While ONGC’s business continues to be dominated by exploration and production (E&P) activities, which account for nearly two-thirds of its portfolio, there is a notable shift towards natural gas production as a key focus area. During the company’s recent earnings conference call to discuss the quarter ended March 2026, Arun Kumar Singh, Chairman and Chief Executive Officer, ONGC, talked about gas as a key growth engine, favourable pricing overhauls, fresh field discoveries, and future priorities and targets. Edited excerpts…
Improving policy frameworks drive gas uptake
From a macroeconomic lens, two key trends are currently shaping the sector. First, there is a significant policy push towards accelerating exploration activities, particularly in deepwater areas. To this end, while ONGC has been undertaking deepwater exploration through its own investments, government support for funding such projects is now under active consideration. Second, the policy environment has become increasingly supportive of domestic E&P activities. Measures such as the reduction in royalty rates for onshore production and other wellhead-related reforms are intended to encourage higher E&P investments.
The pricing framework for new well gas has strengthened the case for investment in domestic gas production. Gas from new wells is priced at 12 per cent of the prevailing crude oil price, effectively linking domestic gas prices to international crude benchmarks. This represents one of the most favourable pricing regimes for domestically produced gas globally, excluding liquefied natural gas (LNG), which carries additional liquefaction and transportation costs. This pricing mechanism reflects the government’s broader objective of improving returns for E&P operators, enabling greater E&P activities. At prevailing crude oil prices of around $90 per barrel, new well gas realises nearly $10.8 per million British thermal units in the domestic market, making India one of the higher-priced gas markets globally for such output. With this, the growth outlook for natural gas remains stronger than that for crude oil. Unless a major oil discovery is made, gas production is expected to continue expanding through the commissioning of new projects.
Mapping operational milestones and increasing production volumes
Currently, ONGC is executing projects worth about Rs 330 billion across its western offshore assets, which contribute around 60 per cent of ONGC’s oil production and 70 per cent of its gas output.
Within the gas portfolio, production from new wells has witnessed a sharp increase. While new well gas accounted for around 17 per cent of gas volumes and 21 per cent of gas revenues in the previous year, production has already crossed 9 million metric standard cubic metres per day (mmscmd) since April 1, 2026, with an additional 3 mmscmd expected from upcoming projects. This would take new well gas production to nearly 12 mmscmd, increasing its share to roughly 25 per cent of the company’s total gas sales.
The contribution of new well gas to ONGC’s overall gas portfolio is expected to continue increasing over the coming years. Having already risen significantly from around 17 per cent of total gas volumes, the share of new well gas is projected to reach 25-30 per cent during 2026-27 and potentially to 30-36 per cent in the following year. This trend, however, does not necessarily imply a proportional increase in overall gas production. Instead, it reflects that older gas fields, which are sold at regulated administered prices, are gradually being replaced by higher-value production from new wells.
ONGC expects natural gas production to grow steadily by 7-8 per cent annually, supported by a strong project pipeline. To this end, the Daman Upside Development Project (DUDP) is expected to drive production growth during the current year, while the next phase of incremental output will come from the Discovered Small Fields (DSF) block, which is also projected to add 4-5 mmscmd of gas production. Beyond these projects, ONGC is optimistic about production from the KG-98/2 deepwater block. While the project experienced significant delays owing to geopolitical disruptions and the dependence on overseas vendors, work on the platforms has finally been completed. The company now has a better understanding of the issues and expects stabilisation measures to gradually improve output performance. The remaining work primarily involves internal pipeline connections, with production expected to commence soon.
Under the DUDP, production has already commenced at four of the planned 15 wells, with the project expected to add around 4.89 mmscmd of gas. Production is being ramped up in phases to maintain system stability, and once fully operational, the incremental output will provide a meaningful addition to ONGC’s current gas production.
ONGC drills around 500 wells annually, of which 100 are exploratory wells and 400 are production wells. During 2026-27, the company plans to increase drilling activity by an additional 50-60 wells, to support its production base. Meanwhile, oil and gas fields naturally deplete over time as reservoir pressure declines, making continuous exploration and drilling necessary to sustain production.
In 2025-26, ONGC’s reserve replacement ratio stood at over 1.10, indicating that the company added new oil and gas reserves equivalent to, or slightly higher than, the volumes it produced and sold during the year. As a result, the reserve-to-production (R/P) ratio has remained unchanged. The company’s proven and probable (2P) reserves currently stand at over 700 million metric tonnes (mmt), representing an increase of 2-3 mmt compared to the previous year.
Performance across subsidiaries
At the overseas subsidiary level, ONGC Videsh Limited has witnessed positive developments across key assets. Production at the Sakhalin project has returned to pre-Ukraine conflict levels, with Russia’s overall production also recovering significantly. The Mozambique LNG project is progressing rapidly, with around 6,000 personnel currently deployed at the site, and LNG production is expected to commence by the end of 2028. Meanwhile, ONGC expects production from its Venezuela asset to increase substantially once the necessary approvals are secured under the prevailing US regulatory framework.
With respect to ONGC Petro additions Limited (OPaL), the company reported earnings before interest, taxes, depreciation and amortisation (EBITDA) of around Rs 12.06 billion during the previous year, against an internal target of Rs 15 billion. The shortfall was attributed to operational disruptions in March. Excluding this disruption, the company stated that it was on track to meet its EBITDA target. For the current year, OPaL has set an internal EBITDA target of Rs 15 billion-Rs20 billion, with the expectation of achieving around Rs 20 billion.
ONGC continues to maintain a strong focus on expanding its renewable energy portfolio through ONGC Green Limited (OGL). Over the past few years, the company has strengthened the platform through strategic acquisitions, including the acquisition of a wholly owned subsidiary from PTC and of Ayana Renewable Power. Ayana’s operational capacity is expected to increase by another 1,000 MW during the current year. With these additions, ONGC expects its renewable energy portfolio to reach nearly 3 GW by next year.
On the cost optimisation front, ONGC had targeted savings of around Rs 50 billion and has already achieved nearly Rs 40 billion. However, the financial benefit from these savings has largely been offset by external factors. An increase in the GST rate on oil and gas inputs from 12 per cent to 18 per cent resulted in an additional annual cost of around Rs 20 billion, while the depreciation of the rupee against the US dollar further eroded the savings. Despite these headwinds, the company remains on track to achieve cost savings of around Rs 30 billion-Rs 40 billion, with savings worth Rs 30 billion-Rs 40 billion expected through ongoing cost optimisation initiatives.
Recent strategic collaborations
In the petrochemicals business, ONGC has approved the formation of a joint venture (JV) between Mangalore Refinery and Petrochemicals Limited (MRPL) and OPaL to create greater synergy in petrochemical marketing. While both companies will continue to operate independently, the marketing function will be brought under a single umbrella brand. The proposal has already been approved by the board and is currently undergoing the remaining statutory approvals. According to the company, the integration is expected to create additional value through improved marketing efficiencies.
ONGC has also strengthened its collaboration with BP plc for production enhancement initiatives in Western Offshore assets, following earlier awarded works on the Mumbai High field. While the initial contract covered 38 per cent of the Western Offshore asset, TSP-II, which has been awarded recently, extends the partnership to the remaining 62 per cent.
The board has also approved the formation of a JV with the Gujarat Maritime Board to develop a new port at Dahej. Dahej is the closest port to the densely populated northern region, making it one of the most cost-efficient gateways for inland transportation. The port is also located near the 8 million tonne Kandla-Gorakhpur LPG pipeline and is expected to support the logistics requirements of both OPaL and the company’s LPG business.
The company has entered into five to six new JV in recent years as part of its strategy to diversify revenue streams. While renewable energy remains a key focus area, these partnerships are concentrated within the broader energy sector and are designed to complement and strengthen ONGC’s existing businesses through greater operational integration. Additionally, in the shipping segment, ONGC has formed a JV with Mitsui and has placed orders for two very large tank carriers to support OPaL’s operations.
“The pricing framework for new well gas has strengthened the case for investment in domestic gas production.”
Looking ahead
In the Indian domestic market, gas is now more lucrative, and ONGC is repositioning itself around natural gas. While global oil production continues to exceed gas production in energy-equivalent terms, ONGC’s production mix has become almost evenly balanced, with gas contributing slightly more than oil.
The company also expects domestic gas demand to continue rising, supported by increasing adoption across sectors. Further, the share of compressed natural gas (CNG) vehicles in India’s automobile market is increasing, and around one-fourth of Maruti’s vehicle sales are CNG variants. Hence, the demand for CNG remains commercially viable even under the current new-well gas pricing regime. Looking ahead, the company’s future growth is expected to be driven primarily by natural gas
