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India’s ONGC Limited poised to become major international player

India’s Petroleum Ministry has forecast an estimated 75% increase in natural gas production over the next five years, according to a Mining Weekly article. Currently, India’s gas production is around 100 million standard cubic meters a day, but India’s Petroleum Ministry expects to be producing between 163 million and 175 million standard cubic meters a day over the next five years.

The Petroleum Ministry expects national E&P major ONGC Limited (ticker: ONGC) to account for the bulk of the higher output, reports Mining Weekly. The company is boosting production from 24 billion cubic meters in the current year to 35 billion cubic meters by 2019 through the development of its new blocks, including Daman offshore western India, and commissioning of blocks KG-98/2 in the Krishna Godavar basin.

This comes after news in October that ONGC was looking to begin a “global acquisition spree.” Financial Times reported that ONGC hoped to take on Chinese rivals and drive foreign production up sevenfold by 2030 through a Rs11tn ($180 billion) investment plan.

ONGC has historically been viewed as a conservative, midsized global energy player, but there has been a shift in recent years to a more aggressive strategy. Following the launch of an investment plan known as “Perspective 2030,” ONGC has invested about $7 billion since mid-2013 to acquire foreign assets in countries such as Mozambique and Brazil.

India is set to overtake China as the largest source of growth in global oil demand by 2020, according to the International Energy Agency. Almost all of this increase will be met via imports, given India’s limited domestic production. ONGC generated revenues of Rs1.8tn ($2 billion) during its recent fiscal year, up 7% from the previous year, but has struggled to raise overall production levels. ONGC is ranked as the top energy company in India, fifth in Asia and 21st globally, as per Platts Top 250 Global Energy Rankings, and is the third ranked E&P company in the world. They operate in Mumbai, Baroda in western India, Nazira in eastern India, Chennai in the south and Kolkata in central India.

Last month, the Indian government announced it would deregulate diesel prices, which Moody’s Investors Service says is a “credit positive” step, according to Reuters. New Delhi Television Limited (NDTV) reported that Raghuram Rajan, Governor of the Reserve Bank of India, had advised the Narendra Modi government to deregulate diesel prices while global oil prices were low.

At an energy finance meeting in Denver yesterday, Jeremy Friesen, executive director of Morgan Stanley’s Commodity Trading Group, told attendees that he sees significant growth coming from India in the next few years. “India is where China was a decade ago.”

India's Energy Imports

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Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.