India’s ONGC looks to team up with global oil majors in its upstream push

India’s ONGC is actively pursuing discussions with oil majors seeking partnerships to accelerate domestic exploration plans while keeping an eye on overseas upstream opportunities, an analysis by S&P Global Commodity Insights showed.

The development signals ONGC’s continued focus at both home and abroad to boost oil and gas output despite the push towards cleaner fuels.

ONGC, which contributes two-thirds of the country’s oil and gas output, is also keeping a close eye on events in Russia where the company, through its international arm ONGC Videsh Ltd., has a sizeable presence, delegates who attended the India Energy Week told S&P Global.

ONGC has stepped up discussions with ExxonMobil, Equinor, the American oil services conglomerate Baker Hughes, and French research organization Institut Français du Pétrole on various issues like technology and deepwater collaboration.

“Energy security is geography dependent. The world is now getting balanced as deep sea investments are becoming economical. The transition to renewables is a reality. However, oil and gas will remain in focus in the journey,” said Arun Kumar Singh, ONGC’s chairman and CEO.

ONGC’s strategic long-term growth path would include expansion of deepwater oil and gas exploration, enhanced oil recovery, boosting renewables capacity, building carbon capture, utilization and sequestration capabilities, as well as playing a key role in India’s push towards a hydrogen economy, according to top company officials.

Upstream investment plans

ONGC officials said the company had set a target of investing $3.5 billion in lifting oil and gas output over the next 3-4 years from its western offshore assets, in line with its effort to ramp up oil recovery from its flagship asset at Mumbai High in Gulf of Cambay region.

The offshore assets in the western region produce 41.5 million cu m/day of gas and around 260,000 b/d of crude, said Pankaj Kumar, director of offshore assets, on the sidelines of the India Energy Week.

In 2021-22 (April-March), ONGC’s crude oil and condensate output fell 3.7% on the year to 21.71 million mt, or 155 million barrels, while its total gas output dropped 5% on the year to 21.68 Bcm.

“We are open to any type of partnership with private players to raise output in our oil and gas assets,” Kumar said.

ONGC plans to produce oil and gas from its ultra deepwater assets in the eastern offshore of the Krishna-Godavari basin at KG98/2 block from May, Kumar said, adding that ONGC would produce at least 10,000 b/d initially at the KG98/2 block, and then to a peak level of 45,000 b/d by the end of the current year.

The Russia factor

OVL currently has a stake in 32 oil and gas projects in 15 countries.

Recently, OVL signed an agreement with YPF SA of Argentina to enhance cooperation between the two companies in the energy sector, such as exploration and development of upstream oil and gas opportunities.

Since the start of the Russia-Ukraine war in early-2022, the strategy of OVL has been in focus, considering many international companies severed ties with Moscow.

“ONGC’s Russian assets have a primary international position in the company’s portfolio. While the share of new volumes from Russia is limited, the country is essential for maintaining OVL’s base production and accompanying cashflows, which will support growth projects in other parts of its portfolio,” said Rajeev Lala, associate director, upstream companies and transactions, at S&P Global.

“With the exit of international oil companies, technical and operational burdens for fields that are difficult to develop will be the responsibility of new operators — essentially, but not solely Rosneft. Asset monetization could be a very long-term prospect if ONGC were to buy into new Russian assets,” Lala added.

Between 2022-2031, Russia is expected to account for an average of 54% of OVL’s total entitlement production, according to S&P Global estimates.

Russia’s reliance on hydrocarbon receipts grew last year, as sanctions took a toll on other parts of the economy. This means government’s revenue needs will retain primacy over investor returns, which heightens risks for any potential foreign buyer of Russian assets, including ONGC, he added.

Production of light sweet Sokol crude at the Sakhalin 1 project came to a halt in Q2 2022 after previous operator ExxonMobil declared force majeure and exited the project.

Following ExxonMobil’s exit, a new Russian entity managed by Rosneft subsidiary Sakhalinmorneftegaz-Shelf took over the operatorship, while foreign equity holders of the project were asked to apply to Moscow to retain their stakes.

“The exodus of oil companies from Russia presents significant challenges for ONGC. The Sakhalin I project is one of ONGC’s most profitable assets, but the absence of ExxonMobil’s technical and operational capability will hamper operations, and likely profits, at the project,” said Mansi Anand, senior research analyst at S&P Global.
According to trade sources, increasingly more Far East Russia’s Sokol crude cargoes are finding homes in India following the grade’s return to the export market in October 2022, as its traditional buyers in North Asia ceased to purchase the grade following the war.
Source: Platts