MUMBAI, March 3: International consultant McKinsey has kicked off the process of developing a structure and strategy for Oil and Natural Gas Corporation's drilling operations. These are currently being discussed with the corporation's board. A significant recommendation by McKinsey is that drilling be organised as a centralised group that will adopt its own accounts.This group will have a regional structure, with area managers responsible for profits from their rigs. It would also have a business development department, which will scout around for and initiate action on opportunities outside ONGC. Drilling will also provide manpower and execution services to the asset at market-linked prices.
McKinsey has also suggested other measures, which include re-designing the basic organisational structure, defining a strategic direction for international growth and redesigning procedures.
The international consultant was roped in by ONGC for a restructuring plan which is currently under progress. The basicobjective of the effort is to improve procedures and systems at the ONGC, especially with a view to reducing the level of red-tapism and bureaucracy that go into decision-ma-king.
Several options for designing the corporate structure have been developed and are currently under discussion.
The key issues to be discussed are placement of services, demarcation of exploration and production assets and organisation of corporate functions.
To maintain its position as the dominant supplier of oil and gas in India, McKinsey has suggested that ONGC will need to view its overseas operations as a major growth area. Keeping this in mind, six to eight countries in central Asia and the middle east have been identified as the thrust areas for ONGC Videsh. This identification is based on an analysis of opportunities for long-term growth for ONGC and its ability to capture these chances.
The ONGC-McKinsey combine has arrived at a preliminary design of the key procedures.
This has been based on discussions with across section of ONGC personnel on potential improvement areas in the current procedures. The redesigned procedures are being redefined by the task forces within the organisation in consultation with international exploration and production experts and ONGC personnel concerned.
To date, the ONGC-McKinsey team has been working on the design of an asset-based structure, corresponding systems and procedures, placement of services and identification of overseas growth opportunities for ONGC. The corporation has also, independently, begin identifying key areas of revenue and growth and has already kicked off the process through a memorandum of understanding with its counterpart in the downstream sector, the Indian Oil Corporation.
ONGC is the third oil PSU that have sought international advice for restructuring its operations. The other two are Bharat Petroleum Corporation and Hindustan Petroleum Corporation. While the former has hired the joint services of Arthur D Little and ICICI, HPCL's recast plan wasdone by Arthur Andersen.
The whole idea of this restructuring is to ensure viability of these companies in a deregulated scenario.
The process will be set in motion barely a month from now when the first phase of the Nirmal Singh committee recommendations come into effect.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
