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ONGC Charts Course For New ‘Avatar’; Targets $5-16 Billion Investment

ONGC Charts Course For New ‘Avatar’; Targets $5-16 Billion Investment


Oil & Natural Gas Corporation Ltd. unveiled a $15-16 billion investment plan to double output from its domestic and overseas fields and expand its refining capacity three folds alongside diversification into renewables in a new vision document for 2040.

“The new strategy document aims to transforms ONGC in a new ‘avatar’ in this new energy landscape as a diversified energy company with strong contribution from non-E&P businesses,” ONGC Chairman and Managing Director Shashi Shanker told reporters.

ONGC Energy Strategy 2040 envisions the company as “A diversified energy company with a strong contribution from non E&P business; three-times revenues and about five to six-times market capitalisation,” he said.

The firm produced 24.23 million tonne 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 tonne of oil and 4.736 bcm of gas was produced from its overseas assets.

It had a turnover of Rs 1.09 lakh crore and a net profit of Rs 26,715 crore in the year ended March 31. As on Aug. 16, it had a market capitalisation of Rs 1.64 lakh crore.

“Our fields are old and ageing, 30-50 years-old and have reached plateau. So we are investing in re-development projects to arrest the fall and extend the life,” he said. The company is investing around Rs 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 tonne 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,” ONGC Director (Finance) Subhash Kumar said. Shanker said the ‘Energy Strategy 2040’ entails ONGC achieving “three times revenue distributed across exploration and production, refining, marketing and other businesses; four times current profit-after-tax (PAT), with 10 percent contribution from non-oil and gas business; and 5-6 times current market capitalisation.”

“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 percent and 5 percent 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 renewable 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 aging fields, where 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 $1 billion) in select frontier themes such as clean energy, artificial intelligence or reservoir/field services technology,” he said.

In upstream oil and gas exploration and production, 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 maximise legacy production, exploration-focused technology partnerships, dedicated marginal fields unit as well as building decommissioning capabilities. Internationally, focus shifts to plays with volume in host regimes with a positive government-to-government relationship with India to secure stable energy long-term supplies, the annual report said.

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.

Source: bloombergquint
Anand Gupta Editor - EQ Int'l Media Network


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