ONGC to double efforts to increase capex spending to make up for time lost due to COVID-19

New Delhi: State-run Oil & Natural Gas Corporation (ONGC) plans to double its efforts to make up for the time lost due to the COVID-19 pandemic and stay close to the targeted capex of Rs 32,500 crore by the end of financial year 2020-21. During an investor call on Tuesday, ONGC Director (Finance) Subhash Kumar said that the COVID-19 pandemic and the global restrictions that followed disrupted the supply chain and hit its project implementation. "We had in April-May recalibrated capex spending to Rs 26,000 crore on the assumption of a long drawn impact of the pandemic on economic activity. But with things opening up, we will be able to achieve spending of close to Rs 32,000 crore… maybe Rs 29,000 crore to Rs 30,000 crore or Rs 32,000 crore," said Kumar.

Asserting that oil and gas exploration projects are highly dependent on foreign vendors for the supply of equipment and services, the ONGC Director (Finance) said that the disruption in supply chain impacted the sector adversely. However, he added that with the resumption of economic activity globally, ONGC is hopeful of making up for the lost time.

ONGC had budgeted Rs 32, 501 cr for capex for FY2020-21

ONGC has budgeted Rs 32,501 crore of capex for financial year 2020-21. The government has urged PSUs to increase capital expenditure in order to give the economy an impetus. The Ministry of Finance wants public sector companies to not just meet the stated capex target but even exceed them. Commenting on the capex figure for the next financial year, Kumar said that the company is in the process of recasting the numbers. 

"We had projected Rs 32,000 crore to Rs 33,000 crore capex for the next fiscal. Post Covid, we have to revisit the numbers. Over the next 15-20 days we will have a clearer view," he said.

'We have hit rock bottom on natural gas pricing'

While saying that ONGC has been making losses at the current government-mandated gas price of USD 1.79 per million British thermal unit, Kumar said that the company will only start making money if gas prices are above USD 3.7 per mmBTU. He informed the investors that the Centre has set up a committee to look into the demand for reviewing the current formula which has made gas production an unviable proposition. ONGC, however, is not in favour of either floor or cap on gas prices and there is a need for a balance between both. "We have now rock bottom prices," he said.

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Commenting on the outlook for the coming quarters, Kumar said, "The worst is behind and things will improve. Things can only get better from here. We anticipate second-half performance will be better."

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