ONGC, PSU oil exploration and production company, will invest Rs 4,11,000 crore in next five years. Besides, Rs. 2,01,000 crore of investment is needed in the next five years to acquire international assets. In a communication to the petroleum ministry, ONGC indicated that the company had plans to invest over Rs 11,00,000 crore by 2030.
ONGC, however, feels if current under-recoveries sharing mechanism continues, the company will have significant cash shortfall which will hamper its growth plans. Further, a sizeable investment of INR 78,000 crore is planned in the exploration programs underway in the six focus basins over the next five years. This investment is essential to drive production growth for ONGC and is expected to deliver at least 400 mtoe hydrocarbon by 2030.
ONGC’s cumulative contribution towards under-recoveries till FY 2013 was Rs 2,16,336 crore. This money, after contributing towards corporate tax, dividend and dividend distribution tax to the extent of Rs 1,47,324 crore, could already have bought assets with potential production capability of 10 to15 MMT per year.
ONGC further mentioned that over the last three years, profit after tax from crude oil from nominated blocks has already eroded by almost 50 percent. Further, existing mechanism would make entire production from their nominated blocks, which are more than 80 percent of ONGC’s production, unprofitable.
ONGC suggested that the upstream companies are ensured of net realization of USD 65/bbl to ensure India’s energy security and ONGC’s growth. Under the proposed mechanism, 80 to 90 per cent of realization over USD 65/bbl will be allocated towards the under recoveries, retaining only a marginal value to cover for increased costs. This mechanism would be a win-win situation for all stakeholders, ONGC asserted.