ONGC plans 15% cost reduction to prepare for $60 per barrel crude price

State-run Oil and Natural Gas Corporation (ONGC) is planning 15 per cent reduction in overall costs in two years as the firm sees crude oil prices sliding to $60 per barrel amid an oversupplied oil market.

 

Planning overall cost reductions of over Rs 9,000 crore by financial year 2026-27 (FY27), India’s largest oil and gas explorer expects lower costs on forecast of higher production primarily from Mumbai High field, scaled-up operations at Pipalav supply base and venturing into oil trading business, said Pankaj Kumar, director production, at a press conference on Monday.

 

Of the Rs 9,000 crore savings forecast, ONGC expects savings of Rs 4,300 crore by March 2026 as it implements 20 initiatives to boost cost efficiency. ONGC sees additional Rs 5,000 crore in cost reduction through other initiatives.

 

The company is undertaking initiatives such as offshore resource optimisation, increasing drilling efficiency, logistics route optimisation, inventory reduction and increasing fuel efficiency, Kumar said.

 

In an effort to unlock over Rs 1,000 crore in savings, ONGC is scaling up operations at Pipavav supply base in Gujarat. The company is also planning to enter oil trading business unlocking $1 billion in annual savings. ONGC is in talks with a few overseas companies, with plans to enter into a joint venture, for the trading business.

Higher production forecast

ONGC said it has been able to arrest the declining trend in its production by registering 1 per cent year-on-year (YoY) increase in crude oil output in FY25. In the first half of FY26, the company registered consistent increase in output. ONGC saw an increase of 1.2 per cent in total oil production in Q1 of FY26, while a boost of 1.1 per cent in oil output in Q2.

 

ONGC's collaboration with energy major BP to boost output from Mumbai High field will unlock up to $15 billion incremental revenue in 10 years, said Kumar. ONGC targets 44 per cent boost in oil production to 65.41 million metric tonne (mmt) and over 89 per cent boost in gas production in a decade’s time. In January 2025, ONGC selected BP as technical Services Provider (TSP) for its Mumbai field.

 

ONGC also foresees higher production from 98/2 block in Krishna Godavari basin expecting 12 mmt of oil and 13.5 bcm of gas in next few years. ONGC has engaged BP as subject matter expert to diagnose root-case and identify well interventions to boost production in 98/2 block.