ONGC Aims to Reduce Costs by 15% in Two Years Amid Crude Oil Price Uncertainty

Strategic Insights -

Indian oil and gas major ONGC is planning to reduce its overall costs by 15% over the next two years as it prepares for potential crude oil price volatility. The company expects to achieve Rs 9,000 crore in total cost savings by FY2027, with around Rs 4,300 crore expected by March 2026 through the implementation of 20 efficiency initiatives aimed at boosting operational efficiency. The cost-cutting measures include offshore resource optimisation, enhanced drilling efficiency, logistics route rationalisation, inventory reduction, and fuel efficiency improvement measures.

Key Takeaways:

  • ONGC aims to reduce its overall costs by 15% over the next two years to mitigate potential crude oil price volatility.
  • The company expects to achieve Rs 9,000 crore in total cost savings by FY2027, with around Rs 4,300 crore expected by March 2026.
  • 20 efficiency initiatives are being implemented to improve cost efficiency, covering major operational areas such as drilling and logistics.
  • The company is scaling up operations at its Pipavav supply base in Gujarat, which is expected to contribute over Rs 1,000 crore in annual savings.
  • ONGC plans to enter the oil trading business, which could unlock up to $1 billion in yearly savings.
  • The company has collaborated with global energy major BP to enhance recovery from the Mumbai High field, with projections of up to $15 billion in incremental revenue over the next decade.
  • ONGC is targeting a 44% increase in oil production to 65.41 million metric tonnes and an 89% boost in gas production over the next 10 years.
  • The company expects higher output from the KG-DWN-98/2 block in the Krishna-Godavari Basin, projecting 12 mmt of oil and 13.5 bcm of gas in the coming years.

Statistics:

  • 15% overall cost reduction planned by FY27
  • Rs 9,000 crore total savings, with Rs 4,300 crore by March 2026
  • 20 efficiency initiatives under implementation
  • Up to $1 billion in yearly savings from the oil trading business
  • Up to $15 billion revenue addition in 10 years from BP collaboration at Mumbai High
  • 1% YoY increase in crude output in FY2025
  • 1.2% and 1.1% growth in oil production in Q1 and Q2 of FY2026, respectively
  • 44% increase in oil production to 65.41 million metric tonnes
  • 89% boost in gas production over the next 10 years

Sources:

  • Global Data Point (2022)
  • SyndiGate Media Inc. ( )