India’s largest oil and gas producer ONGC will this year reverse years of decline in production and gradually raise output thereafter as it invests billions of dollars to produce from newer discoveries, company’s management told investors in a call.
Oil and Natural Gas Corporation (ONGC) in fiscal year 2021-22 produced 21.707 million tonne of crude oil, which is refined to produce petroleum products like petrol and diesel, and 21.68 billion cubic meter (bcm) of natural gas, which is used to produce electricity, manufacture fertilizer and as CNG in automobiles.
In current fiscal year (2022-23), crude oil production is slated to rise to 22.823 million tonne and gas to 22.099 bcm. In the following fiscal year, oil production will climb to 24.636 million tonne and to 25.689 million tonne in 2024-25, the management told investors in a call post announcement of second quarter earnings last week.
Natural gas production is slated to rise to 25.685 bcm in 2023-24 and to 27.529 bcm in the following year.
”We have reversed the declining trend,” ONGC Director (Finance) Pomila Jaspal said.
ONGC, which contributes around 71 per cent to India’s domestic production, has reported a gradual decline in output for over a decade now primarily because its fields are old and ageing.
The government has considered giving away ONGC’s biggest oil and gas fields to private and foreign companies in an attempt to boost output but this has faced internal resistance.
ONGC is now investing Rs 59,000 crore in 20 major projects, including in bringing to production oil and gas reserves found in deepsea KG block KG-DWN-98/2 (KG-D5) and fourth phase redevelopment of mainstay Mumbai High fields.
While investment in KG-D5 will bring additional output, spending in redevelopment of currently producing Mumbai High and other fields would help arrest the natural decline that has set in the ageing fields.
Officials assisting Jaspal at the investor call stated that the company will hook up a floating production system (FPSO) and subsea facilities during the fair weather window starting in January.
First oil from KG-D5 is expected in May 2023 and peak output of 45,000 barrels per day of gas (2.25 million tonne annually) and about 12 million standard cubic meters per day of gas will be in 2024-25.
The block is likely to yield 1.935 million tonne of oil and 2.784 bcm of gas in 2023-24. Jaspal said ONGC will continue to invest around Rs 30,000 crore per year on capital expenditure aimed at arresting the decline in output and subsequently increasing it.
”Our capital expenditure has been in the range of Rs 30,000 crore (per year), which we have been maintaining,” she said.
The firm has a little less than 600 hydrocarbon discoveries. Most of them were either in production or action had been initiated to monetise them.
The roadmap for increasing output addresses monetisation plans of all the discoveries of ONGC, barring about 42 finds which are isolated/far from existing infrastructure, or have very low volumes or are located in difficult areas.