New Delhi: Oil and Natural Gas Corporation (ONGC) has raised its long-run oil price expectation to above USD 75 a barrel from an earlier consensus of around USD 65, and says the shift has brought fields it had written off back into viable territory, Anupam Agarwal, Director (Finance), ONGC, said on the company's Q1 FY2026-27 earnings call.
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"Before Hormuz, the general consensus was coming that oil prices will settle down around USD 65," Agarwal said. "But now with this Hormuz crisis, there's a security layer which is coming on the baseline, and we believe it will be USD 75 plus in the long run. That is our expectation."
He linked the revision directly to the company's investment set.
"With that, many of the fields which we thought might not be viable are working out in the range where they are viable, and we will like to develop them for the energy security for the country," he said.
Agarwal applied the same logic to deepwater, where he said the size of the reservoir has to justify the cost of development. "Deepwater is a high-risk, high-reward game," he said. "The size of reservoir, the economics has to be good to develop that."
Some prospects that did not clear the bar at lower prices now do, he said. "At USD 75-plus kind of thing, that will be continuing to be very, very lucrative also and important for energy security."
He placed the government's recent upstream measures in the same frame. "This is basically recognition by the government as well as by ONGC post Hormuz, the need of energy security for the country," he said, citing fiscal stability assurances, benefits under the Oil and Gas Act and the new gas pricing regime.
Each deepwater exploratory well costs between Rs 800 crore and Rs 1,000 crore, or about USD 100 million, Agarwal said.
ONGC commenced drilling its first deepwater exploratory well in the Mahanadi Offshore Basin under the Samudra Manthan programme during the quarter. Agarwal said the well was spudded around July 25 and that a deepwater exploration well takes about three months to drill, putting results towards the end of September.
The Union Cabinet approved Samudra Manthan, the National Offshore Exploration Scheme, on July 31 with an outlay of Rs 84,084 crore for implementation up to FY2030-31.
Asked how the scheme would work in practice, Agarwal said the company was working off the same public document as the market. The Cabinet approval sets out four components. These include drilling of 60 deepwater exploration wells with an allocation of Rs 43,200 crore, with government support of up to 50 percent of eligible drilling cost or Rs 675 crore per well, whichever is lower. Seismic acquisition and processing carries Rs 28,534 crore and common offshore infrastructure hubs Rs 10,000 crore.
Agarwal described the scheme as a risk-sharing instrument. "It is basically to take a part of the risk of exploration from the oil explorer, and that is the mission government is looking into to ensure energy security of the country," he said.
On what the company keeps if it makes a find, he was unambiguous. "Discovery will definitely belong to the owner of that block who has been awarded that license," he said. "The blocks where we are going alone, (we) will be the owner of that discovery. In the blocks we are going with our partners, it will be the joint venture who will be the owner of that discovery."
ONGC is open to bringing in international partners for deepwater. "Our internal preference is wherever international partners want to come and join with us, they are welcome," Agarwal said. He said the company had previously bid with BP and Reliance together on one block.
Basins under consideration include Mahanadi, where earlier discoveries such as Konark were made, along with Andaman and Cauvery. Agarwal said ONGC would also participate in OALP-X "in a big way".
Annual capital expenditure stays in the USD 3.5-4 billion range, he said, with some upside in exploration capex as Samudra Manthan begins.
On being asked why ONGC is not participating as a claimant in the Panna-Mukta-Tapti arbitration, against which a contingent liability of Rs 15,216 crore is recorded, Agarwal said the company had acted on an understanding with the government rather than a written instruction. "ONGC is an arm of Government of India, so we go by the Government directive, but at the same time, we try to ensure our economic interests are protected," he said.
He then set out the basis for the decision. "When we discussed with the Government, there is no formal directive," he said. "It is a kind of understanding that we should not be going for this arbitration against the Government. Two arms of Government fighting with each other, it is not good."
Agarwal said the arrangement was for the other party to carry the case. "What was decided in that discussion was that let the other party continue in this case, and whatsoever decision will be there that will be applicable for ONGC," he said. "I don't see there is any loss to the interest of any shareholder."
Pressed on whether a court could hold that only the arbitrating parties benefit, he said the structure of the dispute prevented that outcome. "It is a joint venture case where both parties are partners," he said. "It is the joint venture versus the Government. One party of the joint venture has gone in the court. Whatsoever the decision will be there that will be applicable across."
Asked to confirm that the outcome would apply to the JV consortium rather than only to those arbitrating, he said: "Yes, that is the normal principle of JV operations."
ONGC has extended its technical services partnership with BP from Mumbai High across the entire Western Offshore portfolio. Agarwal said Mumbai High oil production reached around 107 percent of contractual baseline production during the quarter and gas around 113 percent.
"Mumbai High, when we talk about the gain is against the baseline," he said. "You know, general oil and gas sector, the fields have a natural decline rate, and that is about 5-6 percent. Over that, we see the increase."
He then gave the translation. "7 percent is coming over the natural decline rate of 6-7 percent. Overall, absolute term, the increase will be about 1-2 percent for Mumbai High. Gas is about 12-13 percent. So there, it is about 5-6 percent."
Agarwal added that the partnership's value extends beyond volumes. "TSP is helping us in finding out how to develop some of the projects, they are trying to help us to decide the extraction strategy, what kind of platforms we should use, how to optimise the surface facilities," he said.
Projects exceeding Rs 40,000 crore are under execution in Western Offshore, covering pipeline replacement, reservoir and pressure management, enhanced water injection and production system upgrades.
Oil production at KG-DWN-98/2 is currently around 21,000 barrels a day and gas around 1.5 MMSCMD, Agarwal said. Ajay Kumar Singh, president (planning and transformation), said all 13 oil wells at the field have been opened and are producing. Of seven gas wells, four are producing and three are yet to be opened, pending commissioning of the central processing platform. He said gas production from the remaining wells is likely to start in October or November.
On the oil side, Singh identified the problem specifically. "We are facing the problem of complexity in reservoir, the interconnection between one reservoir to another reservoir," he said. A study is under way with an external geological centre.
On being asked whether pressure decline or water ingress was involved, Singh said it was not, and that the issue was reservoir contiguity. "Each well, whenever we are going to enter, this cost more than Rs 500 crores," Singh said. "It is unlike shallow water where we can go and it is cheaper one, but deepwater (is) costly..."
Singh said gas output at the field could reach more than 3 MMSCMD once the three remaining wells are opened, and 6-7 MMSCMD by the fourth quarter of FY2027-28.
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Agarwal said standalone oil and gas production, excluding joint ventures, was in the range of 38.87 MMT last year. "This year, we expect to reach about 39 MMT oil plus gas," he said, adding that the company is targeting 40 MMT the following year.
The increment comes mainly from gas. He cited the Daman Upside Development Project (DUDP) reaching 2 MMSCMD by December, central processing platform commissioning on the East Coast contributing 1.3 MMSCMD, and Tapti and Daman wells adding another 0.5 MMSCMD. Another official added that the 2 MMSCMD from DUDP would come on top of 1 MMSCMD already being produced there.
Revenue from new well gas reached nearly Rs 4,000 crore in the quarter, generating an incremental realisation of about Rs 1,900 crore over the administered pricing mechanism. New well gas accounts for approximately 38 percent of revenue from the nomination gas portfolio.
The gas sales-to-production ratio slipped to 75-76 percent from around 79 percent. Agarwal attributed this to offtake rather than output.
"The customers could not take that gas because of pricing challenges or some operational challenges," he said. "Because of that, our sale could not keep pace with the production."
ONGC Videsh has recovered its Sakhalin asset after four years, Agarwal said, but sanctions are still affecting what it earns. "OVL was passing through a rough patch for the last four years post-Ukraine crisis," he said. The asset was taken back in November or December after meeting certain condition precedents, and has been accounted for in the profit and loss statement from January 2026.
"With Sakhalin back in our portfolio, the OVL is back in the robust profit scenario," he said.
Realisations, however, have not followed prices. "Russian assets were not as good as they should have been," Agarwal said. "Because of the kind of geopolitical situation is happening. Russian assets, the realization, it was not at the same level because of the price cap-related concern."
Agarwal said ONGC expects to take over operatorship of some Venezuelan projects from state producer PDVSA following the grant of an OFAC licence by the US. "Now we have full freedom to work on Venezuela project because earlier we were restricting our operations there because of the sanction-related risk," he said. "Those risks are behind us."
He said Venezuela had enacted a new petroleum law offering additional fiscal incentives for resource development, and that ONGC teams are in touch with Venezuelan authorities alongside joint venture partners. ONGC is present in two projects, San Cristóbal and Carabobo.
"We believe very soon we'll be seeing some positive development, the new agreement signed, and we taking over the operatorship for some of those projects from PDVSA," Agarwal said.
He described the projects as a technical fit. "All these projects are shallow-depth onshore projects where ONGC has full expertise, the kind of projects we produce from in Mehsana and Ahmedabad, that kind of places are there," he said.
On the country's resource base, he said: "Venezuela is the place where the largest oil and gas reserves are found. It is the number one in terms of reserves, not Saudi Arabia."
The force majeure on the Mozambique project was lifted last August or September and activity has resumed, Agarwal said. Production is expected to begin at the end of FY2027-28 or the beginning of FY2028-29.
"This is, again, a very important project from the national security perspective also," he said, putting ONGC's share at about 3 MMT of gas in the initial phase.
On the BM-SEAL project in Brazil, where ONGC is partnered with Petrobras, he said the FPSO contract has been awarded and first oil is expected from 2030.
ONGC Petro additions Ltd reported negative EBITDA of Rs 57 crore in the quarter. Agarwal attributed the reversal to feedstock pricing following the Hormuz crisis.
Satish Kumar Dwivedi, Chief (JV and BD), set out the mechanism. "The plant runs on two feeds, gaseous feed and naphtha," he said. "Naphtha prices went up from USD 600 to USD 1,000, and gaseous feed has stopped. As and when gaseous feed starts, the plant will be normalised."
Agarwal pointed to two measures. An exit from the special economic zone for C2 and C3 is expected to add about Rs 1,000 crore in EBITDA terms. Separately, the company has signed an MoU with Mitsui and is building ethane carriers to import ethane.
"With that, our feedstock cost will come down," he said. "So, present challenge is basically relating to the feedstock. As soon as the feedstock-related challenges are over, OPaL will be in much better financial health."
He framed the quarter across the sector. "These are abnormal times, and different part of industry are impacted differently," he said.
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