India's ONGC says new projects to reverse declining oil output from matured fields

India's state-run Oil and National Gas Corp said it witnessed a drop in oil and gas output in July-September due to lower volumes from matured fields and weather-related disruptions, but production from new projects in coming quarters would more than offset that decline.

According to ONGC, its crude output fell 2% year on year to 5.25 million mt (416,576 b/d) over July-September, the second quarter of financial year 2023-2024 (April-March), while natural gas output fell 2.8% year on year to 5.2 Bcm.

"The reduction in production output can primarily be attributed to decline in some of the matured fields and marginal fields," the company said in a statement announcing its quarterly results Nov. 10. "To counter this decline, ONGC is taking proactive steps by implementing well interventions and advancing new well drilling activities within these fields."

In a bid to bolster evacuation capacities and modernize offshore facilities, a shutdown was undertaken in Panna-Mukta for commissioning of a new crude oil pipeline. The shutdown resulted in a temporary loss of production.

In addition, cyclone Biparjoy, which struck in June, disrupted both offshore and onshore operations. Further, oil production of a southern asset was hampered due to the stoppage of wells caused by the cessation of crude oil receipts by a refinery, following a leak in its pipeline.

This fiscal year, ONGC has already discovered five oil and gas fields.

"The current decline in production from matured fields will be compensated in upcoming quarters with commencement of additional production from upcoming projects, which are under various stages of development," ONGC said.

ONGC realized a price of $84.84/b over July-September for crudes, down 11.2% on the year. The state explorer realized a price of $6.50/MMBtu for natural gas over July-September, up 6.6% on the year.

In the cumulative April-September period, ONGC posted a year-on-year decline of 2.7% in crude production to 10.56 million mt, while its natural gas output fell 2.9% year on year to 10.42 Bcm.

Crude sales following reforms

India in recent years has undertaken a series of upstream reforms, such as handing out marketing freedom to upstream producers. India currently allows operators to sell locally produced crude in the domestic market without restrictions.

Under the previous policy, the operator of a field could not directly sell locally produced crude into the market and needed government permission for sale of crude and condensate within the country. But under the new policy, the government ceased its function of allocating domestic crude and condensate output.

Following these reforms, ONGC said it finalized a sales agreement with Mangalore Refinery and Petrochemicals Limited for the sale and purchase of crude oil.

"This agreement brings synergy and is expected to streamline the sale and purchase transactions of crude oil from ONGC's fields in Mumbai High until 31 March 2024," the company said.

ONGC also inked a term agreement with HPCL for sale of crude oil from Mumbai Offshore, the second term agreement sealed for sale of Mumbai Offshore crude oil after the marketing freedom was announced by the government.

ONGC contributes around 74% of India's crude oil and around 63% of its natural gas production.

Diversified energy portfolio

The company said it was planning to set up two greenfield oil-to-chemicals plants in India.

"The company's strategic partnerships in the O2C, refining, and petrochemical sectors reflect an astute understanding of India's evolving energy landscape," the company said.

In a recent exclusive interview with S&P Global Commodity Insights, ONGC chairman and CEO Arun Kumar Singh said he strongly believes that sustained growth in demand for both transport fuels and petrochemicals would continue in India for a couple of decades despite energy transition starting to take away share of fossil fuels in many countries.

The company plans to undertake drilling and exploration in about 500,000 sq km area in the next 4-5 years.

"ONGC is charting a roadmap for opportunities in renewable energy and low-carbon sectors. However, oil and gas exploration and production will remain the cornerstone of its energy business. Extensive exploration in known basins as well as frontier plays, sustained production from existing fields and exploitation of deep-water fields remain the central areas of emphasis," ONGC said.

The company also signed an agreement with NTPC Green Energy Limited to realize its renewable energy objectives and explore the feasibility and setting up of projects in various domains.

The agreement envisages collaboration between the two entities for renewable power projects in India and overseas through offshore wind projects, as well as exploring opportunities in the storage, e-mobility, carbon credits, nuclear, and green hydrogen space.

"ONGC's energy strategy focuses on renewable energy business. ONGC intends to achieve 10 GW of renewable energy capacity by 2030 and has set a net zero target by 2038," the company said.