GAIL, ONGC look to firm up strategies for low oil and gas price regime

At the India Energy Forum by CERAWeek on Tuesday, oil and gas executives agreed on the continuance of a low oil and gas price regime.

While an energy company such as Oil and Natural Gas Corporation (ONGC) looks to firm up strategies to sustain profits, gas processing company such as GAIL (India) aims to gain with higher domestic consumption and train focus on shorter procurement contracts.

“This is the new normal. We may not see pre-2014 levels of crude oil at $100 per barrel,” said Shashi Shanker, chairman and manging director (CMD), ONGC.

Shanker was speaking at the India Energy Forum’s ‘Technologies to Optimise Costs, Recovery, and Emissions in the Upstream’ session.

“Year 2020 has not been a good year for oil companies. It started with a price war, prices touched all-time lows and then the pandemic struck. This has put oil companies through the wringer,” said Shanker.

He remains hopeful of coping with tech advancements and other initiatives.

Gas distributor GAIL (India), on the other hand, is working towards increasing India’s consumption. “The past one year has been volatile. Natural gas prices have fallen sharply, even before Covid put paid to our plans,” said Manoj Jain, CMD, GAIL (India), at the ‘Growing Share of Gas in India's Energy Mix: What is realistic?’ session later in the evening.

He added, “We are the largest buyer of US liquified natural gas in India and the price outlook seems to be on a downward trend.”

India aims to more than double its gas consumption by 2030. A significant part of this need would be met through imports, added Jain.

The mix of contracts for sourcing gas is also undergoing a sea change, he added. At present, two-thirds of contracts are long-term.

 

The preference for short-term and medium-term contracts, including the spot market, is increasing. “More gas exchanges will also help such contracts,” he added.

Jain remains upbeat about India’s gas consumption story, with more than 10 per cent growth expected every year.

Covid-19 and its impact has also forced energy companies to explore newer strategies, including collaboration and technology. “There is huge opportunity work with start-ups,” said Sunil Duggal, group chief executive officer, Vedanta, who was part of the ‘Technologies in Upstream’ session.

He added, “We have decided to have shared service centres. We have the resources in terms of different rigs, which will also be centralised and will be optimally distributed as and where required.”

Shanker added that in the current low crude oil price scenario, collaboration was the way forward. “Gone are the days of $100 per barrel. Everyone needs to collaborate. Business partnerships have become a necessity not just for companies, but also for service providers,” he said. He added that Covid-19 had also hastened the transition to technology.

Jain said the government had used this period when companies could not do much on the ground to work on policy reforms for the gas sector. He added that rationalisation of tax and tariff was a work in progress, and could happen in a year or so.