New Delhi — India's state-run Oil and Natural Gas Corp., or ONGC, is pursuing a multi-pronged strategy of growing its core upstream portfolio, while nurturing dreams to expand in refining, petrochemicals and renewables, as it prepares to embrace the changing energy landscape, its chairman and managing director Shashi Shanker told S&P Global Platts in an interview.
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ONGC, which accounts for more than 70% of India's oil and gas output, believes that diversifying its business is extremely crucial for grabbing opportunities that might show up in future, Shanker said.
"We are in a period of transition. This emerging era is going to be complex when excellence in E&P alone may not be sufficient to drive the company into a secure position in tomorrow's energy landscape," he said.
"Therefore, the decisions and actions we take today -- in response to the changing scenario -- must be less reactive and more transformative," he added.
Shanker said ONGC has prepared a growth road map to prepare itself as a diversified energy company with strong contribution from non-E&P businesses.
"ONGC still remains strongly invested in oil and gas -- but we also look beyond hydrocarbons -- be it renewables or new frontiers, such as artificial intelligence and alternate energy," Shanker said.
Shanker said ONGC's recent merger with state-run Hindustan Petroleum Corp. Ltd. would help the company boost its presence in refining and petrochemicals.
"There are a lot of synergies between ONGC and HPCL, which is why the merger happened. We should be able to grow our refining and petrochemicals businesses two to three times," Shanker said.
While many upstream companies globally have struggled in recent years because of low oil prices and have cut capital expenditure, ONGC has decided to swim against the tide by keeping its capex unchanged.
Despite the significant growth in renewables and the advent of new technologies, oil and gas will remain critical for the country's future energy requirements, Shanker said, adding that the company's internal assessment had estimated that the share of oil and gas would remain a minimum of 30% and a maximum of 38% across different scenarios.
"So, even as ONGC diversifies across the energy value chain and grows as an integrated player, the company will retain its investment focus on E&P, given the importance of indigenous supplies to our domestic energy security," Shanker said.
"ONGC remains confident on the oil and gas business. We will continue our efforts to augment domestic production and sourcing equity oil," he said.
ONGC's capex commitment to its core business was $20.8 billion over the last five years. Capital outlay for 2019-20 (April-March) is set at $4.7 billion, he added.
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PURSUING THE GAS DREAM
Shanker said natural gas would be a big area of focus for ONGC as India aims to boost the share of the clean fuel in its energy mix to 15% from 6% at present.
"Most of our recent discoveries are gas-related. In fact, for the last three years, our gas production volumes have been growing at an annual rate of about 5%. Going forward, that rate will increase substantially," Shanker said.
In the financial year ended March 2019, ONGC produced 45.86 million mt of oil equivalent, largely driven by an uptick in gas output.
In the same year, gas production was 24.75 Bcm -- the fourth successive year of growth in supplies. Major contributions came from Daman in Western Offshore, S1-Vashistha in Eastern Deepwater Offshore and Tripura Onshore.
"Looking ahead, we remain bullish on gas. By 2024, we envisage standalone gas supplies exceeding 32 Bcm on the back of some major projects coming on stream, like East-Coast deepwater development project KG-DWN-98/2, and Daman and Kutch in Western Offshore, to name a few," Shanker said.
"Going forward, we are also committed to exploit challenging discoveries in ultra-deep and high-pressure, high-temperature areas to achieve and surpass the ambitious mark of 40 Bcm," he added.
A series of policy reforms by the government has also made it easier for the company to push ahead with its plans to monetize some of the gas discoveries, Shanker said.
"Now we have the open acreage bid rounds based on revenue sharing model. In addition, the government has given marketing and pricing freedom for gas produced from discoveries in deepwater, ultra deepwater and HP-HT areas for new gas discoveries," he said.
"Earlier, we were not able to exploit those discoveries because it was not commercially viable. But now with the marketing and pricing freedom these discoveries that we have made will be put on stream," he added.
In 2018-19, ONGC made 13 discoveries and monetized five of those during the year itself.
"A giant step on the exploration front were the first-time discoveries in Bengal Basin and Vindhyan Basin," Shanker said.
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