ONGC to become Net Zero by 2038: Media Interaction
The largest state-owned oil and gas company, ONGC, will become Net-Zero by 2038 and invest Rs 1 lakh crore by 2030 on energy transition projects to reduce carbon emissions, Chairman & CEO Arun Kumar Singh announced during an interaction with the journalists in Mumbai on 29 May 2023. By doing so, the Energy Maharatna will prepare roadmaps for net zero emissions as part of the nation's commitment to deal with the climate challenge crisis. "We have done our internal workings and are now confident that we can achieve net-zero for Scope-1 and Scope-2 emissions by 2038," Chairman told journalists here.
After declaring its Annual Financial Results (AFR) for FY 2022-23 on 26 May 2023, Chairman and the Directors of ONGC, MD and Directors of subsidiaries ONGC Videsh Ltd. and MRPL, held an hour-long discussion with journalists, sharing the performance and strategic future plans of the Energy Maharatna and its group of companies in the coming years.
The session was held in a hybrid mode at the Grand Ballroom of JW Marriott, Sahar in Mumbai, whereby senior journalists from the oil and gas beat joined in-person in Mumbai as well as online from across the country. Besides Chairman and CEO Arun Kumar Singh, Director (T&FS) Om Prakash Singh, Director (Production) Pankaj Kumar, Director (Finance) Pomila Jaspal, Director (Exploration) Sushma Rawat, MD-ONGC Videsh (OVL) Rajarshi Gupta and MD-MRPL M Venkatesh responded to the media queries. The journalists evinced keen interest in the state-owned energy giant as the interactive session unfolded itself.
After an introductory welcome anchored by CGM-Chief CC Debasish Mukherjee, ED-Chief Corporate Strategy and Planning Pavan Aggarwal delivered a presentation featuring the corporate highlights and growth plans of the ONGC Group. The presentation brought out that the Energy Maharatna has been among the top CPSEs in terms of market capitalization. The company posted gross revenue of Rs 1,55,517 crores in FY 2023, up by 41% from the previous fiscal year, along with the highest-ever total dividend worth 225%; i.e. Rs 11.25 per share. Additionally, highlights of ONGC Videsh were also presented along with those of other group companies like MRPL, HPCL, and other value-chain companies.
The presentation was followed by an engaging interactive session with the journalists. Responding to a query on production restrictions imposed due to regulations from the Directorate General of Shipping, Government of India, Chairman said that ONGC is awaiting a nod from the International Association of Drilling Contractors (IADC). “We are looking for a solution to it. Hope we’ll reach that very soon. One has to see the production ratio in a global context. Rig manufacturing takes time. Being a responsible Corporate, we have asked for a five-year time.”
Deliberating further, Chairman added that the KG basin gas block is one of the primary focus areas of ONGC. “Our revenue scheme is very vast in terms of resource requirements for ONGC. From a financial point of view and cash flow, we are stable enough unless there is a policy change any further. As much as Rs 61,200 crore is being invested in 14 development and nine infrastructure projects including KG gas field and rejuvenation of existing producing fields like Mumbai High North and Heera.” He informed that the Gas story for ONGC is very strong. “Revenue from Gas will go up in the near future.”
In the aftermath of the prolonged Russian war on Ukraine, queries were also raised on OVL’s share of dividends in Russia, which MD-OVL narrowed to less than USD 100 million. He assured that the state-owned energy giant is not in a hurry as the company has capital and operating expenses for three projects in Russia. “We have our own Capex requirements. We had near-zero production from Sakhalin almost a year ago. Now, we however have got back our 20% stake from the new Russian operator. It is business as usual as far as dividend is concerned.”
It should be noted that the production from Sakhalin-1 stopped in April 2022 after Exxon Neftegaz, its previous operator, declared force majeure at the project in response to international sanctions imposed on Russia following its invasion of Ukraine. Moscow assigned the Sakhalin-1 project and operatorship to a regional subsidiary of Russian oil producer Rosneft. Russia then asked foreign shareholders in the project, including ONGC Videsh, to apply to reinstate their shareholdings in the project before mid-November 2022.
Replying to further queries, the Board Members on the dais also added that the Government of India is ramping up efforts to resume operations at a gas project in a terrorist-affected province of Mozambique where an ONGC Videsh holds a 30% stake. “Work has re-started in the prolific Mozambique field. The production will probably begin by 2026-27,” Chairman exclaimed.
Talking about a significant reduction in profit margin compared to FY’21, Chairman specified the loss for a contested tax liability introduced by the Service Tax department. The payment of service tax on royalty by the company is a legally contested issue. If the provision is altered then the money will reflect in ONGC’s book. Crude Oil pricing definitely has a role to play, but the legal complications are the major factors affecting the company.”
However, in order to overcome the surprise loss, ONGC is looking forward to seeking additional measures, such as the OALP rounds. “OALP is our future. The 9th to 12th rounds will give us the blocks. So, let’s hope for the best. In addition, MRPL and OPaL are strongly engaged in the diversification plan from oil to the petro-chemical sector. Diversification means the expansion of these facilities in these plants,” Chairman said further.
Adding to his point, Director (Exploration) noted, “Optimism is very important at this juncture. We’ll be looking into acreages, also in the NE region. We’ll be using technologies, especially in the areas with more gas flows and sustained production. Category –II basins are highly productive. We have inked MoUs with several organizations like ExxonMobil for deepwater explorations. Joint studies are being carried out, including acreages in Cauvery & Krishna-Godavari basin. They are also curious about Mahanadi. We are sure of finding prospects there as well.”
The company, which has 1.62 lakh square kilometers of acreage, is looking to take the acreage to 5 lakh square kilometers by acquiring one lakh square km every year, spending Rs 10,000 crore annually on exploration.
Director (T&FS) further highlighted that the entire ONGC team is very motivated. “We have taken baby steps in technology up-gradation, like TL fuel engines, a combination of SSP & gas, and HSP in the drilling rigs. We are continuously looking out for prospects of relying more on green energy and reducing carbon emissions.”
Replying to a question on increasing the renewables potential to 10 GW capacity, Chairman asserted that ONGC will be a net-zero company by 2038. “We have done our internal workings and are now confident that we can achieve net-zero for Scope-1 and Scope-2 emissions by 2038. We are focused on the round-the-clock (RTC) issue. A team is working on it. 5 GW of solar power, green ammonia, and wind energy, everything is on the table.”
The company is planning to scale up electricity generation from renewable sources from 189 MW to 1 GW by 2030. It already has 5 GW of project planned in Rajasthan and is scouting for a similar capacity, he said adding ONGC would also look at offshore wind farms.
It is also looking at setting up a 1 million tonne per annum green ammonia plant at Mangalore.
“Overall, the investments will be of the order of Rs 1 lakh crores,” he said.
The media interaction comes after the weekend following ONGC’s Board of Directors held their meeting on 26 May, 2023 approving the annual results for FY’23. The company reported a consolidated net profit of Rs 5,701 crores, down by 53%, compared to Rs 12,061 crore in the corresponding period last year. The state-run petroleum giant's revenue from operations during the January-March quarter stood at Rs 164,066.72 crore, registering a growth of five per cent, compared to Rs 155,946.99 crore in the year-ago period.
Overall, ONGC's crude output is also likely to rise to 21.263 MT in the current fiscal (April 2023 to March 2024), 21.525 MT in 2024-25 and 22.389 MT in the following fiscal. Meanwhile, the natural gas output is slated to rise from 20.636 billion cubic meters (bcm) in 2022-23, 23.621 bcm in 2023-24, 26.08 bcm in the following year and 27.16 bcm in 2025-26.
Click here to view the media presentation on ONGC's annual financial results of FY'23
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