ONGC Targets $1 Billion Profit from Oil Trading
India's Oil and Natural Gas Corporation (ONGC) is taking bold steps to navigate the current oil price challenges, aiming for a significant profit of $1 billion annually through a new oil trading venture. The company plans to partner with an international player, thereby enhancing its operational efficiency and reducing costs by 15%. This strategic move is set to save ONGC approximately Rs 9,000 crore each year, showcasing its commitment to sustaining profitability amidst fluctuating global oil prices.
Currently, the international benchmark for oil, Brent crude, is priced below $65 per barrel, a stark drop from earlier highs. ONGC is bracing for an oil price environment of around $60-65 per barrel over the next few years, as market dynamics suggest a continued surplus supply. This anticipated price scenario poses a challenge for ONGC, which relies heavily on global oil price fluctuations for its revenue. By optimizing costs and developing new revenue streams, ONGC is preparing to mitigate potential impacts on its financial performance.
The company is currently in discussions with four international firms to establish the joint venture focused on oil trading. Although specific partners have not been disclosed, ONGC seeks a partner that brings substantial trading expertise to the table. This collaboration is expected to consolidate ONGC’s trading activities under one umbrella, thus enhancing operational efficiency and scalability. Initially, the joint venture aims to handle trades of up to 90 million tonnes annually.
In addition to the trading initiative, ONGC is implementing extensive cost optimization measures across its operations. The company has introduced over 20 initiatives aimed at reducing overall costs while maintaining its capacity expansion plans. These measures include improving drilling efficiency, streamlining logistics, and adjusting project execution strategies to enhance productivity. The goal is to achieve savings of around Rs 4,300 crore within a year, potentially increasing to Rs 9,300 crore annually within three years.
ONGC’s proactive approach also includes increasing domestic oil and gas production and seeking international technical expertise for key projects. By diversifying its strategies, the company aims to maintain its competitiveness in a challenging market, ensuring that it remains a key player in India’s energy sector.
