Bracing for a lower oil price cycle, India's top oil and gas producer ONGC is overhauling its cost architecture-trimming inefficiencies across supply chains, fuel use and logistics-to achieve savings of ₹5,000 crore by 2026-27 and safeguard investor returns.
"We are redesigning ONGC for a $60 (crude oil per barrel) world," chairman Arun Kumar Singh is learnt to have told analysts and employees in recent interactions, referring to the plunging prices.
A consistent dividend powerhouse for the government, ONGC aims to offset lower price realisations through cost cuts to protect investor returns, according to people familiar with the company's plans.
Several forecasters expect Brent crude to slip below $60 a barrel next year, with the US EIA projecting an average of $52, down from around $63 now and an average of $80 in 2024. While lower prices may aid the economy, they spell tighter margins for producers such as ONGC and Oil India, both of which have begun cost rationalisation drives.
"Everything has been revisited-from specifications and inventory volumes to logistics, rigs, vessels, and ports-to optimise the overall cost structure," a person familiar with ONGC's exercise said.
ONGC expects to save about ₹2,500 crore in this financial year and a similar amount in 2026-27, the people said. The effort is being aided by falling oilfield service rates-offshore jack-up rig rentals have nearly halved, with some of ONGC's latest hires priced at $40,000 a day compared with $90,000 earlier.
The company is cutting inventories, optimising procurement volumes, and reducing diesel consumption across operations. Inventory norms have been lowered to five months for many inputs, from 12-18 months previously, while procurement has been centralised to extract economies of scale.
Transport costs are being trimmed by shifting part of offshore logistics from Mumbai to Pipavav port in Gujarat, and by using crew boats and helicopter services from Surat. "ONGC's new fields are closer to the Gujarat coast than Mumbai, which helps cut transport costs," the person said.
Automation and digitalisation are driving further efficiencies, while plans to set up 0.6 GW of captive renewable capacity are expected to lower power costs, the people said.
"We are redesigning ONGC for a $60 (crude oil per barrel) world," chairman Arun Kumar Singh is learnt to have told analysts and employees in recent interactions, referring to the plunging prices.
A consistent dividend powerhouse for the government, ONGC aims to offset lower price realisations through cost cuts to protect investor returns, according to people familiar with the company's plans.
Several forecasters expect Brent crude to slip below $60 a barrel next year, with the US EIA projecting an average of $52, down from around $63 now and an average of $80 in 2024. While lower prices may aid the economy, they spell tighter margins for producers such as ONGC and Oil India, both of which have begun cost rationalisation drives.
"Everything has been revisited-from specifications and inventory volumes to logistics, rigs, vessels, and ports-to optimise the overall cost structure," a person familiar with ONGC's exercise said.
ONGC expects to save about ₹2,500 crore in this financial year and a similar amount in 2026-27, the people said. The effort is being aided by falling oilfield service rates-offshore jack-up rig rentals have nearly halved, with some of ONGC's latest hires priced at $40,000 a day compared with $90,000 earlier.
The company is cutting inventories, optimising procurement volumes, and reducing diesel consumption across operations. Inventory norms have been lowered to five months for many inputs, from 12-18 months previously, while procurement has been centralised to extract economies of scale.
Transport costs are being trimmed by shifting part of offshore logistics from Mumbai to Pipavav port in Gujarat, and by using crew boats and helicopter services from Surat. "ONGC's new fields are closer to the Gujarat coast than Mumbai, which helps cut transport costs," the person said.
Automation and digitalisation are driving further efficiencies, while plans to set up 0.6 GW of captive renewable capacity are expected to lower power costs, the people said.
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