ONGC, IOC, other oil PSUs to invest Rs 98,521 crore in FY21

ONGC, IOC and other oil PSUs plans to invest over Rs 98,521 crore (US$ 14.10 billion) in the coming fiscal starting from April 1. This investment will be focused in exploring for oil and gas, refineries, petrochemicals and laying pipelines to meet needs of the world's fastest-growing energy consuming nation.

According to Budget 2020-21 documents, this investment proposed in 2020-21 is around four per cent higher than Rs 94,974 crore (US$ 13.59 billion) spending by the state-owned oil firms in the current fiscal year ended on March 31st.

The Oil and Natural Gas Corp (ONGC) leads the pack with a 19 per cent rise in its capital spending at Rs 32,501 crore (US$ 4.65 billion). This investment is focused in finding new reserves of oil and gas and bringing to production discoveries it has already made. It is developing discoveries on both east and west coast of the country.

ONGC Videsh Ltd (OVL), which is the top oil producer's overseas arm, intend to invest almost 10 per cent more at Rs 7,235 crore (US$ 1.04 billion) in oil and gas operations abroad. Indian Oil Corp (IOC), which is the country's top oil refiner, will increase its spending to a 17.4 per cent reaching Rs 26,233 crore (US$ 3.75 billion) with the bulk of it in expansion and upgrade of its seven refineries that produce fuel.

The company also plans to double the invest in its petrochemical business to Rs 3,387.5 crore (US$ 484.69 million) while its exploration spends quadruples to Rs 2,150 crore (US$ 307.63 million). The privatisation-bound Bharat Petroleum Corp Ltd (BPCL) has proposed a 14 per cent increase in its capital spending at Rs 9,000 crore (US$ 1.29 billion), out of which two-third will be in its core refining business.

Since most of its pipeline grid expansion projects are nearing completion, Gas utility GAIL India Ltd will not witness any major increase in its investments at Rs 5,412 crore (US$ 774.36 million). The investment by Hindustan Petroleum Corp Ltd (HPCL), a subsidiary of ONGC, will be same as previous year at Rs 11,500 crore (US$ 1.65 billion) in FY21.

The nation's second-largest oil producer, Oil India Ltd, will invest Rs 3,877 crore (US$ 554.73 million) next year as compared to Rs 3,675 crore (US$ 525.83 million) in current fiscal. The expansion plans of national natural gas pipeline network to 27,000 km from the present 16,200 km was laid down by Finance Minister Nirmala Sitharaman in her second budget along with the pricing reforms as the government is looking at providing boost to the use of environment-friendly fuel.

A target of raising the share of natural gas in primary energy basket to 15 per cent by 2030 from current 6.2 per cent has been set by the government. The key to achieving this target is connecting the gas sources to consumption hubs. Currently, most of the gas pipelines are concentrated in the western and northern part of the country with a few lines in the east and south.

"To deepen gas markets in India, further reforms will be undertaken to facilitate transparent price discovery and ease of transactions," Ms Sitharaman had said. Presently, the price of natural gas produced domestically is fixed by a formula that averages out rates in gas surplus nations such as Russia and the US.

She added without giving an exact timeline, "Further, it is proposed to expand the national gas grid from the present 16,200 km to 27,000 km".

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.