Chairman & CEO (CMD), Oil and Natural Gas Corporation Limited (ONGC)
Special Address by Arun Kumar Singh | Chairman & CEO, ONGC | ET Oil and Gas Annual 2023
Embark on a journey of insights with the Special Address by Mr. Arun Kumar Singh, Chairman & CEO of Oil and Natural Gas Corporation Ltd (ONGC), presented at the esteemed ET Oil and Gas Annual 2023 held at Hyatt Regency, New Delhi.
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About Arun Singh
Arun Kumar Singh, Chairman and CEO of ONGC, stated in January 2025 that the company drilled a well based purely on AI predictions and achieved 98% accuracy, adding that AI investment is expected to significantly improve efficiency in oil exploration and development over the next 3-4 years. He also said that a new deal with BP could yield a 60% gain in recovery from a major reservoir. Singh has emphasized that India will require substantial fossil fuel use to sustain economic growth for the next 20-25 years, and that ONGC has a national responsibility to explore offshore and deepwater areas, committing to an annual capital expenditure of 35,000 crore rupees. In earlier remarks, Singh described the global push against fossil fuels at COP28 as "very hard" and noted that the energy transition presents challenges, including the need to socialize grid costs for renewable power. He stated that ONGC is committed to both oil and gas production and the energy transition, and that the company aims to bring as much gas as possible from its fields to land. Singh also said that India's energy demand will grow significantly over the next 10-20 years, and that ONGC will continue to explore and produce domestically.
Transcript (30 segments)
A
Arun Singh0:10
All the panelists on the dais, distinguished guests on the dais, all our colleagues, because I see a lot of oil and gas professionals in the crowd, so very tough to speak. First of all, very good morning to all of you.
In fact, there is nothing new that I'm going to talk about. Definitely you might have read, heard, or at least, you know, some opinion makers, leaders are all the time writing mostly in Economic Times or Times of India or other newspapers. So I'm going to start with the first question.
Now one can definitely see that earlier times were simple because you had a buffet to choose from, and now among the items kept in a plate you had the choice to, you know, pick each other. Now the plate itself is rotating, and the plate is rotating so fast and in relation to other plates that you must have read what is going on in COP 28. And last, from the 30th onwards, now we are almost 10-15 days in that and you might have read what is going on there. And the push, as I understand, is very, very hard, particularly against fossil fuels.
It is also a fact that the geopolitical scene is also changing very fast because it is largely driven by political-economic considerations. And also the fact that transition is also largely, of course, one of the global warming issue. But in this problem many saw this opportunity and are trying to create a business out of this changing world.
So far as our country is concerned, I'm not going to repeat it, our country will require both—in fact, more fossil fuel growth and also maybe larger growth in renewables—because our energy per capita consumption, primary energy per capita consumption, is one-third of the global average. And still population is growing. If economy grows at 7%, you can calculate, it's not rocket science that India will need a huge amount of fossil fuel to sustain its economic growth, at least for the next 20-25 years. So now what are the choices?
Fortunately, the security issue globally—you can see now a new axis emerging. Geopolitically, if you go by last month's data, the US became the top exporter of oil, six million barrels a day almost they exported last month. So now the world is—as long as the superpower required energy, it had one economic context. Now the economic context itself is changing. And moreover, you can see that what at COP 28 is going on, so you can read the thin lines between the two, and probably everybody can have its own meaning.
Security-wise, we need energy for us to grow, that goes without saying. And as you know, in our country we are 12-13% only, we have our own oil, and around half, you can say, our own gas. Gas will continue to grow, but oil we don't seem to have very good, you know, as of now at least, a good story to narrate. Gas, of course, the country will continue to explore and produce.
So taking cue from here, I'm going to speak about two-three things mainly. First is how we think that we should navigate. First and foremost, we should explore everything that is possible to be explored in our country. Global trend is that everybody is exploring its own waters and land. The global trend is that people are hesitant now to explore others' land and water. All the national oil companies have a primary responsibility to first search their own country for oil and gas, and then if still it is not meeting your requirement, then cross the fence.
But there also, as you know, as a matter of strategy—we don't mind divulging it—we are focusing more on near-producing or producing assets if it is abroad. The long gestation period of 15-20 years, exploration era of investing in a foreign country, investing in somebody's soil—that era seems to be breathing its last. So therefore you might be noticing that many countries want others to come and invest in exploration, particularly that is not gaining traction.
Second trend that must be visible to you is that gradually—today oil price is 73-74. So transition, whether we like it or not, it has impact on oil and gas prices as of now. Because despite—I don't want to name—but one country's production last month was around 9 million barrels a day and they consumed 3.2-3.3 for themselves. So what effectively they exported was 5.4-5.5. And my calculation, if oil remains at 72, they will have budget deficit in their country to meet their annual expenditure. Forget about the future plans of all the best things in the world—they will have a problem.
So what I'm trying to say is that it is very difficult to predict the future, but definitely one should develop the capability to navigate the future. What is in our hand is to just have the capability to swing either way. One cannot rule out—we are not astrologers—that we can rule out the increase in oil and gas prices. At the same time, we cannot rule out now a decrease in oil and gas prices. Anything above $60 for oil, and around—for our country, contextually, I give a premium of 12%, plus $1—so $8.4-8.5 for gas—is something that tactically producers are planning all over the world.
And that's what you find the reason that gas infrastructure in the next 2-3 years is going to grow many folds all across the globe, and mostly LNG. So what is good news about us is that if transition really is pushed hard, oil and gas will become cheaper, because the cost of production of oil and gas for some economies is as low as $3 to $4. So if the transition happens, in our reading of things, people will struggle to find capex, particularly those who are medium and high-cost producers.
But if the tide turns, if energy growth continues all over the world, economic surprises are not there in one of the major economies of the world, then naturally things will turn differently. But while we should appreciate both sides—affordability, for the time being at least, as I can see from 2027 onward, will not be a big issue. But of course between 2024 to 2027, the world can be very choppy. But 2027 onward, if you look at all the numbers of gas and LNG movements, you can predict with a reasonable accuracy of 80% plus.
Now coming to sustainability issues—sustainability is something that the world is struggling a lot. And now let's see how it unfolds. But one thing is clear: some part of the world is doing very well in transition, particularly Europe, more so in Western Europe. In fact, regardless of what happens to the world, they will transit. In our calculation, they have at least 10-15 million barrels a day—at least 5 million barrels a day decline is certain.
Now, the second issue comes is the US—saying something, doing something—let's see. But at least European thoughts and actions are integrated. But there appears to be an integrity issue between thought and action in one part of the globe. For one major economy, in the last six months, the car sales in that country—every fourth car was an EV. And two areas, China and Europe, are taking huge strides in EVs. But this EV is not necessarily going to be powered by the primary source of renewables.
One economy has chosen to not distinguish green power or dirty power—as long as it is electric power. So the rest for you is to infer what will happen. Whether it is a transition towards green or more a transition towards dirty fuel, only history will tell us after we have all the numbers. But right now, the amount of EVs being sold in one economy, the numbers of gas power generation are not matching—it means some power generation is coming from dirty sources. But sooner or later, the world will exert enough pressure to make sure that they move.
Now, what are the major challenges in green? Green is also not easy for the simple reason that you require transmission. And if suppose you have a requirement today—say total power generation peak power of all renewables put together is 150 GW, and if you add another 80-85 which is under construction, it becomes 230-245 GW. But it is peak power. Peak power of renewables is as good as conventional power which is on the grid. So virtually, the grid capacity will have to take care of the peak power requirement. And peak power is not during the day—still, the country needs most of its power in the evening. So the grid challenges, sooner or later, and the grid cost, will have to be socialized.
Socialized means the entire country has to take that burden. I'm sure that is not in our framework, but somebody will have to work on that to see that the cost is distributed all across for green power to be viable from a transmission point of view. Because you produce in Rajasthan and consume in, say, Kerala—the transmission cost and the transmission infrastructure requirement, if suppose you have 500 GW of power by 2030, to my calculation, transmission itself will require a three-fold increase to carry this peak power to any place.
First of all to PSPs or wherever storage is there. Second, the banking policy—that also is dependent on what policy framework comes, because you can't generate power, give some power to someone in daytime, and draw that in night. But if you give half the power in daytime and want all the power in night, from where will the supplier give you that power? So naturally, night power will gradually become more and more expensive. Therefore, you must be noticing that this balancing issue—for our country, unfortunately, is not that strong in wind. Wind could have balanced this, but that is not for us, the OMCs, to work on. So in our country, oil and gas, because of the infrastructure limitation and the demand, is here to stay.
I keep saying everywhere in world forums that the only sweet spot in the world for energy today is India. There is no sweet spot for oil and gas guys other than India. And that is evident in their interest on the downstream side, and that is visible. So what I see as opportunity—that many may clamor for our market, as long as the market integration gives a solid economic case. But it depends on fiscal stability, policy stability. Those are the things that will unfold. I'm 100% sure the next five years is going to do that.
Now coming to ONGC, I'll give you a few glimpses. ONGC is committed to spend ₹35,000 crore per year in capex, because we have a national responsibility of exploring our waters—offshore, ultra-deep waters or deep waters. We need to explore on behalf of the country before reaching some conclusion about what we have and what we don't have. So that expenditure will be around ₹10,000-12,000 crore per year, and around ₹25,000 crore will need to just support our existing production.
And because our new production capacity—we have spent almost all the money in KG Krishna Godavari. So hopefully, we are hoping that first oil should start as early as possible, and gas definitely 3-4 months later. So with this, the capex commitment of ONGC is likely to be around ₹35,000 crore per year. Probably among PSUs, it will continue to be the largest capital expenditure.
Second, one of the challenges that ONGC is working on is the transition. So as a good gesture and good Samaritan, we have already committed that we will be Net Zero compliant—Scope 1 and Scope 2 compliant—by 2038. Currently, ONGC emits around, for Scope 1 and Scope 2, roughly 9 million tonnes of carbon dioxide. And as a signatory of the COP 28 Charter by major oil and gas producing companies of the world, we have committed that, in consultation with all the oil majors, there are two more things we are going to do.
By 2030, the methane emission—which, to the extent possible, if the technology is there, we will try to make zero. Second part was flaring. Flaring is of two types—one is technical flaring, which you call unavoidable flaring, and the rest is avoidable flaring. We have also committed to the world that by 2030, our avoidable flaring will be zero—what we are flaring at our production fields and establishments.
Third thing, which is very much on paper since I spoke about it at COP 28—I'm going to tell everyone here also—that we are exploring, around 20% of our gas we consume for ourselves, for running our systems, power, compressors, all the devices that we have in offshore and onshore. If commerciality works—which should work, because I feel that this 20% of gas can be diverted to the country, provided economics are favorable. Because for running these systems on electricity, we need to bring all the electricity from shore to 170 km away platforms.
And this is a costly game. So therefore, one of the things ONGC is going to say is that if it has marketing and pricing freedom, then ONGC will try to bring this gas to shore. Otherwise, if it is economically not viable, then naturally, ONGC after all is a commercial organization—it has to fend for itself. So we are working on it, very soon we'll be approaching that whatever 20%—currently we have 55 mmcmd production and around 11-12 mmcmd ONGC uses for its own purpose. Of course, this 11 will not be possible everywhere because there are many uneconomical fields where this cannot be done.
But power transmission is possible for offshore platforms which are producing good oil and gas. So if we convert this into green electricity—suppose assuming that it comes at ₹5-6 per unit, plus the associated capital infrastructure at both ends, because we have to invest tons of money on platforms and tons of money on land to transmit this power—and if this power we transmit, then naturally the price of gas is going to go up. It can't be $6.5. A $6.5 world will restrict all the new gases to come into this country. So this is something—that $6.5 is only for nomination fields, but nomination fields themselves consume a lot of gas.
So this is again a policy framework space. I'm sure ONGC will approach the government and policymakers for necessary corrections, to the extent that almost all the big gas producers of the world who can access power from land—because as you know, our Mumbai offshore is only 170 km from shore. 170 km is not a great distance for laying a transmission line. Of course, the economics—I'm repeating again and again: economics, economics, economics—because otherwise it'll remain a distant dream.
So these five things I wanted to share with you. That ONGC remains committed to oil and gas production, more so as a national oil company, for exploring whatever type 2, type 3, and the deep water that is left to be explored. That we will explore at its own cost—but we are hopeful that at least the eastern offshore holds good promise for ONGC. Second part is, it will keep developing the discovered assets. But discovered asset development is also a cost game with the oil and gas prices, which I'm sure in our country will remain remunerative from the demand point of view. So we'll develop those assets as fast as possible.
Third thing: we'll remain committed to transition, and also remain committed to bringing as much gas as possible from our producing fields to the land. So with these words, thank you very much, ET World, for giving us an opportunity to share the forum with distinguished guests and also share our thoughts on what oil and gas—I'm not here to speak on the downstream side, because if it's downstream, I have spent my life there, so I can speak for an hour more. If I start talking about downstream ups and downs... So with this, thank you very much once again and have a good day.