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Oil India Ltd
Earnings Call Analysis
Q2-2025 Analysis
Oil India Ltd
In the second quarter of FY 2024-25, Oil India Limited (OIL) showcased an impressive increase in crude oil production, rising by 4.79% to 0.875 million metric tonnes (MMT) from the previous year. Over the first half of the fiscal year, production rose by 5.5% from 1.655 MMT to 1.746 MMT. However, while crude oil production rose, natural gas production faced a minor decline of 1.36% in Q2, dropping to 0.799 billion cubic meters (BCM), compared to Q2 last year. The half-year production did improve a bit, increasing by 3.99% to 1.617 BCM from 1.555 BCM. This reflects OIL’s ability to boost oil output while maintaining a steady trajectory in gas despite some operational hiccups due to power station shutdowns.
Despite the production growth, average crude oil price realization dropped to USD 79.33 per barrel in Q2 from USD 86.86 in the same quarter last year, impacting revenues. This translates to an 8.67% decrease quarter-over-quarter. Similarly, revenues for the first half of FY 2024-25 rose marginally by 7.58% to INR 11,358.62 crores compared to INR 10,558.04 crores last year, undermined by lower crude prices. The average natural gas price remained unchanged at USD 6.5 per MMBtu.
Despite the challenges of fluctuating crude prices, OIL posted stellar profitability growth. The profit after tax in Q2 soared to INR 1,834.07 crores from just INR 325.31 crores in the same quarter last year, a substantial increase of 464%. Over the first half, profit after tax surged by 70.26% to INR 3,300.91 crores from INR 1,938.74 crores. Furthermore, earnings per share (EPS) reflected this growth, increasing to INR 20.29 from INR 11.92 year-on-year.
OIL has planned a capital expenditure (CapEx) exceeding INR 6,000 crores for FY 2024-25, with around 75% of this directed towards upstream operations. The projected split includes approximately INR 2,000 crores for exploration, INR 1,400 crores for development, and around INR 2,300 crores for facilities and infrastructure. They expect to drill more than 70 new wells, which aligns with their strategic goal to sustain production growth amid a competitive market landscape.
Looking ahead, OIL’s management expects gas production targets to stabilize at around 3.2 to 3.3 BCM for FY 2025. They hinted at a long-term growth vision aiming for around 4 million tonnes of oil and 5 BCM of gas production per year within the next few years. This goal is bolstered by initiatives such as the ongoing IGGL project, expected to enhance connectivity and facilitate increased gas supply to meet industrial needs once fully operational by 2026.
Management addressed challenges related to commissioning operations, particularly with the Numaligarh Refinery expansion. The completion of this project is pivotal, providing an exit route for the additional production. OIL expects demand for finished products to rise as pipeline capacity expands. The refinery is set to boost its capacity from 3 million tonnes to 9 million tonnes, significantly impacting regional energy dynamics.
Crucially, the company is poised to benefit from potential regulatory changes in gas pricing. The government’s allowance for a 20% premium above the current gas price of $6.5 starting in April 2025 could improve revenues for newly produced gas, potentially leading to higher profitability as new wells come online.
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Ladies and gentlemen, good day, and welcome to Oil India Limited 2Q FY '25 Results Conference Call hosted by Antique Stock Broking Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Varatharajan Sivasankaran from Antique Stock Broking Limited. Thank you, and over to you, sir.
Thank you, Neha. A very good morning to everyone. I'd like to welcome all the participants to this call and the management of Oil India Limited, represented by Shri Ashok Das, Director, HR, also holding additional charges of Director - Finance; Shri Saloma Yomdo, Director E&D, on the additional charge of Director - Operations; Shri Rupam Barua, ED F&A and CFO; and Shri Sachidananda Maharana, CGM F&A.
I'd like to hand over the call to the management for their initial remarks, and then we can move on to Q&A.
Thank you, Mr. Varatharajan. We now request our Director, HR and Director of Finance, Mr. Ashok Das to kindly give the inaugural address.
Thank you. A very warm good morning to the friends. At the outset, we would like to thank Antique Stock Broking Limited for organizing this call for discussing the second quarter FY '25 results with the management of the company.
The company's financial results for the quarter ended 30 September '24 were approved by the Board of Directors on 5 November 2024, and have been published. The company has achieved significant milestones in terms of growth in production numbers of both crude oil and natural gas, with significant financial and operating achievement will be briefed by our ED F&A and CFO, which can be followed by a Q&A session. So I welcome you once again to the con call. Thank you.
Good morning dear friends. At the outset, I would like to thank Antique Stock Broking Limited for organizing today's analyst call and -- I am Rupam Barua, CFO of this company.
The company's financial results of Q2 financial year '24-'25 were published on 5 November 2024. I briefly give some highlights about the performance of the company in both physical and financial terms.
Now coming to the stand-alone results, beginning with the production front. The company has continued to improve its crude oil production, which is higher by 4.79% in quarter ended 30 September 2024, at 0.875 MMT vis-a-vis 0.835 MMT in the quarter ended 30 September 2023. Crude oil production has increased by 5.5% in half year ended 30 September 2024 at 1.746 MMT vis-a-vis 1.655 MMT in the half year ended 30 September 2023.
Natural gas production during half year ended 30 September 2024 is at 1.617 BCM, increased by 3.99% over the production in half year ended 30 September 2023, this was 1.555 BCM. However, natural gas production for the quarter ended 30 September 2024 is marginally lower by 1.36% at 0.799 BCM vis-a-vis 0.810 BCM for the quarter ended 30 September 2023.
On the financial side, average crude oil price realization for Q2 is USD 79.33 per barrel vis-a-vis USD 86.86 per barrel for quarter 2 financial year '24, decreased by 8.67%. For the half year ended 30 September 2024, average crude oil realization is USD 82.09 per barrel vis-a-vis USD 82.22 per barrel for the half year ended 30 September 2023, which decreased by 0.16%.
Average natural gas price remains -- for the quarter has remained at USD 6.5 MMBtu. The turn over for half year ended 30 September 2024 has increased by 7.58% to INR 11,358.62 crores compared to INR 10,558.04 crores in half year ended 30 September 2023. This is mainly due to higher crude oil and natural gas selling in half year financial '25 compared to half year financial '24. Average natural gas price for Q2 FY '25 has remained unchanged at $6.5. The EBITDA margin for Q2 financial year '25 has decreased by 47.67% vis-a-vis 48.29% for Q2 FY '24, which is mainly due to lower total sales.
Profit after tax from Q2 financial year '24-'25 is INR 1,834.07 crores vis-a-vis INR 325.31 crore for Q2 financial year '23-'24. The profit after tax for the half year ended 30 September 2024 has increased by 70.26% to INR 3,300.91 crores vis-a-vis INR 1,938.74 crores for the half year ended 30 September 2023.
The earnings per share for the half year ended 30 September 2024 is INR 20.29 per share vis-a-vis INR 11.92 for the half year ended 30 September 2023.
Now I'm going to give financial performance of Numaligarh Refinery Limited. Profit after tax of Numaligarh Refinery Limited for Q2 financial year '24-'25 is INR 175.05 crores vis-a-vis INR 735.51 crore during Q2 financial '23-'24. And profit after tax for the half year ended 30 September 2024 is INR 605.58 crore compared to INR 657.95 crores for the corresponding period last year. NRL gross refining margin during the Q2 financial '24-2025 is USD 2.25 per barrel vis-a-vis USD 16.04 per barrel during Q2 financial year '23-'24. And gross refining margin for the half year ended 30 September '24 is USD 4.45 per barrel vis-a-vis USD 13.49 per barrel for the half year ended 30 September 2023. NRL's EBITDA for Q2 financial year '24-'25 is INR 398.85 crores vis-a-vis INR 1,084.55 crores for the Q2 financial year '23-'24. While EBITDA for the half year ended 30 September '24 is INR 1,132.5 crores vis-a-vis INR 1,079.34 for the half year ended 30 September '23-'24.
Our consolidated results, Oil group turnover for the half year ended 30 September 2024 is INR 17,456.79 crores vis-a-vis INR 15,225.23 crores for the half year ended 30 September 2023. And consolidated profit after tax for the half year ended 30 September 2024 is INR 4,085.46 crores vis-a-vis INR 2,039.85 crores for the half year ended 30 September 2023.
With this, my opening remarks on performance is over. We are now open to question and answer.
[Operator Instructions] The first question is from the line of Probal Sen from ICICI Securities.
Just had a couple of questions. First was what is the reason for the sequential dip a little bit that we have seen in the natural gas production in Q2?
Actually, your voice is not clear. Can you please repeat that question?
I was saying, sir, that first question was what is the reason for the sequential decline -- Q-o-Q decline in gas production? Any color you can throw on this.
Actually, there are -- this is [ Saloma Yomdo ] by the way -- CGM, OSG, the Director of Operations. So what is happening, in this period there's a little bit of shutdown, especially NTPS, such as Namrup Thermal Power Station, and LTPs, Lakwa Thermal Power Station, which is around 0.6 and 0.45 or something like that, around 1 [ NHM ]. So during that period -- during this Q2 period, they had a major shutdown, actually. They didn't operate.
And also NRL, what happened is that they had some surplus naphtha during this period. So NRL consumption was also a little bit low. And the NPL also was from 27 -- 28 to 39, almost 20 days -- close to 20 days, they were having some emergency plant treatment. Lower treatment. Basically, this is because of the lower treatment. It is not that we cannot produce. We could produce, but because this lower treatment by the customers. Because of that only, it happened.
So sir, if I can ask a follow-up. In the third quarter, then -- have we seen a reversal of some of these conditions? So can we expect a pickup in offtake in the third quarter if the shutdowns are over and NRL's surplus naphtha is also used out?
I think there are -- in this quarter, quarter 3 -- in the quarter 3, I think there will be more application. But on the other hand, there will be a little bit of late upliftment by the [ PBGPL ] because this is a lean season for the [ PBGPL ]. So overall, I think there will be a small increase -- increment. I think it will go to the level of the earlier quarter or maybe a little bit more, yes.
So sir, for FY '25, then, overall, the guidance that we had of 3.2 to 3.3 BCM, if I remember correctly, that is still maintained. That's the kind of production we expect to still do? And sir, any guidance you can give for FY '26 as of now?
For '26. FY '26, no, because we are in upgradation of many [ specialists ] basically, and we are thinking about the pipeline from IGGL. All those things, unless they come, I think this situation will remain a little bit more or less like -- the earliest like that. But overall, I think we'll be able to go good once the IGGL line comes.
So '26, we don't have any guidance as of now on the gas production is what you're saying.
As of now, no chance. Only thing that we can tell you about is that, there will be less of sharing as of current because we have already installed [ IGGL ] pipeline. So this is the replay.
And Director E&D also is coming, and he will...
This is Saloma. Although you are aware that the long-term vision of the company in the next few years is to achieve production close to 4 million tonnes of oil, and 5 BCM of gas per year. So that's a long-term vision, which we envision to accomplish within the next couple of years. But the gradual increase will definitely be there. Now the bottlenecks with respect to lower treatment of customers, et cetera, will be mainly offset by -- like our CGM said, by the proposed IGGL pipeline, which will come up. And in the meantime, we are aggressively going for achieving 0 flare by December '25. And so there is also going to be -- include an offtake, where we see that there is potential requirement -- additional requirement even from existing customers. So on a year-on-year you can expect that this 4% or 5% incremental growth in gas production and oil production will definitely continue.
Understood. So that's what I was looking for. One last question, if I may, on NRL. This quarter, is it possible to share the GRM, including the excise duty benefit? I think the number shared was net of that.
Yes. Actually, the GRM, which is reported by NRL, is always without excise benefit because that is the comparable GRM on pan-India basis. So excise duty is never included part of GRM reported by the refinery. Now the GRM, which has been reported by NRL for this quarter 2 is only $2.25 per barrel. Having said that, there is also -- there is an issue in this quarter in terms of the inventory loss, which is prevailing across the industry actually during this quarter. So the inventory loss is about USD 4.5 per barrel. So if you remove that, then the GRM would have been about $6.7, $6.6, $6.5. $6.7.
Similar to what it was last quarter?
Yes.
The next question is from the line of Kirtan Mehta from BOB Capital Markets.
I also want to understand in terms of the -- why we had given a Y-o-Y production growth on the oil side? The sales was -- there was a Y-o-Y decline in the sales of oil. Could you explain the reasons for the sales?
We couldn't hear your question clearly.
For the crude oil production, there has been a 4% Y-o-Y growth in this quarter as against that, there has been a 1% to 2% decline in the sales for the crude oil. What is the reason which has led to this Y-o-Y decline in the crude oil sales?
Actually, last quarter there was annual shutdown was there.
Actually, there was a small shutdown in NRL of about 10 to 15 days. So as a result of that, there has been a slight decline in the sales of crude oil, although there has been improvement in production.
And will we be able to sort of offset that additional inventory during the next quarter? So would the crude oil sales be higher by that amount?
Crude oil sales will improve because unless there is shutdown, there is no question of production going on.
The refinery uptake depends on their operational issues and all. So we don't have any issues. From our side, we'll be able to kind of create sales for us.
And what would be our FY '25 target for the crude oil? Would it remain unchanged?
Crude oil production target for the FY '25 current year and [ previous year ].
Yes, for the current year, the target, actually, we have created our unrealized crude oil target. It will be 3.6 million tonnes -- close to 3.6 million tonnes -- yes, 3.56 million tonnes or something.
3.56 million tonnes for the crude oil. And natural gas is 3.2 BCM to 3.3 BCM, correct?
Yes. Our assessment will be a little higher -- close to 3.45 million this year. Close to 3.5 million, 3.45 million will be our shipment in the crude oil. 3.45 million to 3.5 million.
Could you also highlight the progress on the Indradhanush Gas Grid. Is it likely to get completed by December '24?
As far as Phase 1 is concerned, that is about 385 kilometer, which is running from Guwahati to Numaligarh. That has already been mechanically completed. Okay. And nitrogen, this feeding has already been done for about 280 kilometers or something. And by December, they are saying that they will be able to start off with this as well.
And for sort of these additional customers that we will be adding alongside the Phase 1, have we already entered into the agreement with them now?
See, Phase 1 is still running from Guwahati to Numaligarh. So that line will not have any impact as far as Oil India is concerned because Oil India up to Numaligarh is catered by DNPL, which is also under upgradation and augmentation. So as far as up to Numaligarh line is concerned, definitely, they must be having some stock within GAIL with regard to their customer arrangement and all.
For our perspective, which is the line which will -- when would the sort of the augmentation of the line would help us to start increasing the volumes?
As far as Oil India is concerned, because we should be capable of evacuating the gas, which is there with us in the Duliajan region, okay? So as far as that gas is concerned, that will be -- we'll be able to evacuate once there is another line of about 116 kilometer 24-inch line, which will be coming from [ Numaligarh ] up to Duliajan. But that will be an additional line. So once that line comes up to Duliajan, then we will be able to push the gas from Duliajan to our fullest potential.
And could you also share the current status on that line and the target dates for completion?
That is about 2 -- within 2 years' time, they are going to make it happen.
So for the next couple of years, would this mean that our natural gas production will remain more or less flat until and unless this line is complete?
That may not also be a correct statement for the reason that because DNPL line is also under augmentation. And as you are aware, because Numaligarh Refinery is under expansion. So their expected date of completion is December 2024. So once this new refinery comes into full stream of operation, they will require additional gas, which they are -- as on date, they are taking 0.9 to 1 MMSCMD. So that will ramp up to 2.5 to 3 MMSCMD. So as a result, we cannot say that we have to bank on this IGGL only to increase our production.
So NRL would be the key -- one of the key customers where we'll see the offtake increase. And about the DNPL line, what would be the status? And when is it likely to get?
DNPL line is going ahead with 2 phases, so Phase 1 and Phase 2. Phase 1 expected completion is March '25, and Phase 2 is March '26. So this is a INR 433 crores project that is also going ahead.
And what would be the sort of the offtake addition with the completion of Phase 1 in March '25?
As far as you see the Numaligarh Refinery, the completion is targeted December '25. So the first is -- so the first phase of this DNPL line, the total capacity, the increased capacity requirement for the Numaligarh Refinery is expected to be around 3 MMSCMD. Out of that one we are already transporting with the existing capacity. So the target is that by last quarter of next financial year, I mean, the next calendar year, the DNPL first phase line will be activated. And because the mechanical completion will take some time, so by the time that DNPL line increased capacity of 2 MMSCMD comes into play, that will directly meet the increased requirement of Numaligarh Refinery. So we can say, expect that the increase in volume may start from the last quarter of next financial year for the DNPL pipeline.
Right. So then the understanding would be basically this year's target and even the next year's target will be more or less flat, but we'll see a material increase in the gas offtake by around 2 MMSCMD as and when NRL starts taking the additional debt. Is that the right understanding?
Absolutely. And '26-'27 onwards, we can expect a substantial increase because then by that time the IGGL -- yes, the capitalization -- the connectivity will increase. All the different gas lines that is developing in the northeast region, they are also working parallelly. So the IGGL connectivity definitely enhance oil -- crude oil -- gas production will basically solve the different gas grids under the CGD regime that are getting developed. So it will be the feeding line for all those [ regions ] across the northeast.
Just one more question in terms of, could you also update on the progress on the NRL refinery? And how are -- what are the next milestones to track before sort of the commissioning of the refinery expansion?
As far as refinery expansion project is concerned, they have already achieved about 70% of the physical progress by now, and about more than INR 20,000 crores of capital CapEx has already been achieved out of INR 28,000 crores.
And the target rate still remains at December '25, vis-a-vis the commissioning.
Absolutely.
Is that a mechanical completion date? Or is that the sort of the commissioning date?
That is the commissioning date.
So basically, pre-commissioning activity would start sometime in the first or second quarter of the FY '26?
Yes. No, see, the moment the refinery is completed mechanically, it will not start in full string from the day 1. So that will progressively increase. So the initial year might be starting with 50% to 60% capacity, next year going up to 75%, then finally reaching 100%.
[Operator Instructions] The next question is from the line of Vidyadhar Ginde from Sohum Asset Managers Private Limited.
So it appears that your oil and gas production increase is mainly constrained by demand. And so as some pipelines get commissioned, Numaligarh Refinery expansion gets commissioned, your production will increase. So my question was that do you -- Numaligarh Refinery expansion from 3 million tonne to 9 million tonne. One, probably selling that 9 million tonne also is probably demand for -- final petroleum products also is likely to be constrained? So is it easily possible for Numaligarh Refinery to ramp up to -- whenever possible to 100% in 2, 3 years or demand constraints? Or is there a pipeline which can take the final -- the finished products from Northeast to other parts of India?
As far as the pipeline product evacuation part is concerned, there are 2 issues here. Are you talking about -- is their raw material procurement side or...
No, no, no. I'm talking about finishing [ this year ]. My question really is that I am not very sure whether there is additional demand within northeast for another 6 million tonnes, whatever production, 5 million tonne extra production. So that is the question. So can you produce that much and send it elsewhere in India? That is my question.
As far as that part is concerned -- the product evacuation part is concerned, you are very correctly raising the question that what is it's additional capacity, how it is going to be evacuated. As of now, you are aware probably that our pipeline is being used by Numaligarh Refinery for evacuation of their products from their Northeast to -- up to Siliguri 1. But that existing pipeline having -- is having a capacity of 1.7 MMTPA. And that pipeline is being augmented from 1.7 MMTPA to 5.5 MMTPA, that is under progress. And that particular augmentation project is also going to coincide with the completion of the refinery expansion.
So automatically, the additional capacity is being created to cater to the additional requirement of Numaligarh Refinery when -- once this capacity expansion is complete. So automatically, their additional product will mostly be evacuated through our pipeline only, which is under augmentation.
So this Siliguri 1 is the production with incremental capacity expansion to Siliguri happens. Can it go all over India wherever it wants to go? So is there...
Yes. Numaligarh Refinery is also creating facilities in Siliguri terminal for additional tankages and loading and unloading facility, et cetera. So from there onwards, the products will move through either tankages or railway at that as of now. And they are also planning to put in place some pipeline, which we'll be able to take the product up to the high demand areas in the installation.
That pipeline, you will put or IOCL or somebody else? Who is going to put that pipeline?
No, that pipeline will be put by Numaligarh only. So they are on -- this is under planning right now.
Okay. No problem. So basically, you are saying that because the pipeline to evacuate additional production is also going to be commissioned along with the refinery. As and when the refinery stabilizes, it can ramp up over a 2-, 3-year period to 100%, and therefore, to that extent, your oil demand and gas demand will go up.
Yes, yes.
Yes. So that was -- my second question was on your gas production. Like some of your gas production is potentially eligible for this '25. Is any of your gas production is going to happen in the next 2, 3 years eligible for this higher 20%, higher gas price and that is a -- can you give us some color on what proportion of your FY '26 or '27 production could be eligible for this higher gas price?
Yes. I think the $6.5 cap is for the APM gas. But as per the direction of the government that from April '23 onwards, whatever additional activity you do on the new gas that you produce, you will get a premium of 20% over the $6.5 cap that we have.
And so we are working out various modalities like which are the fields, which are wells from which this gas will be qualified as premium gas. And as of now, there are still some [indiscernible] which needs to be modified with the regulatory body, which is the evacuation of hydrocarbons. And once that is sorted out, we will be able to come up with the exact figures, like which are the gas and how much of the gas is currently available for the premium price. I think we don't have it right now. But...
So whatever increase in production will happen from here on, it will be, in any case, entitled to the higher gas prices? Because you were also guiding a big jump in your gas production in any case?
That gas actually produced from a new well or production through new well intervention. So if that happens, then even if we are producing from our own nomination fields, that gas will face higher price in the form of premium of 20%.
So do you have any idea of what proportion of your production in FY '26 or '27, it is going to [indiscernible]?
As of now, we are thinking of finding out those areas from where the production will qualify for the premium gas. That's currently on.
So when can you give a better color? Will it take a few quarters for you to give us a more clear idea on that, on how much of your production? When do you think you would be able to guide us on what proportion of your output will get a higher price?
See, data is being shared with the ministry from time to time based on the requisition which is from the ministry for DR report to finalize. So once the report comes, then only that notification part will be possible. So before that, it is better not to give any mention of quantification, right?
Actually, so this is going to add on [indiscernible] -- the amount of new gas will increase day by day because we are going to work about -- we are going for new interventions. That is for the quality, we are not able to tell you the quantity as of now because there are many [indiscernible].
And just if I could add one more question. So how much of your -- most of the incremental oil, I presume, goes to Numaligarh. But in case of your incremental gas, 5 BCM, which you are talking of, what proportion of this incremental gas is going to Numaligarh for the expansion?
That part I have already mentioned that Numaligarh Refinery is presently picking up about 0.92 to 1 MMSCMD of gas from us.
Okay. So which are the other big consumer potential?
Oncoming capacity, they would be requiring 2.5 to 3 MMSCMD.
Correct, correct. Which are other big consumers of gas, which might -- over the next 2 years other than Numaligarh?
APL is going to increase, right?
APL capacity is likely to get increased.
So how much more they will consume?
Once it is commissioned, there will be larger demand from the CGD entities because the entire Northeast, CGD docks have already been awarded. So once the CGD entities become functional, the [indiscernible].
[Operator Instructions] The next question is from the line of S. Ramesh from Nirmal Bank Equities.
Can you give us some sense in terms of your plans in the city gas distribution and biogas. And is it going to be included in the segment called renewable energy in terms of reporting?
After the 12th and 12A round of bidding, we have actually got 9 geographical areas in all. So out of those 9 geographical areas, 3 are already functional. Those are in Maharashtra and Haryana. That is the geographical area of Kolhapur, Ambala and Kurukshetra, where we are already producing and we have a steady market over there. In addition to that, we have got a geographical area in...
Tripura.
Yes. We have a CGD in Tripura and we also have a CGD in Manipur. So these are the -- Meghalaya, I think [indiscernible]. So these are the CGDs where we have our own interest. And our CGDs are already in the process of laying the network there, even though the CGD -- even though the IGGL network is yet to come, but we are at our end, doing everything possible so that once the IGGL network is commissioned, we can immediately draw gas from that network and run it through our own vendor so that we can create a market for ourselves. Parallelly, we are setting up CNG stations in those areas. I think 2 of the CNG stations in Tripura, which are currently being run by GL, we have tied up with them, and we will be supplying our gas to those CNG stations, which will immediately become functional. So these are some of the things that we are doing in the Northeast for enhancing our sales volume.
As far as CGD is concerned, we are excited to set up 25 CGD stations. Out of which, what we have done so far is that we have identified a few technology partners with whom we will be setting up 1 CGD station in Tinsukia, Assam. That is already -- that has reached some level of finality. And other CGD stations also, we are thinking of stepping up. But that would take a little bit of time because CGD has to be spiked with the natural gas. Those things we are currently working on and possibly in the days ahead, we'll be able to come up with some additional information on this.
Okay. So out of these 9 GAs, how many GAs are on your own stand-alone, how many rigs?
Stand-alone, one. We are having partnership with HPCL mostly. And the Arunachal GA, we are having partnership with BPCL.
So in terms of your capital allocation, you have shown about INR 2,000 crores of CapEx. Out of which INR 1,400 crores is for your E&P business. So where is the E&P CapEx going? And can you share how much of that will be for these nomination blocks where you can get 20% premium? So although you may not be able to give the volume on which we will get that 20% premium, would have done some basic working for the internal rate of return, right? So you are spending so much of money. Is it possible to say how -- where this INR 1,400 crores and the other capital expenditure is going based on whatever you have shared?
Your question is on CapEx?
Yes. Yes, the cash flow you've given INR 1,400 crores for E&P and other capital expenditure, INR 4,700 crores, can you share where it...
I mean you cannot clearly grow in on any one particular area. It could be oil. It could be gas. It could be other areas as well. Now your question is specifically on gas, I believe. Is that your question?
Sir, you are spending INR 6,000 crores. You already spent INR 6,000 crores in first half. So if you can share what is the split for this CapEx in terms of the projects on which you are spending, it will be useful for us to understand which business you are investing in.
Just give us a moment.
Let's see, the next 3 years, CapEx projection for the Oil India on internal basis will be in the range of around INR 6,000 crores to INR 7,000 crores. And on the group basis, if we consider Numaligarh Refinery, it can be around INR 10,000 crores to INR 12,000 crores.
Now out of the INR 6,000 crores, the -- mainly if you see the trend, our -- around 75% of the CapEx is directed towards the upstream initiatives of the company. And the balance, we are going to see we are elevating to the other initiatives and also including the renewables, the CGD space or the parcel allocations towards this space also.
Now on the upstream initiative part as we'll be doing that we have got acreage of around 50,000 square kilometers plus another OLP regime. And in many of the areas, we have already completed the [indiscernible] part. And we have got extensive drilling plans.
I just like to highlight that our target for this year is almost around 70-plus wells. So a lot of CapEx is diverted towards the upstream part for the development drilling and also exploratory drilling. And you'll be ever that oil is now planning for the option within in Andaman. So the Andaman, there will be a part allocation to the Andaman offshore initiatives as well out of the current CapEx. So for a broader deadline, you can say that around 75% was the upstream initiative, which will include drilling plans in our Northeast in the main producing area, in the different other regions like Rajasthan and also in [indiscernible] and 1% in particular, a few of the wells in the offshore region is in Andaman. And so we are targeting in Q4 to start the drilling in Andaman.
Yes. Mid-November, we are starting the drilling activity in offshore Andaman.
So how much of your E&P CapEx out of the 75% is...
Yes, yes. So you want the hard numbers?
Yes. So out of the 75%, you are spending on the upstream...
Broadly, as my colleague has explained, we'll be spending about INR 7,000 crores in the current year. The heads are systemic survey exploration, drilling, development. Then we'll be investing in our subsidiaries. As I've explained, we have about 25 CGD stations to be set up, so all of these will be spent on these heads. And exploration cost would be more than INR 2,000 crores. My development would be close to INR 1,400 crores, a little more than INR 1,400 crores. Other oil and gas facilities, et cetera, will attract another INR 2,300 crores. This is the broad break-up of the INR 7,000 crores that we are projecting.
Understood. Just to get some perspective on Vidyadhar's question on the potential for additional production from the nomination wells for getting that 20% premium, is any of this development expenditure going towards the increase in production in new wells or additional well interventions in the nomination blocks, just to understand what your thought process is there?
What we are currently doing is that we are in the process of exploring those areas, which will be -- which will qualify as new wins on -- those are new well intervention. Actually, we will have to kind of qualify those 2 conditions to get that extra premium. If that doesn't happen, then our gas will be like normal gas. So that would take some time. However, monies will be spent on new wells as well.
So how much of that expenditure will be in the new well, just to understand?
No, like our hydro plant president mentioned that in '24, '25, exploration drilling, INR 2,000 crores is projected. So this exploration drilling doesn't necessarily mean rank exploration in new areas. So what we do is chunk of our exploration, we also do in our nominated regime in terms of near-field exploration. And therefore, you will see that the exploration work that we drill are not only in the rank exploration areas or in the OLP blocks, but is also qualified exploration for near-field exploration.
And that's why in the near-field exploration, in the nominated regime itself, you will have some exploration wells. And chunk of the development wells where this [indiscernible] INR 700 crores is the budget. Now for development drilling, you know that 99% of the [indiscernible] comes from nominated regions in the Northeast apart from about 600 barrels from Rajasthan. So majority of the development drilling will also be held in the nominated blocks in Assam and Arunachal. And all these wells, which will be drilled at development wells or exploration wells in the nominated regimes will be eligible. The ratio of gas will be eligible for a premium 20% gas.
Okay. So your CapEx provides for some capital expenditures in the nomination block. That's why I wanted to confirm.
Actually, the majority of it will be there.
Yes, actually, at least we have always mostly around 3 [indiscernible] in our GDP. There are around 3 non-gases target. So you can -- if we talk about -- in addition, we generally target 3.
[Operator Instructions] The next question is from the line of Mayank from Morgan Stanley.
I had a follow-up question on the CapEx itself. Can you just -- I think you gave a bit of detail around the breakup of the CapEx that you're doing. But can you also give us a bit of a breakup of how much goes into Rajasthan, what goes into Assam, Duliajan? And what will kind of go into Andaman that you're kind of planning and how much could be of oversees that you'll have to do your equity contribution as?
If you request a detailed breakup in terms of the areas where this CapEx is going to be spent, so that can be addressed separately. We do not -- we are not readily prepared. We don't have that breakup as of now.
Okay, sure. So I think I'll just follow up on that. The second thing was in terms of your NRL CapEx, you said INR 200 billion of the INR 280 billion has been spent, correct? Can you just give us the total net debt that you have now sitting at NRL's balance sheet?
NRL debt is right now, it is around INR 11,500 crores.
The next question is from the line of Sabri Hazarika from Emkay Global Financial Services.
Just 2 questions. Sir, firstly, I think your provision and the driver that went up by around INR 200 crores quarter-on-quarter. Can you tell us exactly what effect this has happened?
Can you -- actually, your voice is not very clear.
I got to know what you want to understand actually.
Actually, this quarter, we have taken a write-off of about INR 72 crores on account of wells sitting in [indiscernible]. Okay. That is INR 72 crores is a write-off. And apart from that another INR 270 crores -- INR 297 crores, we have taken provision in respect of starting wells.
In respect of which well?
There are about 5 wells, 5 wells we have taken a provision of about INR 297 crores. So that includes basically 1 well in Moran, 1 well in South [indiscernible], 1 in [indiscernible], 1 in Ashoknagar, 1 in Malikbaria. So these are 5 wells against which about INR 290-odd crores has been taken as a provision. Apart from that write-off of INR 72 crores on account of that [indiscernible] well.
[indiscernible] well is part of OALP, right, and the others are like part of nominated?
[indiscernible] blocks.
[indiscernible] blocks. [indiscernible] ONGC is our partner. And 1 I think is [indiscernible] and rest are our nomination areas.
2 nomination.
2 nomination.
Got it, sir. And sir, just a small question. You mentioned Phase 1 and Phase 2 of BNPL. So Phase 2, I could understand by 2026, the entire and other steps will get augmented. Phase 1 will be what? By 2025 March what are you trying to achieve in Phase 1?
Phase 1 is basically is having us cover 55-kilometer area. And apart from that, in the Phase 2, there are many other lots which are lined up that will give the final set to the profit actually.
55 kilometer, does it connect to a major customer? Or it's like...
That is always exclusively for BNPL. That is normally there.
Okay. No, I mean 55 kilometers, not like [indiscernible] 55 kilometers incremental volumes is [indiscernible]
Sabri, just to explain, this is [indiscernible] here. Just to explain, actually, this BNPL project it is -- one part is the expansion of the capacity, and one part is basically an upliftment of the current facilities based on certain observations and some extensive repairing activities also that was taken out within the same project. So the project is that is why phased in 2 basis, the first repairing and -- measure repairing part will be carried out. And then at the same time, capacity expansion part is also simultaneously going on. The repairing part will be completed in the first week basically. And then the capacity expansion is tied up, in sync with the expected date of commissioning of Numaligarh Refinery.
So what we expect that by end of next financial, by mid, the first phase will be over, but that will not help all to enhance the capacity because this is a stand-alone line going for feeding NRL gas requirement. So once the entire project gets completed, it was the latter part of next year, then the additions of gas evacuation will start once Numaligarh Refinery commissions and we really get stabilized.
The next question is from the line of Hardik Solanki from ICICI Securities.
Yes. My question already got answered.
Next question is from the line Kirtan Mehta from BOB Capital Markets.
Just one question to understand the capital intensity of the well workover programs and new well programs that we are doing. Would you be able to highlight how the capital intensity or our CapEx efforts have ramped up in the nomination block?
So actually, as far as exploration and development progress are concerned, we have more than 55% to 60% of our total CapEx on account of addressing those exploration and development activity. So I don't have the exact breakup of what you are asking, but as far as the CapEx, this strategy is concerned, more than 60% of the CapEx goes on account of this explorational development efforts.
My question was more from the perspective that, for us, basically, I think the production growth has been constrained primarily by the demand and not necessarily by sort of the additional CapEx investments required in the existing project. So under -- and the incentive scheme of 20% extra premium on the gas is primarily to sort of support the additional capital intensity in the legacy field. So is it really applicable for us this new well gas provision because our capital intensity is not really sort of rising?
As far as, yes, new well production is concerned, that demand is not constrained by CapEx obviously.
Sorry, the [indiscernible] is not constrained by the demand. Because, as you know, Northeast is having more than 7.5 MMTPA of capacity, planning capacity, whereas the total production in the Northeast is about 4 to 4.5 MMSCMD.
And so there is capacity. So the moment I can produce my gas, probably will immediately find the store. So there is no rent as far as crude oil is concerned. But yes, as far as gas is concerned, the production is constrained by demand as unless -- but demand can unlocked the moment these facilities are in place. And majority of the facilities are in terms of this IGGL completion and BNPL completion, not necessarily at our end.
No, there is another thing that we are also trying to implement. That's why. And I think Oil India is going to be the first in the country to do it. Actually, we have done it earlier as well.
Now in order to address this issue of constrained production because when we produce gas, in some of the fields, we also produce some [indiscernible] along with the gas. So if I have to shut down a couple of gas wells because of low [indiscernible] by our customers, I'm also losing out on some of the production of oil in terms of the condensate which comes along with the gas. And therefore, we address this problem, of course, the IGGL line will come. It will take another couple of years. But we cannot afford to lose even a single drop or barrel of oil. And that's the reason we have taken up this initiative that we will have a facility for underground gas storage.
So this is something which is -- which we are planning to undertake on a wider footing. And we have already identified a couple of wells or reservoirs where we will try to implement this strategy. And so whenever there is a shortage or there is a requirement for curtailing our gas production, we will not curtail per se. But we will still produce and we will still produce the oil -- additional oil also with the gas and whatever gas gets produced, we will inject it back to the reservoir for storage. It's like an oil storage. But here, we are talking about the gas storage.
Unless on when the -- later when the demand requires, we can even put us back that way. So this concept we are writing implement, we are going to refer in the country to do it or is also eyeing for it. But then these are a few of the steps that we are already taking so that our production levels are sustained well to the desired levels.
The next question is from the line of Somaiah from Avendus Park.
Somaiah this side. First question, sir, in terms of the 30% equity contribution for [indiscernible] expansion CapEx, how much have we contributed so far? How much remains?
We have already contributed about INR 1,100 crores.
Sorry?
We have contributed so far INR 1,100 crores?
INR 1,100 crores, we have already contributed.
INR 1,100 crores, we have already contributed.
Yes, basically as the promoters contribution, our total commitment towards the NRL project is INR 2,200 crores, and this is splitted into 4 cash costs. So first to cash cost actually, we have already trade of INR 550 crores. So the total cumulative investment as a promoter to the refinery CapEx for the project is INR 1,100 crores as on date. The third cash flow also we have received and that will be disbursed sometime by December. So by the end of this financial year up to December, INR 1,100 crores plus INR 550 crores. And then based on the development of the product, as and when we get the balance cash flow request from the refinery, that will be paid. Our total commitment is INR 2,200 crores.
Okay. Sir, also, CapEx for NRL, let's say, after next year, and the expansion is partly done, what will be the CapEx run rate post that?
See, NRL CapEx, actually, the total refinery product cost is INR 22,000 crores, and that is -- again, is getting revised. Of course, the formal approval is awaited but it is expected to be around INR 33,000 crores -- INR 32,000 crores. Now there is already a debt arrangement of INR 18,000 crores by the refinery, and the increased cost will be made from some additional debt drawdown as well as maybe some additional internal accruals also may contribute to that.
Now the -- as we have already mentioned that the total draw that has been done is around INR 11,000 crores out of the INR 18,000 crores capacity. The CapEx that is for '24, '25, they have planned phase-wise CapEx. And for the current year, '24, '25, the CapEx is -- planned CapEx is around INR 10,000 crores. And it will be at that level for the next year also because they have to complete -- the target is to complete the refinery by December '25.
Okay. Sir, one clarification here. So the revised CapEx for NRL expansion would be INR 32,000 crores, that's the updated number?
I mean that is awaiting ministry approval. So what is approved as of now is INR 28,000 crores. There is a revision. The revision proposal is with the ministry. The approval is yet to be received.
Okay, sir. Sir, also, I was just trying to understand, post expansion, once all the 9 MMT comes up fully ramped up, what would be the run-rate CapEx required for NRL in case we have.
Essentially, Numaligarh Refinery is having another project in hand. That is the pet-chem project. So for that project also, they have received approval. And that will be around INR 7,000 crores. And the expected project is actually a few of the physical activities are simultaneously done with the refinery project itself because it is an integrated project, most of the refineries are taking this kind of project now considering the change in the scenario. And so what you can see that, yes, after the 9 million capacity is reached, definitely the refinery have to be more focused on streamlining the inroad supply chain, our broad supply chain for the 9 million refinery.
But at the same time, the mix CapEx, measure CapEx that is in plan is the pet-chem project. The approved cost for that is INR 7,000 crores. And the time requirement is 3 years from the approval of debt. And the approval is what we have understood is recently received. So you can say that in another 3 years' time, the pet-chem project will come up. And it will be free depending on the funding availability, how the additional capacity is marketed. So it will be a combination in that way. But if you ask me what is the next phase of CapEx, that will be the pet-chem project, which is INR 7,000 crores CapEx.
Okay. Sir, what will be the product line in this pet-chem project? Or would it be LTP, HTB? What is it?
On the technicality part, we cannot comment right now. About 360 KGPA.
Sorry, capacity?
360 KGPA.
Okay. And sir, also, just a couple of clarifications. One, this new well intervention gas pricing, so does this $6.5 seeding apply to this? Or is it just that 10% of crude and then a 20% premium to it? How does it...
As per our understanding, the premium will be charged on the [indiscernible], which is $6.5. If a premium is charged on any price lower than $6.5, then possibly the intent.
I was looking at -- I mean there is another possibility that the ceiling is not applied and the crude at [ 75 ]...
As far as the pricing is concerned, that is not for nomination blocks of oil and oil indices. So for the oil nomination from there, they are maintaining a cap. And that cap is very still 31 March 2025.
Yes, from April 2025, we will be getting $0.25 premium over and above the $6.5. So it would be averaging $6.75 coming April. So as far as the premium $0.25 is concerned, as far as our understanding goes, that will be applicable on $6.5., I don't know.
Just would like to also highlight 1 point. All the 1 part is targeted towards our main producing area, the nomination well. And 1 part is for a oil producing. The blocks that we are having are oil producing. Now if we have any [indiscernible] in the oil producing, then the price restriction is not applicable for that part of the gas production.
So I think in your number simulation, of course, it's an ongoing process. I think it takes around typically 5 to 10 years. But what we would like to highlight is that not the entire CapEx is going towards only towards the $6.5 or 20% premium. Part of the CapEx is also moving towards the oil division where the gas, if we have any discovery, that will be at a very higher price. There is no [indiscernible].
[indiscernible] marketing sale in respect of the gas produced from those areas. If it is DSA or if it is OALP, so there is no restriction.
Going forward, say, after another 2, 3 years, one of the IGGL line comes and we are connected to the national grid, then we also have -- we can also see the opportunity of connecting additional gas for the IGGL platform. So because that gas demand is always there, we are also in touch with the IGGL team. So all these additional revenues will come once the IGGL connectivity and the northeast connectivity with the national grid is issued.
Ladies and gentlemen, we'll take this as a last question. I now hand the conference over to the management for closing comments.
This is the last?
Yes, sir.
So thank you very much, Antique, for organizing this con-call interaction. We are -- we hope we have been able to satisfy the queries of the parties, and thanks once again. Thank you.
Thank you. On behalf of Antique Stockbroking Limited, that concludes this conference. Thank you for joining them, and you may now disconnect your lines. Thank you.