New Delhi: State-owned Oil and Natural Gas Corporation (ONGC) plans to reduce its oil production costs by 15 per cent over the next two years, targeting savings of about ₹9,000 crore by 2026-27, a senior company official said on Monday.
The move comes as the company expects crude oil prices to remain in the range of $60-65 per barrel in the medium term.
ONGC Director (Production) Pankaj Kumar said the company expects to save around ₹4,000 crore in the current fiscal (2025-26) as part of its cost optimisation drive.
“To achieve this, ONGC has constituted a dedicated cost council aimed at rationalising operational expenditure and improving efficiency across its projects,” Kumar said.
Currently, the company’s cost of oil production stands at about $45 per barrel. The state-run explorer has identified over 20 cost reduction initiatives, with potential savings of ₹4,300 crore from ongoing projects and another ₹5,000 crore from those in the planning stage.
The cost reduction would account for around 15 per cent of the company’s planned operational and capital expenditure of ₹62,000 crore during the period.
The measures include offshore resource optimisation, increased drilling efficiency, logistics route optimisation, inventory reduction and improved fuel efficiency, Kumar said.
As part of the plan, ONGC is scaling up its Pipavav Supply Base in Gujarat to handle nearly two-thirds of its Western Offshore operations, unlocking savings of over ₹1,000 crore.
ONGC has also brought on board British oil major BP as a technical service provider to enhance production from its Mumbai High field, which is expected to generate $15 billion in incremental revenue over the next ten years.
Under the partnership, ONGC and BP are targeting a 44 per cent increase in oil production to 65.41 million tonnes and an 89 per cent rise in gas output to 112.63 billion cubic metres from the field over the next decade.
The company has committed $400 million in capital expenditure for Phase I of the redevelopment and has divided the field into six hubs for faster and optimised execution. Under Phase II, ONGC and BP plan to drill 100 new wells during FY28 and FY29.
The company is also exploring technical service providers for other key assets, including the KG-DWN-98/2 block in the Krishna-Godavari basin. BP has been engaged as a subject matter expert for identifying interventions to boost production from the field.
The ONGC board has approved a joint development scheme that aims to produce 12 million metric tonnes (MMT) of oil and 13.5 billion cubic metres (BCM) of gas from the block over the next few years.
Kumar said the company’s cost optimisation measures are part of a strategic roadmap to prepare for a $60 per barrel crude price environment, ensuring long-term sustainability in a subdued pricing scenario.
