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Case Study on the

International Business
Expansion Strategy

ONGCs Mission & Vision


To be global leader in integrated

energy business through sustainable


growth, knowledge excellence and
exemplary governance practices.

Introduction of ONGC
It was established in the year 1956.
Its Head quarter is in Dehradun.
The chairman of ONGC is Mr. Sudhir Vasudeva
Its revenue is $30.745 billion in the year 2012
Currently there are 32862 employees.
ONGC is business organization involved in the

exploration and production of hydrocarbons in


India and abroad.

Cont
It is one of the largest Asia-based oil and gas

exploration and production companies, and produces


around 77% of India'scrude oil (equivalent to around
30% of the country's total demand) and around 81%
of itsnatural gas.
ONGC has been ranked 357th in theFortune Global
500 list of the world's biggest corporations for the
year 2012
ONGC set up OVL in 1996 as a wholly owned
subsidiary. It is the largest Oil exploration and
production (E&P) company in India.
OVL currently has presence in 31 E&P projects in 15
countries, namely ; Vietnam, Iraq, Libya, Syria, Sudan,

Reason for Expansion ONGC


business
Licensing Policy:- by this private sector can also

participate in the exploration and production.


Demand of crude oil:- demand was increasing
day by day.
Oil Prices:- The trend of international prices was
volatile and rising.
Competition:Domestic competition was
increasing.
Burden:- Increasing burden on the country due
to the rising oil import bill.
Dependency:- The bottom-line was crude oil
prices.

Major strategic decisions taken


ONGC changed from a Commission to a company.
ONGC appointed MC kinsey as a consultant for

complete revamping and restructuring of the


organization.
ONGC expanded its global operation through its
subsidiary OVL.
ONGC bought 71% stake in the MRPL refinery.
ONGC decided to acquire equity oil abroad
through the endeavors of the OVL.
Human resource development.

Objectives of ONGC
Doubling reserves to 6 billion tones by 2020.
Improving average recovery from 28% to 40%.
Tying 20 MMT per annum of equity of hydrocarbon

from abroad.

Internationalization Strategy
of ONGC
Carried out in house studies of various moderate
and semi-major, major offshore and onshore fields.
Came up with about 400 Oil and Gas blocks.
Evaluated these fields with available data came
up with the priority list for foreign foray

Combination of marketing entry


strategy
Joint venture with equity participation in producing

oil/gas fields.
Joint venture with equity participation for exploration
and development blocks.
Consortium approach, pooling other Indian oil
companies, such as IOC Ltd, GAIL, etc.
Operator ship contracts (management contracts)
Turkey engineering Contracts.

Countries where OVL has its


producing assets
Producing assets of OVL :

a. Having 20 percent holding in Sakhalin(Russia)


b. Having 45 percent stake in partnership with

British Petroleum.
c. Having 25 percent equity in the Greater Nile
Oil Project in Sudan.

Countries where OVL having


discoveries and exploration
OVL assets with discoveries & exploration :

a. Having 100 percent interest in Appraisal &

Development in Qatar.
b. Having 70 percent interest in Exploration &
Appraisal in Egypt.
c. 15 percent interest in Development Phase in
Brazil.
d. 20 percent participation interest in Myanmar.

OVL Operations

Vietnam

Sudan

Myanm
ar

Sakhalin-I

Strengths:
O.N.G.C LTD is perceived to be the leader
in oil production industry.
O.N.G.C being an international company
has sufficient resources and capital to
invest.
It has a very efficient and professional
management team.
Being an international company has
sufficient resources and capital to invest.

WEAKNESS :
O.N.G.C facing difficulties to
produce oil from aging reservoirs.

SWOT analysis

OPPORTUNITY:
Energy utilization of buried coal
resource (700 -1700M), estimated
63BT Equivalent to15000 BCM.

THREATS:
Security of personnel & property

especially crude oil continues to be a


cause of concern in certain area.
Some exploration Campaign
THREATS
Company involves
high technology,
high technology, high investment and
high risks.

Current Scenario

ONGC The only Indian energy major in

Fortunes Most Admired List 2012 under


'Mining, Crude Oil Production' category
ONGC is ranked at 171st position in Forbes
Global 2000 list of the world's biggest
companies for 2012 of the world's biggest
public companies released on April 18, 2012.
Total 23 Discoveries made in FY12 which
include 15 New Prospects (9 offshore, 6
Onshore) and 8 New pools (1 offshore, 7
onshore).
ONGC declares an impressive Annual
Performance while notifying two more
discoveries : 29 May, 2012
(OVL) is the biggest Indian multinational, with

PP2030 aims to double ONGCs production

over the plan period with 4-5 per cent growth


ONGC intends to maintain its position as the
dominant energy player in India as well as
abroad.
OVL signs definitive agreements to acquire an
interest in the Azeri, Chirag and the Deep
Water Portion of the Guneshli Fields in the
Azerbaijan sector of the Caspian Sea and an
interest in the Baku-Tbilisi-Ceyhan Pipeline.
Dated: 8th September, 2012 .
The acquisition would mark ONGC Videshs
entry into oil rich Azerbaijan and is consistent
with its stated strategic objective of adding
high quality international assets to its existing

"ONGC

is close to announcing a significant


discovery near the Mumbai High fields, which may
increase output in the region by 25,000 barrels
per day," ET reported. "The discovery awaits
formal scrutiny and assessment by the Directorate
General of Hydrocarbons (DGH) and the company
will make an announcement only after regulatory
approval."
The basin is the largest in India and includes
Mumbai High, Bassein and Heera and Neelam
producing fields. ONGC had made the oil
discovery in this basin in 1974.

QUESTIONS

Critically evaluate the reasons influencing ONGCs international expansion?


Factors influencing expansion -

New exploration licensing policy


Lack of new discoveries
Domestic competition

Identify the key factors affecting


OVLs country selection.
Opportunity in the area of oil exploration.
Future relationship with the countries.
Size of the other company or its growth

OVL made use of strategic


alliances and joint ventures for
its
international
expansion
ventures rather than opting for
complete ownership. Do you
agree with such a kind of
approach?

Reasons for Joint Ventures and Alliances


Gain Access to a Particular Resource
Risk and Cost Sharing
Learning
Speed to International Market (Rapid

Expansion)