Oil and Natural Gas Corp. expects a 5-6% increase in oil production for FY25, attributed to elevated production from the KG 98/2 basin.
The company sees improvement in production output in Q4 FY24 and expects to conclude the fiscal with production levels comparable to, or slightly higher than, FY23, it said in a conference call on Monday.
It guided a 15% increase in production output in the next three years.
Q3 FY24 Production Output
The government-owned oil and gas exploration firm reported a 3.3% and 4.3% year-on-year decline in oil and gas production, respectively, in the third quarter of fiscal 2024.
The company attributed this to various factors, including the shutdown at Panna-Mukta offshore platforms, the impact of Cyclone Biparjoy, pipeline leakage in a critical southern asset, and the natural decline from mature fields.
KG 98/2 Basin
The KG-DWN 98/2 block is situated offshore the Godavari River delta, 35 km off the coast of Andhra Pradesh, and has been highlighted as a key production basin by the company. The first oil production at the KG block commenced on Jan. 7, an exchange filling said.
At present, the total oil and gas production at KG 98/2 stands at 12,000 barrels of oil per day and 1.75 million metric standard cubic metres of gas per day, ONGC said.
During the conference call, the oil exploration company said that it expects full-fledged production benefits from the basin to come into effect in FY26.
Tax Benefit
The Special Additional Excise Duty is a tax levied by the government on domestically produced crude oil and is monitored fortnightly. As of Feb. 3, the government announced a hike in windfall tax on petroleum crude, adjusting it to Rs 3,200 per tonne from the previous rate of Rs 1,700 per tonne. For an oil production company, the tax hike reflects negatively on profitability.
The oil currently being produced from the KG 98/2 basin is not applicable for SAED. However, the applicability is still under review and the decision has not been finalised yet, the company said.
Capex Guidance
ONGC also guided a standalone capital expenditure of Rs 33,000–Rs 35,000 crore for FY25 and Rs 30,000 crore for FY24.
ONGC Videsh, the wholly owned subsidiary and overseas arm of the company, guided for a capex of Rs 9,000 crore for the next three years.
The company also mentioned that a total capex of Rs 28,000 crore has been incurred on the KG 98/2 basin so far, and the company will also be spending Rs 60,000 crore on ongoing projects over the next two to three years.
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