New Delhi: State-owned ONGC plans to generate around $1 billion in profits through a new trading company for buying and selling crude oil and refined fuels of its group companies, a top official said on Monday.
Currently, ONGC’s subsidiaries, including Hindustan Petroleum Corporation Ltd (HPCL) and Mangalore Refinery and Petrochemicals Ltd (MRPL), trade about 70 million tonnes of crude oil annually and export some fuel.
The new entity will consolidate these trading activities to achieve economies of scale and secure better pricing.
The trading company will handle crude purchases for HPCL and MRPL, as well as oil and gas from overseas subsidiary ONGC Videsh Ltd (OVL). A global oil company will be given equity to provide international trading expertise. Four international firms, not primarily oil traders but experienced in oil and gas trading, have expressed interest, according to ONGC Director (Production) Pankaj Kumar.
HPCL and MRPL will also be offered stakes.
HPCL currently imports 36 million tonnes (MT) of crude for refining and will increase volumes once its 9 million tonne Barmer refinery in Rajasthan is commissioned next year. MRPL imports 15 million tonnes annually, and OVL produces about 10 million tonnes of oil and oil-equivalent gas from overseas.
The trading arm is part of ONGC’s broader strategy to optimise operations amid a low oil price environment.
With international crude prices dropping to around $60 per barrel from $81 in December 2022, earnings are under pressure.
ONGC is also focusing on boosting output from existing fields and cost optimisation. Partnering with BP as a technical service provider, the company aims to revive Mumbai High fields and optimise the KG-DWN-98/2 block. Annual opex and capex savings of 15 per cent, or roughly Rs 9,000 crore, are expected to begin this year, with full benefits in 18 months.
Overall, the new company is expected to unlock $1 billion in value while streamlining operations across ONGC’s domestic and overseas assets.