ONGC's Arun Kumar Singh Reveals AI Secrets for Finding Hidden Oil | The Core Report

Thank you for asking this question. In fact, this 10 years is contextual. Contextual in the sense that if you are in deep water offshore exploration—to commence the exploration and then to bring oil or gas to the surface—that is a 10-year context. For onshore, particularly if you discover something, it could be as low as—from day starting—maximum 3 years. But the global trend now, if you see, most of the oil and gas now is being found in the last decade or so. The new discoveries are in deep or ultra-deep water. Deep water—Guyana, for example, Exxon explored for so many years, now it is almost going to hit 1 million barrel production. And why I said this for deep water and ultra-deep water—because you start the process by taking a license, then you have to do seismic, then you have to process it, then interpret it, because it's very hard, large data. And then choose a location, make a choice about a location to drill and see whether your prognosis is right or wrong. So that drilling itself—planning it, signing a contract, and then drilling and finally discovering oil—that process itself, come whatever you do, it takes around 4 years. Then after discovery, you will appraise it—how much is the oil, whether it's economic, not economic—that also takes around a year or so. Then you have to source, you have to do subsea equipment. That project typically, I don't think anybody has done in less than four years. And then if you have gas, then you have another challenge—converting into, if you are close to shore, fine; if you are not close, then you have to convert into LNG to ship it. So nowadays, if you see all the last four years, the numbers which have come—either from Brazil or Guyana—the big numbers, these are all ultra-deep water. In our context also, for our country, we believe now that earlier roughly 3.36 million square km of sedimentary basin in our country—1.2 was blocked, never explored, which has potential, what we call sedimentary basins. Those blocks the government released very recently, and now we expect a lot from there. But most of it, we also believe, will be deep water, ultra-deep water. So in that context, I said we need to compress the time—compress the time of exploring, seismic, explore the time of—you know, now for example—we know for sure that we'll keep doing exploration in deep water for the next 5 years, then we should contract a vessel on a long-term basis, and whoever is exploring there, he can use the same vessel. So then you can save all those times, plus you can compress the time of data processing and interpretation. Similarly, development. So this is one side where we said that in our country also, if we believe now that large potential is left in deep or ultra-deep water—that was the context in which I said 10 years. Otherwise, if you find something onshore, onshore is a game of—like today also, Gujarat, if we keep drilling, we keep discovering, we keep producing. But these quantities just go in making up for the depleted, declining production. So when you notice, almost from the onshore area, we've been producing 6 million ton a year of oil—we are producing 6 million ton a year for the last 10 years—because what we do is, in our parlance, what we call normal decline of reservoir is a standard phenomenon—6 to 7%—you lose production every year from the existing reservoirs. So you keep discovering new reservoirs, adjacent area or nearby areas, and you keep compensating for it. But exploration—if something big, like something big we found in Rajasthan onshore, that was decades back, and then after that, something big in the country—if I remember correctly—it is Krishna Godavari. The rest are small pools which are just going to make up for the continued production. So it was contextual. I wanted to summarize that it should not be said that it takes 10 years in all circumstances. Like for the Middle East, it may be 2 years, because Middle East—all the reservoirs so far, big ones, are still onshore. So therefore, we have to see in that context.

Right now, our focus is Krishna Godavari. First of all, I must clarify to you that 60 to 65% of ONGC's production comes from offshore—primarily Mumbai offshore—and now, of course, we have added Krishna Godavari. Krishna Godavari—we have opened all the wells now, oil wells are moving well. We have to open more wells of gas; that is planned in the next 4-5 months, and then we ramp up production. So these are the big ones. But ONGC also produces around one-third of its oil in onshore—primarily in Gujarat, Andhra Pradesh, Northeast, and Tamil Nadu, if you see the broad segregation. So these places, we keep doing work every year, we keep doing some new project. But the big one, if you say—contextually, the biggest thing that we are expecting now is our new deal with BP. This is about increasing the recovery from Western offshore—Mumbai High. Mumbai High is a primary asset of ONGC even today. Our recovery so far has been 29-30% from whatever is initially in place. Now, with BP, we are hopeful—the offer itself says we can expect 60% gain from the baseline. So this is something that should hold us in good stead for time to come, because it is a big reservoir and a big opportunity there in terms of improving our technology, process, system, so that we produce much more than what we have been producing in recent years. So our focus is two-fold: one is exploration—keep exploring deep water, and wherever we find oil; and second is to keep improving our existing reservoirs. These two. And for this, I can tell you, we need around 30 to 35,000 crore per year. So we are one of the biggest capital spenders also in the country, and this will continue for the next 4-5 years.

So now we have lined up—everybody has lined up its resources to explore. Well, like right now, we are drilling in Krishna deep water. We just 3-6 months back finished drilling and having a discovery in Mahanadi. So in this area, we should hope for a big reservoir. And if—God, but you can't change the geology, but you can definitely explore. And if you find a Guyana, then our energy needs are addressed. And Guyana was something that they knew was going to be—obviously they must have known, which is why Exxon 20 years they kept exploring, and many explorers came and left, till somebody came and said let's try one more, and there they found a reservoir which is so good—today itself is around 700,000 barrel a day, and hopefully next year they'll reach 1 million barrel a day, plus they can produce more.

What I explained to you was basically addressing our energy needs. ONGC currently is present in 15 countries, around 32 blocks, through a 100% subsidiary called ONGC Videsh Limited. Then that production today is around 10 to 11 million ton a year. So you can say that it is—40 million, 42 million ton we produce within the country. So 40 plus 10, you add 50, 53, 54 million ton. We have our share of production in the global pool, which roughly works out to 1 million barrel a day. But our country is consuming 5-plus million, so even if we take the OVL quantity, we go maximum up to roughly 20%. So we need to increase there as well as here. But nothing works better than finding something in your own country. And now there is another challenge—because if you see now exploration, particularly exploration, people have—because of this transition and all that—what was being explored in 2013 is not the case today. In 2013, the world spent roughly $125 billion in exploring; today it is at $50-52 billion a year. So exploration basically has moved into the domain of national oil companies, because it has a different outlook, it has a different future. So our primary responsibility is to explore Indian waters and Indian onshore, wherever something is left. But foreign, of course, we have producing assets. If some producing asset or near-producing asset we get, then we'll invest heavily, because that will also secure our country's energy needs.

So that is a bigger strategic question, if you see. ONGC is owner of HPCL. ONGC acquired HPCL. ONGC is OPaL owner, which is also a 2 million ton petrochemical and chemical plant, and ONGC also owns MRPL. So literally, ONGC on the downstream side also is very strong. But ONGC primarily itself is focused on E&P, with this presence in the downstream also, strong presence, but through a different commercial structure. Now coming to petrochemicals—our petrochemical consumption in India is very low compared to global average. So our petrochemical story will continue to grow more strongly than energy, because energy—primary energy need could be 3 to 4% growth, but petrochemical growth will certainly be more than 8% plus. So now there are two things in it. That if transition gets accelerated and you have, after say 10-20 years, still you are left with your reservoirs—naturally, oil-to-chemical is the answer, because the country will still continue to need huge petrochemicals. So petrochemicals is basically a two-pronged strategy: one is national need, and second is it also secures you for future. Plus also, third, it offers employment. The downstream side of petrochemicals offers huge employment opportunities in our country. Like our OPaL is only a 2 million ton unit, but direct and indirect employment around its periphery in the Dahej itself is around 2 lakh people working for that, because of petrochemicals. So gradually everything—the employment is there because of distribution of products. You make downstream—you make table, you make glass, you make chair, you make car accessories. So all these will get made from the product that you make as commodity in your petrochemical plant. So therefore, it is a downstream side. So we have a huge opportunity. China today is the world leader in terms of capacity to crack and all that. But we hold another opportunity because we have the market, and we have—the market will keep growing at 8-9% for at least the next 30-40 years. So therefore, petrochemicals is a larger immediate, medium, and long-term need. Long-term need may come out of transition needs—what do you do with oil? So naturally convert into petrochemicals. Plus also, ONGC today—I'm Chairman of MRPL and OPaL—when OPaL already produces 2 million ton of the 4 million ton of petrochemicals and chemicals that ONGC in the group company makes, where ONGC is more than 51% owner.

Gradually, what is happening globally, if you see—oil and gas companies are trying to become energy companies. That happened in Europe in a big way, because if you see, they entered through gas, then they went to power distribution, then power generation. Because one thing is also true for our country: our electricity need will be far faster growing than the petroleum need. So if that be the case, and with—two, three things are strategic advantages to ONGC in terms of renewables. One is that it has the financial muscle to invest. Second is round-the-clock power can be a combination of gas as well as solar—because other options are working, but at a much slower pace. And third thing is that the country needs more power. And fourth—very few people know that ONGC owns OTPC, that is a power company—ONGC Tripura Power Corporation—where we produce around 800 megawatt of power from our gas and sell it to the local Northeast and also to Bangladesh. So the capability of ONGC, inherently in some pockets, is existing for power generation, even for transmission. It runs a small transmission company which runs power transmission, of course, that is a JV with Power Grid, which is Northeast. So ONGC is present everywhere in the energy value chain today—only the size is different in different buckets. So this capability—and that is a strategic question, of course. Others may differ with this. Earlier, the natural hedging for oil and gas companies was to be in all three sectors—E&P, midstream, and downstream—and naturally, if upstream doesn't do well, downstream will do well; if downstream doesn't, so it was a—and that is the reason for all these years, for centuries, only international oil companies survived, because they had the full integrated value chain. In part, if you exist, you may not survive for long, because one bad time comes and you are wiped out. So this is—now, in my personal opinion—I'm not saying everybody should follow this—same thing will hold true for oil and gas companies: that sooner or later, they have to get into the other forms of energy. Because otherwise, if you are only in E&P today—oil and gas—and oil and gas takes a backseat, then of course you have a short shelf life. But that will not happen in India, because in the Indian context, for 30-40 years, oil and gas is going to kick. But if you take a long-term view, all oil and gas companies have to ultimately become energy companies—energy from whatever source: even nuclear power, even CBG, even ethanol, even oil and gas—so the entire energy basket. Whatever primary energy basket exists in the world, any source—you should be in all the places, for to survive for centuries. If you want to survive for a few decades, then it's fine—you remain segregated.

So my personal time, I've taken account—92% in the last two years has gone to conventional E&P. Because OVL is run independently by the MD, so there is a separate board—only I sit in the chairman board meeting, non-executive chairman. And I'm non-executive chairman of MRPL, I'm non-executive chairman of OPaL—so these don't take much of my time. Unfortunately, management is very competent in all the subsidiaries, so they run on their own. But overall, you know—overarching situation—I'm aware of. But my personal time goes in still—and in that, particularly at least 40% of the time goes to: can we do something great in exploration, and also in enhancing production from our existing fields. Like a lot of time has gone into stitching these tie-ups, and that is a win-win with win-win conditionality from both sides. So time-wise, we are fair. But one other thing that we still continue to focus on E&P. Renewable also doesn't take much of my time, because we have created a company called ONGC Green Limited—it is head—it is run by that Managing Director—and only they come to ONGC for money, because ONGC has the resources. So that role I perform in the board meeting, nothing more than this.

In some areas, the majority of the areas, we are at par with any international oil company. If you come to exploration, deep drilling, all that—we can say that when you see, in 60-70 years, it is as strong as any IOC. There are two, three areas where they have more experience than us, for the simple reason that they are more exposed, more experienced because they're bigger. One of such areas is the EOR, or what we call enhanced oil recovery. In that area, they know something that we are yet to learn—or to the extent that they know, we also know 60-70% of things. We have been doing—like onshore, if you say Gujarat—ONGC is the best in enhancing recovery from the fields of onshore. But when it comes to carbonates, particularly—I don't know if I'm getting too technical—but their recovery of total initially oil in place in some fields is, say, 50%. Our recovery is 29-30%. It is not that oil is not there—it is there, 70% we are leaving underground. It is world over—it depends on how much you are able to recover and bring to the surface. And in that area, we found that we need some help, and we needed help from only those guys who are really big and who really know this. So we floated a process, we ran a process, through which we selected BP. So we expect that at least in our western offshore reservoirs—how to pressurize the reservoir, which part of the reservoir we should pressurize, how to maximize our recovery from underground—that issue we wanted some help, and therefore we have done this tie-up.

Shale is a very recent phenomenon in the world. Shale is nothing but—you know—eating in the kitchen itself instead of kitchen and dining table. So wherever oil is getting formed or it is not moving, you reach there and you extract. So basically, this is—as you were rightly said—the US mastered that. But fortunately, their geology and their structure of Earth is such that it enables a very easy technology—they found a way to figure out how to do it. We have done for five areas the shale, but we are not as strong on shale in terms of the gift of nature to us so far. If we discover something different, then it is—so that side is one part of the technology. But shale technology so far we have not needed, for the simple reason that we have not found the shale which is as good as the US, or for that matter, even some Latin American countries. But in the conventional oil and gas space, in one or two areas we needed help. Particularly for ONGC, it became very relevant because of the fact that our largest reservoir is still Mumbai High, and we have not produced more than 28-29% there. So there is opportunity to go up to 50% very comfortably, because there are many reservoirs in the world where recovery has crossed 50-51%, as in with equal vintage or older. They are ahead of us because of the learning curve—at least in enhanced recovery, how to recover more. So there's no harm in knowing from someone who knows, and maybe after some time we will know better than anybody else.

Today, if you see, only integrated companies are able to have this kind of muscle. Fortunately for ONGC, this kind of money—generating from ONGC is not a problem, because you have your oil production today, gas production, then your investment. So you can continue these investments, and also we have committed to invest at least 10,000 crore plus per year in our exploration. So that we will continue to do. So this is one aspect. One more area which is very relevant for the country to know is that there are many small pools which have been discovered by the private sector as well as the public sector. Now there is a need to do joint development to bring scale and also the cost down. That path we are now starting, because particularly in two-three geographies of the country, particularly deep water, private companies have also discovered, we have also discovered. So that part—now we are starting our journey on that. We have started communication, how to do it—joint development—so that there is an economy for doing, for both of us, because both of us independently possibly can't do. So if you join together, then many infrastructure gets commonly shared and your cost of production comes down.

ONGC has eight institutes of ONGC and they do R&D. Of course, the applied R&D is not pure science, but application of science. We have eight institutes. Starting—four are in Dehradun, remaining four are outside. And these are internal technology improvement institutes, which, of course—today in drilling, we should be very proud of our drillers' capacity and all that, because there is an institute which keeps feeding them regularly what to do, what not to do. But coming back—this is the E&P old-world thing. Second, on the technology side, we have internally devoted a lot of resources to AI. And now we drilled a well recently purely based on AI outcome—that to locate a well—and we found 98% accuracy of prediction. So that is something that we should be very proud of. That AI, our investment in AI is going to pay big in terms of efficiency in the next 3-4 years, at least in oil exploration and development. Because the accuracy of our prediction—because we follow a path that it will find so much there, but if you drill in a wrong place by even 5 km away, then you don't get so. But this case particularly has given us lots of confidence that possibly we can use AI more extensively in locating a well, particularly in producing fields. And this AI came from—in-house, plus of course help from one big technology company, because they also helped us. So you can say mixed effort of both. But it looks like that accuracy and efficiency in oil and gas sector is going to improve immensely through AI, because we are underestimating its potential. Because one well has shown us 98% accurate—so it means there is something that we can do more on this side. And therefore, we are accelerating the pace. In fact, now we have given in DOT—that is, we call it organizational digital transformation. In that project, we call it DOT. We have given 70 IT resources, best our internal people, there, and 30 for AI. So 100 bright people are working 24 hours around the clock—maybe you can say throughout the year—on only improving AI and digital penetration in ONGC. Because this is the area which will give us good efficiency. I'm 100% sure that it will pay for itself in 3-4 years in a big way. And startups—your last question—startups.

So when we say—there are three, four types of talent which ONGC attracts. First is, of course, those who are daredevils, those who want to do chopper rides every day—that variety. Plus you have challenging offshore production, of course. So this is one variety. There also we need good talent to run the show on a day-to-day basis, particularly with good understanding of working equipments and processes. Second is the design side—that what we should, how we should design our facilities. There also, I think ONGC has one of the best institutes, and therefore those who are interested in designing and R&D—and I told you about R&D institute numbers—so those who are in that frame of mind, for them also ONGC is a space. Now third space is now pure digital technology space. Very few people know that ONGC's internal spend on digital and all that is 3,000 crore plus per year. So it runs literally a huge digital project inside—it is running today in hundreds. So those who want to have the new world—for that also ONGC is the right place. Fourth, those who want a longer life in any company—ONGC is the best place, because it is in the newest spectrum as well as in the oldest spectrum. So you have the longevity of one organization, which is assured in the long run, because of what I explained to you previously—that you can work anywhere. And fifth, we transfer people across—it is not that if you are good in one place and we found that you can do here also. So new world, old world, both coexisting together for the betterment of society and country, and for the individual. So this is—you can say, if somebody wants like Army-like life, western offshore is Army life—every day you fly in a chopper every morning, you go from one platform to another, second platform to third platform, in a dangly in an orange suit. So like Army type of life is western offshore. If somebody wants to have a pure digital life, that also ONGC is well equipped—one full building we have dedicated for that. So all kinds of people can join ONGC—that is my offering. It is not one type.

Thank you.