Special Address by Arun Kumar Singh | Chairman & CEO, ONGC | ET Oil and Gas Annual 2023

All the 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. 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, and now among the items kept in plate, you had the choice to fine each other. Now the plate itself is rotating and plate is rotating so fast and in relation to other plates that you must have read what is going on in COP28 and last from 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. And 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 trying to create a business out of this changing world. So far our country is concerned, our countries will require both more fossil fuel growth and also larger growth in renewables because our energy capita consumption, primary energy capita consumption is one-third of the global average and still population is growing. If economy grows at 7%, you can calculate, it is not a rocket science that India will need huge amount of fossil fuel to sustain its economic growth at least for next 20, 25 years. So now what are the choices? Fortunately, the security issue globally is you can see now a new axis emerging that geopolitically and if you go by last month data, US became the top exporter of oil, 6 million barrel 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 COP28 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 13, 12, 13% only we have oil, our own oil, and around half our own gas. Gas will continue to grow but oil we don't seem to have very good story to narrate. Gas of course 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 that we should explore everything that is possible to be explored in our country. Global trend is that everybody is exploring its own water and land, the global trend is that people are hesitant now to explore others land and water. All the NOCs 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 go cross the fence. But there also as a matter of strategy, we are focusing more on near producing or producing asset if it is abroad. The long gestation period of 15, 20 years exploration era of investing in 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 price as of now because despite, I don't want to name but one country's production last month was around 9 million barrel 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 plan, they will have problem. So what I'm trying to say that it is very difficult to predict future but definitely one should develop capability to navigate future. What is in our hand is to just have capability to swing either way to navigate future. One cannot rule out, we are not astrologer that we can rule out the increase in oil and gas price, at the same time we cannot rule out now decrease in oil and gas price. Anything above 60 of oil and around for our country contextually I give a premium of 12% plus $1, so 8.4, $8.5. Gas is something that tactically producers are planning all over the world and that's what you find the reason that gas infrastructure in 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 economy is as low as 3 to 4 while for some. 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 tide turns, if energy growth continues all over the world, economic surprises are not there in one of the major economy of the world, then naturally then the things will turn differently. But while we should appreciate both sides, affordability issue for the time being at least for as I can see from 2027 onward will not be a big issue but of course between 24 to 27 world can be very choppy. But 27 onwards if you look at all the numbers of gas LNG movements and all that you can predict what will happen with a reasonable accuracy of 80% plus. Now coming to sustainability issue, sustainability issue is something that world is struggling a lot. And now let's see how it unfolds but one thing is clear that some part of the world is doing very well in transition particularly Europe, more so in Western Europe. In fact they will regardless of what happens to the world they will transit. In our calculation they have at least 10 to 15 million barrel a day, at least 5 million barrel a day decline is certain. Now second issue comes is US, US saying something, doing something, let's see that. But at least European thoughts and actions are integrated but there appears to be integrity issue between thought and action in one part of the globe. So for one major economy is concerned, you know that last 6 months the car sale in that country every fourth car was a EV. And two areas China and Europe is taking huge strides in EV but this EV is not necessarily going to primary source of renewables. One economy has chosen to not distinguish green power or dirty power as long as it is electric power. So rest for you is to infer that what will happen but yes whether it is a transition towards green or is more transition toward dirty fuel that only history will tell us after we have all the numbers. But right now the amount of EV being sold in one economy, the numbers of gas, power generation through gas is not matching. It means some part of generation is coming from dirty sources. But sooner or later world will exert enough pressure to make sure that they move. Now, what are the major challenges in green? I'll just list few of them that green is also not easy for simple reason that you require transmission. And if suppose you have requirement of today say total power generation will be is around peak power of all renewal put together is 150, 150 GW and if you add another 80, 85 which is under construction become 230, 234.5. But it is a peak power, peak power of renewable is as good as a 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 country needs all the power in evening, most of the power in evening. So now the grid challenges sooner or later and the grid cost will have to be socialized. Socialized means 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 transmission point of view because you produce in Rajasthan and consume in say Kerala. The transmission cost and the transmission infrastructure requirement, at suppose you have 500 GW power by 2030, to my calculation transmission itself will require 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 is not, that also is dependent on what policy framework comes because you can't generate power, you can 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 the supplier will give you that power. So naturally the night power will gradually becoming more and more expensive. So therefore you must be noticing that this issue, balancing. For unfortunately our country is not that strong in wind that wind could have balanced this but that part, but that is not for us OMC to work on but it is ET oil and gas so therefore I'll refrain from those areas. So in our country oil and gas because of the infrastructure limitation and the demand is here to stay, is here to stay big. I keep saying everywhere in the 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 in downstream side and that is visible. So what I see as opportunity that many may clamor for our market as long as the market integrated ways gives a solid economic case but it depends on the fiscal stability, policy stability. So those are the things will unfold. I'm 100% sure next 5 years is going to do that. Now coming to ONGC, I'll give you few glimpses. ONGC is committed to spend 35,000 CR 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 that what we have and what we don't have. So that expenditure will be around 10 to 12,000 CR per year and around 25,000 CR 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 we are capex commitment of ONGC is likely to be around 35,000 CR per year, probably among PSU it will continue to be the largest capital expenditure. Second that one of the challenge that ONGC is working on is the transition. So as a good gesture and Good Samaritan, we have already committed that we will be zero, Net Zero compliant, scope one and scope two compliant by 2038. Currently ONGC emits around for scope one and scope two roughly 9 million ton of carbon dioxide. So and as a signatory of COP Charter, COP28 Charter by major oil and gas producing companies of the world, we have committed that with in consultation with all the oil majors. The two more thing we are going to do is to, by 2030, the methane emission, which will make zero to the extent possible. If the technology is there we'll try to make methane emission zero. Second part was flaring. Flaring are of two types, that one is technical flaring which you call is unavoidable flaring and rest is avoidable flaring. So we have also committed to world that by 2030 our avoidable flaring will be zero. What we are flaring in production fields or our establishments. Third thing which we are is very much on paper since I spoke about it at COP28 so I'm going to here also tell everyone 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 divert to country provided economics is 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 thing that ONGC is going to say that if it has marketing and pricing freedom for the gas, we will try to bring this gas to shore. Otherwise, if it is economically not viable then naturally when ONGC after all is a commercial organization it has to fend for itself. So we are working on it, very soon we will be approaching that whatever 20% currently we have, 55 mmscm is our production and around 11 to 12 mmscm per day ONGC uses for its own purpose. Of course this 11 will not be possible because there are many uneconomical fields where this cannot be done that you bring power transmission there. But power transmission is possible for offshore platforms which are very good oil and gas, gas production and oil production also. So if we convert this into green energy, green electricity. Suppose assuming that it comes at 5 to 6 rupees a unit plus the associated capital infrastructure at both end because we have to invest tons of money on platform and tons of money on the land to transmit this power. And if this power we transmit then naturally the price of the gas is going to go up. It can't be $6 and half dollar. World $6 and half dollar means $6 and half dollar will restrict all the new gases to come in this country. So this is something that 6 and half is only nomination field but nomination field itself consumes a lot of gas. So this is something again a policy framework space. I'm sure we are going to approach, ONGC will approach government and policy makers for necessary correction to the extent because almost all the big gas producers of the world, those who can access power but from land because as you know our Mumbai offshore is only 170 kilometer 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. So these four things, 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 two, type three and the deep water is left to be explored that we will explore at its own cost without maybe but provided it but we are hopeful that at least Eastern off holds good promise for ONGC. Second part is it'll keep developing the discovered assets but discovered assets development is also a cost game with the oil prices and gas prices which I'm sure in our country will remain remunerative for the demand point of view so we'll develop those assets as fast as possible. Third thing will remain committed to transition and also will remain committed to bringing as much as gas possible from our producing field to the land. So with these words thank you very much ET World for giving us an opportunity to share the forum with distinguished guest and also share our thoughts and what oil and gas. I'm not here to speak on downstream side because if downstream, I have spent my life so I can speak talking, I'll take an hour more. So if I start talking about downstream ups and downs. So with this thank you very much once again and have a good day.