ONGC needs radical changes in organisational structure and focus

Oil and Natural Gas Corporation (ONGC) will become a loss-making entity in next 3-5 years unless the current performance crisis is addressed by bringing radical changes to the organisational structure and focus, a new report has warned. The McKinsey report, titled "ONGC -- A Crisis at Hand", submitted to the petroleum ministry, said that without immediate restructuring the success of Rs 100 bn ($ 2.1 bn) planned investment in performance improvement efforts in existing oil fields in 2001 would be seriously jeopardised.

According to the report, obsolete technology, inadequate reservoir/geological data and unreliable cost estimates had led to ONGC loosing focus on its core functions of exploring oil and gas reserves and optimum exploitation of existing fields. If the present trend continued, the study said, ONGCs profitability would be severely squeezed, and financial losses would be a real possibility in the next five years.
It suggested that ONGC needs to shift from volume/activity orientation to commercial goals for which organisational structure and the system needs revamping. The state-owned corporation needs to be restructured into four units -- producing assets, exploratory assets, services and corporate functions, McKinsey recommended, adding, while producing assets would focus on optimal exploitation of known reservoirs, exploration assets would take responsibility of reserve accretion.