ONGC profit falls 31%, company’s board approves creation of new subsidiary for marketing, trading natural gas

Oil and Natural Gas Corporation (ONGC) reported a profit of Rs 3,763.5 crore on a consolidated basis for the quarter ended December, 31.1% less than the profit made in the same period a year ago, mainly on the state-run oil and gas producing company’s lower crude price realisation and under-recoveries in the gas business. The company’s board, on Saturday, has approved creation of new subsidiary for marketing and trading natural gas. The board has also decided to pay an interim dividend of Rs 1.75 on each equity share of Rs 5.

The company, which produces about 65% of domestic crude oil, supplied 5.6 million tonne (MT) of crude oil in the quarter from its ageing oilfields, recording an annual drop of 3.3%. Its natural gas output fell 5.9% year-on-year (y-o-y) to 5.8 billion cubic metres. ONGC’s realisation from crude oil from its nominated fields fell 27.7% to $43.2 per barrel during the December quarter, compared with the year-ago period. Gross revenue was down 8.4% y-o-y to Rs 1lakh crore in the quarter.

The upcoming subsidiary will focus on the gas business value chain, including LNG, hydrogen enriched CNG, ONGC said. The company will also help ONGC diversify further into the gas to power, bioenergy, and other bio fuel business fronts. ONGC will also acquire 5% stake in IGX, the country’s maiden and only gas exchange.

The move towards diversification comes at a time when the company is not able to sell its produce at viable rates. The company has made numerous representations to the government about the stress faced due to low gas prices. The government price of domestic gas is currently at $1.79 per million British thermal units (mBtu), whereas the firm’s average output cost is around $3.7/mmBtu. More than 95% of the gas currently produced by ONGC is sold at government determined rates.