NEW DELHI: Once oil prices began sliding in 2014, explorers around the world scrambled to cut costs by rolling back investment plans and shedding jobs. While global upstream funding fell a quarter off its $800-billion peak over the next two years, two companies continued to drill and pump money into new projects – Russian giant Rosneft and India’s flagship explorer ONGC.
Kremlin-backed Rosneft enjoyed the benefit of low production cost, a large domestic base for oilfield services and the safety net of mostly rouble-denominated payments. ONGC had no such comfort but it made up by contracting for new fields and expansion projects of existing ones at bargain prices.
The strategy is paying off now, with the company’s natural gas production hitting an all-time high of 70 mcmd (million cubic meters per day) this month, marking more than 6% year-on-year growth rate against global average of 3-4%. Gas sales also hit record level at 56 mcmd, with captive consumption accounting for the rest.
Company executives said gas output will rise to 116 mcmd in the next three years as new projects and a rash of discoveries are brought on stream quickly. To put things in perspective, the current production volume can run CNG and PNG services in 10-11 markets the size of Delhi-NCR or run power plant of 12,000 MW.
The uptick coincides with the government’s push for expanding CNG and PNG services to cover 70% of the country’s population and raise the share of natural gas in the energy basket to 15% from 6% with a view to reducing India’s carbon footprint.
ONGC had flagged off 17 production-related projects entailing capex of Rs 76,000 crore through oil’s downturn between 2014 and 2017. This is among the highest ongoing upstream funding programmes globally. It is pumping Rs 57,000 crore in the KG-DWN-98/2 project in the Bay of Bengal as well as in developing other discoveries off the west coast.
Along with these investments, a more decisive and aggressive stance of the company management has contributed to lifting performance. “Contracts of major project engineering companies, whom nobody would touch earlier, have been terminated and others have been put on notice for delay in recent times. Timebound project completion and accountability are the new mantras in the company. There is no slack,” a senior company executive said.