ONGC charts course for $15 billion investment

ONGC has been under pressure to reverse the falling output from its ageing fields. (Photo: Reuters)

NEW DELHI : India’s top oil and gas producer ONGC on Friday unveiled a $15-16 billion investment plan to double output from its domestic and overseas fields, expand its refining capacity three folds and diversify into renewables to earn four times higher net profit by 2040.

Oil and Natural Gas Corp (ONGC), which has seen crude oil production stagnate as a majority of its prime fields are ageing and are past their prime, has adopted a new ‘Energy Strategy 2040’, company Chairman and Managing Director Shashi Shanker told reporters here.

The company, which started with an equity infusion of 343 crore by the government more than six decades back, has generated a wealth of over 9 lakh crore since then and is now venturing on a new road to further enhance value.

It has already seen a turnaround in natural gas with output rising for the fourth successive year to 24.75 billion cubic meters and is further slated to go up to 32 bcm by FY24, he said. “We see gas production rising to 40 bcm by 2040,” he said.

The new Energy Strategy 2040, which was adopted by the board a few weeks back, sets target of “three-time revenue distributed across exploration and production (E&P), refining and marketing; 4 times current PAT with 10 per cent contribution from non-oil and gas business; and 5-6 times current market capitalisation,” he said.

ONGC, he said, will still remain strongly invested in oil and gas but it also looks beyond hydrocarbons.

“The new strategy document aims to transform ONGC in a new ‘avatar’ in this new energy landscape as a diversified energy company with a strong contribution from non-E&P businesses,” he said.

The firm produced 24.23 million tonnes of crude oil in the 2018-19 fiscal year and 25.81 billion cubic metres of natural gas from its domestic fields. Another 10.1 million tonnes of oil and 4.736 bcm of gas was produced from its overseas assets.

It had a turnover of 1,09,654 crore and a net profit of 26,715 crore in the year ended March 31, 2019. It has a market capitalisation of 1.55 lakh crore as on date.

“Our fields are old and ageing, 30-50 years old and have reached a plateau. So we are investing in re-development projects to arrest the fall and extend the life,” he said.

The company is investing around 86,000 crore in 27 major projects to boost oil and gas production, which has stagnated over the last few years.

These projects will yield 76 million tonnes of oil and 121 bcm of gas.

The overall plan, which includes overseas projects, expanding refining capacity and investing in renewables, will entail $ 15-16 billion investment.

“These numbers will change as we progress with some projects being advanced and finances undergoing changes,” ONGC Director (Finance) Subhash Kumar said.

Shanker said its investments in new frontiers – primarily to hedge against disruption in existing portfolio, will include carbon capture and storage, artificial intelligence for exploration, hydrogen fuel, lithium mining and biofuels.

Oil and oil equivalent natural gas production is seen rising from 65 million tonnes to 135 million tonnes by 2040, he said.

“The strategic roadmap envisions a future-ready organization whose growth is predicated on a few important planks: consolidation of our core upstream business (domestic and international); expansion into value accreting adjacencies in the oil and gas value chain (downstream and petrochemicals) and diversification into renewables (offshore wind) and select new frontier plays through dedicated venture fund,” he said.

‎It targets cumulative upstream output (local and overseas) almost doubling from current levels with 2% and 5% CAGR in domestic and international operations respectively.

With two 35 million tonnes per annum of oil refining capacity vested in its two subsidiaries — HPCL and MRPL, ONGC is targeting to raise this capacity to around 90-100 million tonnes. Also, expansion is petrochemicals will be prioritised.

Besides, ONGC plans to make investments in renewables energy sources with a target to create 5-10 gigawatts portfolio with a focus on offshore wind power, he said.

ONGC has been under pressure to reverse the falling output from its ageing fields, where the natural decline has set in. It is investing heavily to arrest the domestic fall while at the same time aggressively look for assets overseas.

“The strategic roadmap also looks to create long-term optionality through investor play (venture fund corpus of about USD 1 billion) in select frontier themes such as clean energy, artificial intelligence (AI) or reservoir/field services technology,” he said.

In upstream oil and gas exploration and production (E&P), priority would be accorded to select difficult plays (high-pressure high temperature, ultra-deepwater) with high-prospectivity and low stretch from current core, development of in-house enhanced oil recovery solutions to maximize legacy production, exploration-focused technology partnerships, dedicated marginal fields unit as well as building decommissioning capabilities.

He said there was significant room for deriving operational synergies between HPCL and MRPL through integrated crude sourcing, centralised trading, capability and infrastructure sharing.

Expansion in petchem is based on the robust demand of outlook of 8-9 per cent CAGR for the country as well as ONGC’s significant presence in the market through its subsidiaries.