge the commitment and dedication of the entire OIL family in sustaining your Company Oil India Limited, a truly world class enterprise.
Together, we certainly have come a long way, - but we have Promises to keep and we shall continue to grow!
Wish you all the best!
Jai Hind
Sd/-
(N.M.Borah)
Chairman and Managing Director Date : 24.09.2011
Place : Duliajan
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