ONGC Sees Growth Opportunities in Gas Production Following Boost to Profitability from Higher Prices

ONGC Expects Natural Gas to Become Dominant Part of Business

State-run oil and gas producer ONGC is anticipating a significant increase in natural gas production and sales, driven by new high-priced gas production and rising domestic demand. According to the company, gas now contributes more to its earnings than oil, thanks to favorable pricing reforms and lower handling costs.

In recent years, ONGC's production of gas has surpassed that of oil, with gas accounting for a larger share of its revenue. The company's chairman and CEO, Arun Kumar Singh, attributed this shift to the increasing contribution of 'new well gas' production, which is priced based on 12% of crude oil prices. Last year, new well gas accounted for around 20% of gas volumes, and this figure is expected to rise to 25-30% this year before further increasing in the coming years.

The company has seen significant growth in gas production from new wells, with the 'new well gas' realizing nearly USD 10.8 per million British thermal unit in the domestic market at crude prices of around USD 90 a barrel. This is one of the highest-paying gas markets globally for such production. ONGC expects gas production growth of 7-8% annually, driven by projects including the Daman field development project, the DSF block, and ramp-up at the KG-98/2 deepwater block.

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The company has made significant progress in its western offshore fields, with four wells under the Daman project already online. ONGC is executing projects worth about Rs 33,000 crore in western offshore fields aimed at sustaining and increasing production. Western offshore assets account for around 60% of ONGC's oil production and 70% of gas output.

ONGC has also expanded its partnership with BP plc for production enhancement projects across western offshore assets, after earlier assigning Mumbai High redevelopment work to the company. Production at the company's KG-98/2 block in the Bay of Bengal has faced geological challenges, but the company now has a "full handle" on the issues and expects output stabilisation measures to improve performance.

In addition to its hydrocarbon operations, ONGC is also focusing on renewable energy, with its renewable energy portfolio nearing 3 gigawatts through acquisitions and ongoing expansion under ONGC Green Ltd. The company is targeting an additional Rs 3,000-4,000 crore in cost savings after already achieving about Rs 4,000 crore in efficiencies under an internal optimisation programme.

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ONGC also announced plans for a new port joint venture with the Gujarat Maritime Board to support logistics for petrochemicals and LPG operations, including its OPaL petrochemical business. The company's chairman and CEO, Arun Kumar Singh, said ONGC increasingly viewed itself as a "gas and oil company" rather than an "oil and gas company", reflecting the strategic shift toward cleaner fuels and stronger domestic gas demand in India.

The company expects gas production from key offshore projects to rise steadily over the next two years as new wells are commissioned and infrastructure bottlenecks ease, even as some projects face delays linked to geopolitical disruptions and technical complexities.