ONGC shifts strategy towards natural gas as production outpaces crude

Oil and Natural Gas Corp (ONGC) is morphing into a "gas-and-oil" entity rather than a traditional oil-and-gas producer, according to chairman Arun Kumar Singh. This rebranding highlights a tactical pivot driven by natural gas volumes overtaking crude oil.

"Gas is now slightly more than oil in our portfolio," Singh told analysts, adding that ONGC's future growth will be driven largely by gas production even as crude output remains broadly flat without major new discoveries.

"We should call ourselves a gas and oil company, not an oil and gas company."

Singh emphasized that gas has become the primary growth engine for the state-owned explorer, propelled by surging domestic consumption, favorable pricing overhauls, and fresh field discoveries. While crude extraction is projected to plateau, gas volumes are set to climb as newer reservoirs go online. Thanks to highly competitive global pricing, gas now represents a far more profitable portfolio segment, he noted.

"Gas is a more valued fuel in the Indian context, and ONGC is gradually becoming a more gas-heavy company," Singh said, adding that gas output already exceeds oil and will continue to expand over the coming years.

The commodity has grown more appealing than oil following structural reforms that link "new well gas" to 12% of international crude prices. Singh cited India's escalating gas requirements—particularly in the transportation sector—as a major macroeconomic catalyst. He reiterated that while oil output will likely stagnate absent a massive discovery, ONGC’s future trajectory will be "gas-led," cementing its pivot toward a balanced energy mix.

"ONGC produces and sells more gas than oil. In fact, gas is now a little more than oil," he pointed out.

Currently, the exploration and production (E&P) division comprises nearly two-thirds of the conglomerate, with gas yields already eclipsing oil and positioned for aggressive future expansion. Singh credited proactive government interventions—including slashed royalties, persistent market-indexed price reforms, and financial backing for deepwater ventures—with boosting sector profitability and retaining higher revenues for upstream firms.

Production from "new well gas" is climbing rapidly, currently constituting roughly 25% of total gas yields. Singh projected this share could reach 30–36% shortly, eventually dominating the company’s gas asset mix as older, mature fields inevitably deplete.

ONGC anticipates an annual gas production expansion of 7–8%, anchored by upcoming projects like the DUDP, DSF fields, and offshore sites including the 98/2 blocks, which are slated for commissioning over the next fiscal cycle. The energy giant maintains an active drilling regimen of nearly 500 exploratory and production wells annually, reporting a reserve replacement ratio above 1.1 in FY25-26, proving it replaces more volume than it extracts.

To sustain and accelerate production, ONGC is deploying around ₹33,000 crore into offshore infrastructure. Simultaneously, it is focused on enhancing recovery protocols at aging assets like its Western Offshore fields, which generate the lion's share of current supply. These Western Offshore sites are currently integrated into a comprehensive technical service partnership (TSP) with BP, a collaboration already yielding measurable operational improvements across its entire asset footprint.

Regarding international ventures, Singh said that output from Russia's Sakhalin asset remains steady, while the Mozambique liquefied natural gas (LNG) venture is on track for a potential 2028 completion. Additionally, output from Venezuela could scale up provided the regulatory environment turns favorable. Meanwhile, ONGC foresees a financial turnaround at its petrochemical division, OPaL, alongside aggressive capacity building at its green energy arm, ONGC Green, which aims to achieve nearly 3 gigawatts of renewable capacity by next year.