On behalf of the Board of Directors and on my personal behalf, it is my pleasure to extend to each one of you a cordial and warm welcome to the Twelfth Annual General Meeting of your Company.
The report of the directors
on the performance of the company during the financial year 2000-01 and the
annual statement of accounts are with you and with your permission, I shall
take them as read.
Current economic scenario:
The recent terrorist attack in US has given a body blow to the US economy, which is reverberating in the other economies as well. Our economy is no exception. This has led to a period of uncertainty all over the globe. In India, this uncertainty is further compounded by the slowdown in the Indian economy. The deceleration of economic activity for the second year in succession is a matter of concern. After a long time, exports have declined by 4.8% in June this year compared to a growth of 25% last year. The import bill especially of crude oil is ballooning adding to the overall import bill of the country. However, leading indicators of industrial activity and business confidence suggest that modest recovery in the industrial sector is likely in the second half of the year. The prime minister’s recent pronouncement on the resolve of the government to arrest the economic slowdown may add to the business confidence. The lifting of sanctions by the US on India also is expected to have a soothing effect on the economy. However, there is an urgent need to enhance the production of crude domestically and increase refining capacity to lessen the burden on the oil pool deficit.
As far as your company is concerned, I am happy to report that the 10.5 MMTPA Refinery Project has achieved full financial closure and the company is at an advanced stage of complying with certain pre-disbursement conditions stipulated by the financial institutions and banks, after which the work at the refinery site will resume. The implementation of the refinery is 63% complete and the amount invested on the same is Rs6300 crore (including expenditure on terminal) as on June 30, 2001. After restarting the project work, the refinery is expected to be commissioned within 18 to 24 months.
EOL eligible for
The government is proceeding ahead with the deregulation of the Oil sector as scheduled. You will be happy to know that your company has become eligible to market petro products as per government guidelines. Your company’s marketing division is preparing for the challenging task of dealing with the free market situation that will be ushered in by April 2002, when the Administered Price Mechanism is likely to be dismantled. Even though there is an oversupply in the near term in petro-products, the long-term prospects look encouraging.
Your company plans to be ready with the supply and distribution model, comprehensive retail marketing plan, including brand strategy and efficient marketing organization including participation in disinvestment programs of IBP to leverage this opportunity. In line with this strategy, your company has initiated process to open about 1700 retail outlets in the next 3-4 years.
I am pleased to inform you that your company has been pre-qualified for bidding for acquisition of stake in privatization proposal of IBP, a public sector marketing company. If this materializes, your company will have a strong competitive edge to market its products.
Exploration in top
On the Exploration and Production front, your company has made substantial progress during the year. This division commenced drilling of its first exploratory well in the Rajasthan onshore Block, RJ-ON-90/5, in February 2001 and has since completed the well with encouraging results. Plans are afoot to drill another well in close proximity to the first well to fully establish the potential of this block. Meanwhile, your company has inducted the Romanian National Oil Company – Petrom S.A. as operator with 21% participating interest in an offshore Block BB-OS/5 located north of Mumbai High oil field. This company, besides sharing the risk associated with the exploration, will also impart the state-of-the-art technology for better implementation. An offshore well is planned to be drilled in the last quarter of 2001 in this block. In addition, exploration work is commencing on the prospective Cachar block, CR-ON-90/1, lying in the petroliferous North-East where, in the first phase, we are required to acquire seismic data.
Ratna ready for
Your company has completed the formalities pertaining to the Production Sharing Contract (PSC) for the Ratna and R-series fields near Ratnagiri and is awaiting the final signing.
Foray into CBM
Your company had also evaluated the current coal bed methane (CBM) offering by the Government of India and has bid for three prospective blocks in the coal-rich Damodar Valley. We expect that during the current year, approval of the government would be received for conducting CBM exploration in Block CB-ON/3 in the Mehsana District of Gujarat where, your company drilled three wells earlier to establish the CBM potential.
The Energy division of your company continues to perform well in view of high oil prices internationally. This has led to a sharp increase in the utilization of land rigs and hardening of charter rates. It is expected that the occupancy of rigs will stay high in the near term. Your company has currently contracts worth about US$ 80 million in hand. Two rigs in Oman, which were coming off contract, during April 2000 to March 2001, have received extensions, which ensure continued deployment through the current financial year. With current market trends, three rigs coming off contracts are expected to get fresh employment at better rates. Two rigs have become operational in the Saudi market, one of which in the last financial year and one during this year. This has added to the growth in energy business. These developments are expected to generate substantial demand for drilling contractors in the coming years and the company is expected to obtain a good deal of business.
As I said last year, it is our dream to make your company globally competitive and a force to reckon with, we shall strive and endeavor to achieve this goal with single-minded dedication. I seek your whole-hearted support to make this a reality. I thank you for sparing your valuable time to be here with us today. I thank all the employees, bankers, stakeholders and my fellow Board members for their encouragement and support during the year.
Note: This does not
purport to be the proceedings of the 12th Annual General Meeting held on
September 28, 2001.