The sight is awesome: cornflower-blue waters, waves churning into white breakers and spray, and white gulls soaring in the stiff breeze.

But that's cold comfort for the hundred-odd people aboard Dolphin, the drillship chartered by ONGC. For them, it's a battle against huge odds in the Arabian Sea.

The waves here are five meters high, and the temperature is almost freezing at three degrees Celsius. But the crewmembers aboard the Dolphin are undaunted as they search for their target 3,000 meters under the seabed.

Cut to the Bay of Bengal where Seven Seas, another drillship, is sending its probes to a depth of 1,500 meters. Or to Sagar Vijay, ONGC's own drillship, which has been prospecting 900 meters under the seabed since September 2003.

The three ships -- Dolphin, Seven Seas and Sagar Vijay -- are costing ONGC $900,000 a day.

Welcome to the great Indian oil hunt.

To understand the scale of the operations, you must travel to the ONGC's pride, Bombay High where oil was struck just 170 km from the coast at a depth of 400 metres. Those were the good days.

Says Subir Raha, chairman and managing director, ONGC, which produces 84 per cent of the country's annual 32 billion tonnes of oil: "The days of easy oil are gone. There aren't any short cuts."

Raha's target is to raise crude production by 10 per cent by 2006-07. But that is a tall order. "Considering a natural decline of 8 per cent in the production of the existing oilfields, this means ONGC has to achieve a gross increase of 20 per cent in our production," Raha says.

Raha is getting strong backing in this mammoth oil hunt. Powered by the India Hydrocarbons Vision -- 2025 report, which gave priority to a huge push in exploration efforts, the government has moved into overdrive. As many as 94 blocks have been given out for exploration under the New Exploration and Licensing Policy since April 2000 against just 22 blocks in the preceding 10 years.

While ONGC holds 57.2 per cent of the total area licensed by the government for oil exploration, Reliance Industries and Oil India Ltd have grabbed licences covering around 26.6 per cent and 5.5 per cent, respectively.

Energy-hungry India has had mixed success in its hunt for oil. In the last two years, India has reported 21 oil and gas discoveries amounting to over 800 million metric tonnes of oil and oil equivalent gas.

Apart from Reliance, the other foreign and domestic companies, which together account for around 16 per cent of the country's total crude oil production, include Essar, Assam Company, Cairn Energy, Niko resources, Premier Oil and Hardy Oil.

Public sector downstream oil companies like Hindustan Petroleum and Bharat Petroleum have also made a foray into upstream oil exploration as joint venture partners of ONGC in some blocks.

So why are Indian companies suddenly stepping up their hunt for oil?

Petroleum Secretary B K Chaturvedi has an answer: "A large part of the remaining sedimentary basin will require deep sea exploration. At the existing speed of exploration, the process of giving out all the sedimentary basins would continue till 2025. There's no way but to accelerate the process as the exercise must be over at least 10 years before that."

That's an understatement, considering India's dependence on imported oil has jumped from just 30 per cent of its domestic demand in 1991 to 70 per cent now.

The fact is the country's oil production has also stagnated for far too long. After Bombay High, the only two significant oil discoveries -- more than a billion barrels of in-place reserves -- have been the Gandhar discovery by ONGC in the eighties, and the recent Mangala oilfields find in Rajasthan by UK-based Cairn Energy.

This clearly has to change urgently, say analysts like Shubhomoy Mukherjee, head of oil & gas sector ratings, at ICRA. India, which imports 80 million to 90 million tonnes of crude oil (cost: over Rs 85,000 crore -- Rs 850 billion) against total domestic availability of only 32 million tonnes, desperately needs to find more buried treasures of black gold. India's oil needs will rise to 3.2 million barrels a day by 2010 from around 2.2 million now.

In the process, India, which is now the seventh largest consumer of oil, will emerge as the fourth-largest consumer after the US, China and Japan.

Analysts say another reason why India needs to step up its oil hunt is the growing gap between consumption and production growth.

For example, crude oil production rose at a compounded annual growth rate of around 2.3 per cent from 1994 to 2003. But consumption leapt upwards at a CAGR of some 8.3 per cent.

Raha, for one, is taking this seriously. Consider the Sagar Samriddhi project in which ONGC is seeking to find one-third of the estimated 11 billion tonnes of oil and oil equivalent gas reserves lying unexplored in deep waters. If ONGC could produce one-fourth of the reserves, India would have 1 billion tonnes of oil and gas over 25 to 30 years.

That would be fantastic news for the company, which has been able to tap only 6 billion tonnes of oil and gas in the past 45 years even though it has 57 per cent of the oil exploration acreage in the country.

But mindboggling investments will be needed to reach these ambitious targets: the company is spending over Rs 400 crore (Rs 4 billion) a day to drill 47 exploratory wells. Raha says ONGC, which has domestic exploration licences for a total of around 680,800 square km, will invest Rs 33,000 crore (Rs 330 billion) in the 10th Plan period on oil & gas exploration, discovery and asset building. "The proposed investment is part of our expansion plans and ONGC is spending Rs 10,000 crore (Rs 100 billion) every year on business development," he adds.

Many consider such a huge investment too risky considering the recovery rate in India has been a mere 28 per cent compared to the world average of 40 per cent.

But Raha, understandably, disagrees. Even at a minimum average $20 a barrel, he estimates the revenues from 1 billion tonnes of oil production would be at least Rs 644,000 crore (Rs 6,440 billion) over the next 25-30 years.

At current prices, each percentage point rise in the recovery factor represents an extra value of Rs 16,000 crore (Rs 160 billion).

Can ONGC pull it off? The initial results have been positive with Sagar Vijay already striking oil in the Krishna Godavari basin. A bullish ONGC estimates its existing crude oil production of 26 million tonnes will rise to 49 million tonnes by 2011-12, and 62 million tonnes by 2016-17.

There are, of course, other ways for ONGC to reach its ambitious targets. The corporation is looking at ways of 'renewing' Bombay High, which accounted for 48 per cent of ONGC's crude oil production in financial year 2003, but has been showing signs of ageing. The company has already invested Rs 8,500 crore (Rs 85 billion), which has led to a net production increase of 50,000 barrels per day.

Avinash Chandra, former director-general of hydrocarbons, believes progress in India's oil exploration efforts have been tremendous, which is evident from the huge success of the four rounds since 2000. The fifth round is expected to be announced anytime now.

Chandra may have a point. Thanks to DGH, the time span between the offering of blocks and signing of production-sharing contracts has been cut to an incredible 3-4 months against 1-2 years earlier.

The deployment of nine seismic vessels in Indian waters compared to one or two vessels earlier has increased the offshore data acquisition sharply.

The icing on the cake has been the spectacular performance of India's oil companies abroad. ONGC Videsh, for example, already has nine overseas assets, and wants more. Deals have been struck in countries like Russia, Sudan, Vietnam, Syria, Iran, Iraq, Libya and Myanmar. OVL already gets 3 million tonnes of oil from Sudan and beginning in 2005, expects to get another 5 million tonnes from Sakhalin.

Others have also joined the rush. Reliance Industries has bought a 30 per cent stake in an offshore field in Yemen. The project, struck oil in mid-June last year.

All this is a far cry from the 1990s when the government stalled all ONGC's new exploration projects because of the severe foreign exchange crisis. The company, no doubt, has paid a heavy price for this. But Raha doesn't like to look to the past.

"We're flush with funds now." ONGC piled up reserves of Rs 34,151 crore (Rs 341.51 billion) even after paying a whopping 300 per cent dividend in the last financial year. "Our challenge is to convert these resources into assets and wealth for the company, its investors and its customers," Raha says.

As oil prices skyrocket, India will surely say 'cheers to that.'

The SEC cloud over oil estimates This is not a comforting thought for those who worry about India's already scant proven energy supplies. If ONGC adopted the standards set by the Securities and Exchange Commission (SEC), the estimated proved crude oil amount announced by the company might be lower than anyone believes right now. That gloomy admission comes from ONGC itself in its preliminary prospectus for its share sale released in February. "If at some point in future we were to adopt SEC standards, the estimate may come down significantly," the document says. SEC standards are being adopted increasingly by global oil majors for their widespread acceptability. At the moment, the company says it uses "internally-developed definitions" to calculate its proved domestic reserves. Those definitions are based mostly on international standards set from March 1995 by the Society of Petroleum Engineers, or SPE. These standards, referred to as the SPE International Standards, take into account not only the probability that hydrocarbons are physically present in a given geological formation but also the economic viability of recovering the reserves. But there are vast differences between the SPE standards and SEC Standards. How different? Well, crucially, the SPE standards are looser. Under SPE, proved reserves must be based on "current economic conditions, operating methods and government regulations." The SEC Standards require that proved reserves be based on the "existing economic and operating conditions, i.e., prices and costs as of the date the estimate is made. Also under SPE, reserves in undeveloped drilling sites that are located near a commercial producing well may be classified as proved reserve if there is a "reasonable certainty" that success will be achieved. Under SEC, it must be "demonstrated with certainty" that there is continuity of production from the existing reservoir before an unexplored location near a current commercial producing well can be classified as proved reserves. As far as project commitment, under SPE, proved reserves may be estimated as long as there is a reasonable expectation of project development. The SEC requires a more firm commitment by the company to develop the project. As a result, the ONGC document says, "The magnitude of any proved reserve difference between the SPE and the SEC standards could vary greatly. In some cases, the difference could be significant, whereas in other cases there could be very little difference. The SEC Standards also are more restrictive in that they require the reserve estimates to use only the prices and costs in effect on the actual "as of" date. If it adopted the SEC standards, for ONGC shareholders there is another sting. A reduction in estimates would have a chain effect: it would impact the amount of depreciation and depletion expense, impairment charges or certain other financial information derived from or relating to such reserves amounts reported by ONGC in its financial statements in future. And that would all affect the crucial bottom line.

Additional reporting: Surajeet Dasgupta