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Oil PSU capex hits 4-year low in FY20 with ONGC, IOC planning investments

The decline in spending comes at a time when the government is emphasising on raising domestic output to cut costly oil imports

Press Trust of India  |  New Delhi 

Interim Budget 2019: FM has cheap crude oil to thank for his fiscal record

State-owned firms' capital expenditure has hit a four-year low with PSUs such as and planning to invest Rs 93,693 crore in and gas exploration, refining and petrochemicals in the 2019-20 fiscal year.

The capital expenditure outlay of and (ONGC), (IOC), (India) Ltd, (BPCL), Corp Ltd (HPCL), and Petrochemicals Ltd and their subsidiaries is the lowest since 2014-15, according to Union Budget for 2019-20 documents.

had proposed an investment of Rs 89,335 crore in the current fiscal year ending March 31, 2019, but will end up investing Rs 94,438 crore. This is lower than Rs 132,003 crore invested in 2017-18, Rs 104,426 crore in 2016-17 and Rs 97,223 crore invested in 2015-16.

They had invested Rs 89,180 crore in 2014-15.

The decline in spending comes at a time when the government is emphasising on raising domestic output to cut

had spent USD 109.1 billion on imports in 2017-18 while the same for the current fiscal are projected to rise to about USD 130 billion.

ONGC, according to Budget documents, is projected to spend Rs 32,921 crore in 2019-20, down from Rs 33,007 crore in the current year. IOC's planned capex will see almost 2 per cent reduction at Rs 25,083 crore.

and fuel marketing HPCL and BPCL will, however, see a rise in capex at Rs 9,500 crore and Rs 7,900 crore respectively.

has proposed 10 per cent less capex at Rs 5,339 crore.

Videsh Ltd, the overseas arm of ONGC, has proposed 15.5 per cent lower capex at Rs 5,161 crore.

"India's import dependence on and natural gas has been a source of big concern to our Government. While we have taken a large number of measures to moderate the increasing demand through the usage of bio-fuel and alternate technologies, urgent action is needed to increase hydrocarbon production to reduce imports," had said in his Budget speech in Lok Sabha on February 1.

He had stated that a high-level inter-ministerial committee has made several specific recommendations, including transforming the system of bidding for exploration, changing from revenue sharing to exploration programme for Category II and III basins.

"The Government is in the process of implementing these recommendations," he had stated.

The BJP-led had moved from production sharing contracts, where acreage for exploration of was allocated to firms offering the largest work programmes, to revenue sharing contracts, where the firm offering highest revenue to the government was given the blocks.

Now it seems the government is reverting to the old regime, at least for areas in some basins.

has 26 sedimentary basins measuring 3.14 million square kilometers. These are classified into four categories: Category-I basins where commercial production has been established like Cambay, Mumbai Offshore, Rajasthan, Krishna Godavari, Cauvery, Shelf and Assam-Arakan Fold Belt; Category-II basins with known accumulation of hydrocarbons but no commercial production so far such as Kutch, Mahanadi-NEC (North East Coast), Andaman-Nicobar and Kerala-Konkan-Lakshadweep.

Category-III basins have hydrocarbon reserves that are considered geologically prospective such as in Himalayan Foreland Basin, Ganga Basin, Vindhyan basin, Saurashtra basin, Kerela Konkan basin, Bengal basin; and Category-IV which are the ones having uncertain potential which may be prospective by analogy with similar basins in the world. These include Karewa basin, Spiti-Zanskar basin, SatpuraSouth RewaDamodar basin, basin, Narmada basin, Deccan Syneclise, Bhima-Kaladgi, Bastar basin, Pranhita Godavari basin and Cuddapah basin.

Deepak Mahurkar, Partner and Oil & Gas, PwC said: "The government has acknowledged the need for reforms in the upstream industry to overcome the issue of significant Pure exploration contracts are appearing to be issued, which will be a new dimension to India's E&P sector."

K Ravichandran, Senior Vice President, Head-Corporate Ratings, ICRA, said the announcement on the impending changes in bidding framework for new blocks in order to boost domestic production will be a positive development for the sector.

First Published: Sun, February 03 2019. 11:30 IST
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