The Oil and Natural Gas Commission, stung by criticism from Goldman Sachs (Global Investment Research) about its corporate governance and overseas acquisitions, on Sunday issued a detailed rebuttal of Goldman Sachs' ''negatively slanted'' report that came out last week, saying it was aimed at hurting the company's image.

''A perusal of their report reveals that their analysis is devoid of basic facts and certain analysis is based on non-comparable benchmarks,'' the public sector oil behemoth said in its statement. The company rebutted Goldman Sachs' allegations on a range of issues which included government subsidies, overseas growth strategy and stock performance.

Goldman Sachs had raised various concerns regarding ONGC's operations. Its outlook on ONGC is based on concerns over overseas growth strategy largely being ineffective, unexciting execution track record in domestic business, rising costs in ageing domestic fields, limited focus on cost control, long-running corporate governance issues and structural unattractiveness – lower oil prices and a limited upside from the oil price rebound.

It also said that ONGC was subsidising fuel prices under government orders. Key positive stock catalysts are in government hands and hence unpredictable, it said.
Responding to the ''sell'' recommendation of Goldman, ONGC said that corporate governance remains the highest priority for the management at all times. ''More than adequate disclosures are made on all operational as well as non-operational issues,'' it said.

About subsidy discounts extended to public sector marketing companies, ONGC said, ''Subsidy discounts are applicable to crude produced from nominated blocks only, where there is no production sharing or profit oil sharing with the government.

''Despite subsidy discounts, ONGC's retention price has steadily increased. Hence, we feel minority shareholder's interest is not unduly compromised. Crude prices are steadily giving constant upside to ONGC's revenues.''

The status on subsidy sharing was duly disclosed in its IPO offer document for 10-per cent disinvestment by the government in March 2004, the company said. ''Quarterly results carry information on subsidy discounts and the same are duly reported to the board on a regular basis. Concerns of independent directors are conveyed to the administrative ministry,'' the company said.

On concerns that its overseas growth strategy is not effective, the company said, ''Overseas properties have grown from one in 2003 to 44 in 2009. Investments in some properties have been paid back much before the evaluated time period. The percentage of overseas production to total production of ONGC Group has moved from 7.23 per cent in 2002-2003 to 15.42 per cent in 2007-08.''

ONGC also dismissed the concerns in the report on rising costs in aging domestic fields and limited focus on cost control. It brushed aside the concerns on its execution track record in domestic business. The company said, ''Cost control remains always under focus and various measures taken to keep the costs under check.''

Countering the concerns expressed on the structural aspect of the company, the company said, ''Being one of the lowest-cost exploration and production companies, lower crude prices do not adversely affect the company in a big way. Despite large subsidy sharing with oil manufacturing companies, ONGC has generated the highest net profits among all corporate concerns – public and private, registering highest dividend pay-outs in recent years.''

ONGC also said it has acquired 43 overseas oil and gas assets in just six years. It acquires properties abroad through its foreign arm, ONGC Videsh (OVL). ''Investments in some of the properties have been paid back much before the evaluated pay-back period,'' it said.

Pointing at the cash flow of its wholly owned subsidiary, ONGC said OVL has already repaid a large chunk of the loans extended by the parent company. Of the total of Rs25,684 crore loaned to OVL, Rs11,820 crore has already been repaid.

The percentage of overseas production to total production of ONGC group has moved up from 7.23 per cent in 2002-2003 to 15.42 per cent in 2007-08. The company added 255.01 million tonnes oil equivalent of reserves through acquisition of overseas properties since 2003-04, it said.

Commenting on corporate governance issues raised by Goldman Sachs, the statement said, ''Despite subsidy discounts, ONGC's retention price has steadily increased. Hence, we feel minority shareholder's interests are not unduly compromised.''

Goldman Sachs also said the government, as promoter, had taken $20 billion (Rs103,340 crore) "in cash" out of the company over the last six years without consulting minority shareholders.

Subsidy discounts to public sector oil marketing companies is a practice of the government since 2003-04, ONGC replied. ''Subsidy discounts are applicable to crude produced from nominated blocks only, where there is no production sharing or profit oil sharing with the government,'' it added.

It said the company had disclosed the risk related to subsidy to the potential shareholders in its initial public offer document in March 2004.