ONGC doubles its capex plans to make up for lost time during Covid-19

India’s top oil and gas producer ONGC  said its capital expenditure during the current fiscal is likely to be close to the Rs 32,500-crore target as it is doubling efforts to make up for the time lost due to the pandemic.

At an investors call, Oil and Natural Gas Corp (ONGC) Director (Finance) Subhash Kumar said the COVID-19 outbreak and the global restrictions that followed had disrupted the supply chain, hitting its project implementation. Oil and gas exploration and production projects are highly dependent on foreign vendors for the supply of equipment and services.  

“In April-May, we had recalibrated capex spending to Rs 26,000 crore on the assumption of a long-drawn impact of the pandemic on economic activity. But with things opening up, we will be able to achieve spending of close to Rs 32,000 crore,” he said.

ONGC, India’s top oil and gas producer, had budgeted Rs 32,501 crore of capital expenditure for the fiscal to March 2021 (FY21).

The government is looking at increased public spending to give a boost pandemic-hit economy. It is pushing public sector companies to not just meet the stated capital expenditure targets but even go beyond them.

Stating that the company continues to lose money at the current government-mandated gas price of USD 1.79 per million British thermal unit, he said the company starts making money only if gas prices are above USD 3.7.

The government, he said, has set up a committee to look into the demand for reviewing the current formula which has made gas production an unviable proposition.

ONGC, however, is not in favour of either floor or cap on gas prices and there is a need for a balance between both. “We have now rock bottom prices,” he said. ONGC received $ 28.72 for every barrel of crude oil it sold in the April-June quarter, which improved to $ 41.38 in July-September.

Commenting on ONGC’s second-quarter earnings, Moody’s Investors Service said despite the recent recovery, crude oil prices remain below fiscal 2020 levels (fiscal year ending March 31, 2020).

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