ONGC sees gas eclipsing oil as core earnings driver, targets 7-8% annual output growth

New Delhi: State-owned oil and gas major Oil and Natural Gas Corporation (ONGC) is repositioning itself around natural gas, with its Chairman and CEO Arun Kumar Singh telling investors at an analyst call that the company now produces and sells more gas than oil, and that gas earns better margins, helped by favourable pricing reforms and lower handling costs.

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Singh summed up the pivot, saying ONGC increasingly viewed itself as a "gas and oil company" rather than an "oil and gas company," reflecting a deliberate shift towards cleaner fuels and India's rising domestic gas appetite.

The pricing advantage of New Well Gas

A key driver of improved gas economics is "new well gas" — output from newly drilled wells that is priced at 12 percent of prevailing crude oil prices, rather than the lower administered rates that apply to legacy fields.

Sinigh told investors that new well gas accounted for roughly 20 percent of ONGC's total gas volumes last year. That share is expected to climb to 25–30 percent this year and rise further over the following years as more new wells come online.

Singh said, "At crude prices of around USD 90 a barrel, new well gas realises nearly USD 10.8 per million British thermal unit in the domestic market," adding that India ranked among the highest-paying gas markets globally for such production.

Production growth targets and key projects

ONGC is targeting gas production growth of 7–8 percent annually. The projects underpinning this outlook include the Daman field development project in western offshore, the DSF block, and ramp-up at the KG-98/2 deepwater block in the Bay of Bengal.

On Daman, Singh said four wells had already been opened, with output expected to rise progressively as more wells come online. The company is executing projects worth about Rs 33,000 crore across its western offshore assets, which contribute around 60 percent of ONGC's oil production and 70 percent of its gas output.

On KG-98/2, Singh acknowledged geological challenges but expressed confidence in the path ahead, saying ONGC now had "full handle" on the issues and that output stabilisation measures would improve performance. Current production from the block stands at approximately 2.3 million metric standard cubic metres per day (mmscmd) of gas and around 25,000 barrels of oil per day.

BP partnership and Mumbai High

ONGC has expanded its partnership with BP plc for production enhancement across western offshore assets, having earlier assigned Mumbai High redevelopment work to the British energy major. Singh said oil production at Mumbai High was running at 102 percent of target levels, while gas output was at 108–109 percent of baseline projections.

Overseas operations: Russia, Mozambique, Venezuela

ONGC's overseas arm, ONGC Videsh Ltd (OVL), is also showing improving prospects. Production from Russia's Sakhalin project has recovered to near pre-Ukraine-war levels. Development of Mozambique LNG is progressing rapidly, with first LNG targeted around 2028. The company also expects higher output from its Venezuela operations under the current US administration, contingent on licensing approvals.

Renewables, cost savings and new ventures

Beyond hydrocarbons, ONGC's renewable energy portfolio under ONGC Green Ltd is approaching 3 gigawatts through acquisitions and ongoing capacity expansion.

On the cost front, the company is targeting an additional Rs 3,000–4,000 crore in savings, having already achieved about Rs 4,000 crore in efficiencies under an internal optimisation programme.

ONGC also announced plans for a new port joint venture with the Gujarat Maritime Board to support logistics for its petrochemical and LPG operations, including its OPaL petrochemical business.

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Despite the optimistic tone, Singh declined to provide specific production guidance for FY27 and FY28, citing the inherent uncertainty of exploration and production operations. He maintained, however, that gas output would continue to grow as new wells are commissioned, infrastructure bottlenecks ease and key offshore projects ramp up over the next two years.

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