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ONGC Shifts Focus: Gas Now Leads Oil in Profitability
27 May
Summary
- Natural gas is increasingly dominant and profitable for ONGC.
- New well gas, priced at 12% of crude oil, is key to growth.
- ONGC expects annual gas production growth of 7-8%.
State-run oil and gas producer ONGC is strategically repositioning itself, increasingly viewing natural gas as its primary business driver over oil. This strategic shift is underpinned by favourable pricing reforms and lower handling costs associated with gas.
Production from newly drilled wells, termed 'new well gas' and priced at approximately 12% of crude oil prices, is a crucial element of this strategy. This higher-priced output is gradually replacing lower-priced gas from older fields, thereby enhancing overall profitability. ONGC forecasts an annual growth rate of 7-8% in gas production.
This anticipated growth is propelled by several key projects, including the Daman field development, the DSF block, and the ramp-up at the KG-98/2 deepwater block. ONGC is also executing projects worth approximately Rs 33,000 crore in western offshore fields to sustain and boost output. Furthermore, the company is expanding its partnership with BP plc for production enhancement initiatives.
ONGC's international arm, ONGC Videsh Ltd (OVL), is also showing improving prospects. Production from Russia's Sakhalin project has nearly recovered to pre-conflict levels, and the Mozambique LNG development is progressing rapidly, targeting first LNG around 2028. The company is also pursuing higher output from Venezuela operations.
