State-run oil and gas major ONGC has said it expects natural gas to play an increasingly dominant and more profitable role in its overall energy portfolio, driven by rising domestic demand and higher realisations from newly drilled wells.
Speaking during an investor call, ONGC chairman and CEO Arun Kumar Singh said the company is already producing and selling more natural gas than crude oil, with gas earnings improving due to pricing reforms and comparatively lower operational costs.
He noted that “new well gas” — output from freshly drilled wells whose prices are linked to 12 per cent of international crude oil rates — accounted for about 20 per cent of total gas volumes last year. This share is expected to rise to 25–30 per cent in the current year and increase further over the medium term as new projects come online.
At prevailing crude oil prices of around USD 90 per barrel, ONGC said new well gas realises nearly USD 10.8 per million British thermal unit in the domestic market, making India one of the higher-priced gas markets globally for such output. The company added that older gas fields, which are sold at regulated administered prices, are gradually being replaced by higher-value production from new wells, thereby improving overall profitability and margins.
ONGC expects its gas output to grow at an annual rate of 7–8 per cent, supported by ongoing developments such as the Daman field project, DSF blocks and the ramp-up of the KG-98/2 deepwater asset in the Bay of Bengal. Singh said several wells under the Daman project have already been brought into production, with output expected to increase steadily as additional wells are drilled and commissioned.
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The company is currently executing capital projects worth around Rs 33,000 crore in western offshore fields, which account for nearly 60 per cent of ONGC’s oil production and about 70 per cent of its gas output. These investments are aimed at sustaining and enhancing long-term production levels. ONGC has also strengthened its collaboration with BP plc for production enhancement initiatives in western offshore assets, following earlier partnerships on the Mumbai High redevelopment project.
On the KG-98/2 block, Singh said the field had faced geological challenges, but the company now had a better understanding of the issues and expects stabilisation measures to gradually improve output performance. ONGC also highlighted improved prospects for its overseas arm, ONGC Videsh Ltd (OVL). Production from Russia’s Sakhalin project has recovered close to pre-Ukraine war levels, while the Mozambique LNG project is progressing, with first output targeted around 2028.
The company also expects potential upside from Venezuela operations, subject to regulatory approvals. In the renewable energy segment, ONGC said its clean energy portfolio is approaching 3 gigawatts, supported by acquisitions and expansion through ONGC Green Ltd.
The company is also targeting additional cost savings of Rs 3,000–4,000 crore, over and above about Rs 4,000 crore already achieved through internal efficiency measures.
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