New Year Message from the desk of Chairman, MRPL

Date: 
01 January 2008

Dear colleagues,

2008 has arrived in all its glory. Let me convey my choicest wishes to all members and families of ONGC group companies. A new year is with us again. How time flies. Whoever said that time waits for none is obviously more than correct.

Looking back at the year that has left us  2007  we have some really good news to share. We've featured as the first-ever Indian company in the Fortune's coveted list of World's Most Admired Companies, 2007. ONGC is currently Asia's Best E & P Company, as per Platts 250 Global Energy Companies List, 2007.

We achieved an annual Reserve Accretion of 169.52 MTOE. The highest in a decade and secured a record 24 blocks in the NELP-VI, reinforcing our leadership in the Indian E&P industry. We also became the only Indian company to produce ATF from Gas Condensate.

ONGC's subsidiaries OVL and MRPL also registered unprecedented performances in 2007. OVL established footprints in a number of overseas acreages, taking its global project count to 35 in 17 countries. MRPL also recorded capacity utilization of 130%. Fiscal - 08 is turning out even better on financial parameters for both subsidiaries.

We also received a host of other accolades on our corporate governance model and initiatives for protection of the environment - too numerous to mention succinctly. Our financial performance has also been highly impressive. We hope to end this fiscal with record figures yet again. So, pat yourself on the back; we have done it yet again, year on year, our tomorrow is truly becoming
brighter.

However, before we rejoice, a word on introspection. Our performance is now continuously evaluated against that of other players in the business, who are supposedly more nimble, more surefooted, more alert to new opportunities and quicker to convert a prospect to discovery and a discovery to production. While, we may argue our case, it is the perception that we need to be concerned about. One barometer of "perception of performance" is market capitalization of the company. On this parameter, we have admittedly slipped to the number two spot after having ruled the bourses as the "numero uno" corporate.

We also need to introspect on whether our improved financials are merely a by-product of the high crude-price regime or whether we have actually improved on operational fundamentals. I leave it to you to be the judge on this one. Be fair, be brutally honest and be factual in your assessment. It is the realization from this introspection that will set the agenda for this year.

As we look back at our history, we have achieved much thanks to the unstinting efforts of our seniors, but a perpetual business enterprise has no option but to improve internally and to grow continuously and at rates faster than the competition and that too not merely on the home turf, but globally. Big challenge; surely, but we are not faint of heart to let such a challenge go unchallenged. We are made of sterner stuff. So think of all the clich's, pull up your socks, gird your loins and many others. Believe me, clich's still work; the message is - be prepared and be resolute for 2008.

Energy demand in India will grow at a much faster rate than the global projection of 3%. In the absence of any break-through in the transportation sector, the energy supply basket will continue to be fed predominantly by Oil and Gas. To meet this booming Oil and Gas demand, structured initiatives by E&P companies like us need to be put in place.

In domestic E&P space, expeditious reserves replacement is our first priority. The XI Plan Reserve Replacement target is 1+. We need to take concerted efforts to achieve that. Arresting decline from our matured fields and enhancing production from the new fields comes next in our agenda, along with expeditious development of discovered fields, especially in deep and ultra deep-waters. Technology management will be crucial in the latter. We have already initiated strategic partnerships with global leaders in this sphere. Another area of concern is achieving our drilling targets in the face of global shortage of deepwater drilling rigs at high charter rates. Apart from technology, financial engineering and contract negotiation skills would be required.

Overseas, we have to continue with acquisitions, by making the best use of funds. While our priority areas are in Africa and Central Asia, we are exploring each possibility to grow inorganically in the global E&P turf.

MRPL is also well poised for capacity expansion and steering the aromatics SPV, thus enhancing value for various stakeholders.

While firmly anchored in Oil and Gas E&P, ONGC is also preparing for the future. We have taken initiatives for tapping New Energy Sources like Coal Bed Methane (CBM) and Underground Coal Gasification (UCG), harnessing India's natural endowment of Coal Reserves. These efforts need to be accelerated.

Renewable sources of energy and alternative clean fuels are also an objective to which we are firmly committed. ONGC is setting up a 50 MW Wind Power

Plant in Gujarat. ONGC has also laid the foundation of Rajiv Gandhi Energy Centre in New Delhi, for undertaking holistic research in state-of-the-art Renewables like Thermo-chemical Reactor for Hydrogen, Geo-bio Reactors and Fuel Cells. These efforts must now aim at migration of concept to market in the quickest possible time.

In addition, we need to aggressively pursue ways to discover more effectively and to produce more efficiently.

2008 is a big year for us, a year of opportunity with an extra day as a leap year. And yes, at the corporate level we're planning ahead for the long run. While our plans will organize resources, it is your willpower and the spirit of achievement that will translate them into reality. I firmly believe that it is the aggregate of individual effort that produces collective result.

Another heartening news is that Mr. Dinesh Kumar Saraf has joined us as regular Director (Finance) on 27th December-07. While welcoming him, I feel confident that our financial management systems will improve further.

I would like to thank my colleagues on the Board and senior colleagues in Assets, Basins, Services and Institutes for their continued support. When facing various challenges and opportunities, it is unity under unanimous thought, creativity, competence, pursuit of profit, maximizing share-holder return, care for employees; serving and separated, and the passion to serve the nation and humanity through our various CSR initiatives that has enabled us to strengthen this great Institution ONGC.

Dear colleagues, I thank you again personally and on behalf of my colleagues on the Board for believing in yourself and in your ability to deliver results. It is this belief in self that has taken us to where we stand today. From this vantage point, we must constantly ask ourselves whether we have become too self-satisfied with the Group's achievements and are now failing to create new value, or if in discharging our duties we are merely waiting for orders rather than taking personal initiative, or just what sort of value we personally created in 2007 or can create in 2008.

Lastly, I thank the families of all ONGCians for believing in this organization and sharing our vision for growth. My wife Rashmi, daughter Swati and son Nayan join me to wish a VERY HAPPY 2008 to all the members and families of ONGC group Companies.

2008 is upon us, enjoy!

Jai Hind.
-sd-
R S Sharma