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Oil and Natural Gas Corporation Ltd
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Good day, ladies and gentlemen. I'm Harpreet Kapoor, the moderator of this call. Thank you for standing by, and welcome to First Quarter FY 2022 earnings conference call of ONGC Limited. [Operator Instructions] So without any further delay, I would like to now hand over the proceedings to our CMD, Mr. Subhash Kumar. Over to you, sir.
Good day to all. Thank you very much. Just before formally starting, let me give 2 pieces of information. One is that ONGC was established in 1956 on 14th August. So this happens to be our beginning of 66th year. Secondly, I'm also very happy to announce that I have with me in my room -- in this very conference room, Director Offshore and Director Exploration, Shirish [ Shirivastwadi ] Director Onshore, Mr. Anurag Sharma; our officers on special duty of ED Offshore, Mr. Pankaj Kumar; and then we have Mr. Vivek Tongaonkar, CFO; Mr. Anupam Agarwal; Mr. Rajeev Kumar; Mr. Lakshman Gora; Sanjay Bharti, Jagdish Prasad, and of course you know him, Mr. Prakash Joshi. I have also with me Mr. Adhikari from CMD office. So with that, we can start the proceedings of the day. So just to introduce, I'm Subhash Kumar, CMD, ONGC, holding additional charge of CMD ONGC in addition to Director of Finance of ONGC. And let me, on behalf of ONGC, welcome you all to this earnings call for quarter 1 FY '22. Thank you all for joining us on the call. So also on the call are my colleagues from corporate planning from Delhi. Mr. Akhil Verma; Mr. Rajarshi Gupta; Mr. [ Binod Helen ]. So they are -- and also my colleagues from ONGC Videsh, Mr. Nirmal Kumar, our colleagues from { P&D Mr. Chandra Shekar ]. So all of these are present here. ONGC has compiled its final results for the quarter ended 30th June, which have been reviewed by statutory auditors. The financial results have already been released on 13th of August 2021, that's yesterday, through a press note and sent to the stock exchanges. These have also been sent to analysts who are there on our mailing list. There is a brief synopsis of the results. The company has earned a net profit; that is, profit after tax, of INR 4,335 crore during the first quarter of FY '22 as against INR 497 crore during the first quarter of FY '21, an increase of INR 3,838 crore, that's, in terms of percentage, this is an increase of around 772%. The increase in net profit during the current quarter versus the same quarter of previous fiscal is on account of higher sales revenue due to higher crude and gas prices, which have been partly offset by lower natural gas prices. The sales revenue for first quarter of this fiscal has increased by INR 10,021 crore. That's an increase of around 78%. And it is this fiscal at INR 22,955 crore as against INR 12,934 crore in the corresponding quarter of the previous year. The sales revenue in the current quarter has increased mainly on account of higher sales revenue from crude oil, that's around INR 10,013 crore, and value-added products have added INR 1,263 crore, which is, of course, is partly offset, as I said earlier, by lower sales revenue from natural gas to the extent of INR 625 crore and increase in GOI, Government of India, share of petrol -- profit petroleum by INR 630 crore, mainly in RJ-ON-90-1, that is by INR 490 crores. The billing that is net of VAT and CST for crude oil during the first quarter of current fiscal was at INR 65.59 per barrel as against U.S. dollar. So I -- pardon, it is USD 65.59 per barrel against USD 28.87 per barrel in the same period of the last year. This actually result translates into an increase of 127% and in dollar terms, this is an increase of $36.72 per barrel. The exchange rate of rupee versus dollar stood at INR 73.73 versus INR 75.86 in the first quarter of previous fiscal. Thus, realization for crude in rupee terms stood at INR 4,836 per barrel in first quarter of this fiscal versus INR 2,190 per barrel in quarter 4 of FY '21, which amounted to increase of INR 2,646 per barrel. That's an increase of 120.1. The figure of INR 2,190, which I mentioned, actually pertains to Q1 of FY '21. During Q1 FY '22, the statutory levies stood at INR 5,970 crore as compared to INR 2,981 crore in Q1 of FY '21. That's an increase of INR 2,989 crore. That's roughly doubling of the figures. The increase in royalty on crude oil by INR 1,486 crore and [ gas ] by INR 1,620 crore is mainly attributable to increase in average selling price of crude oil from INR 16,373 per MT in Q1 of FY '21 to INR 36,253 per metric tonne in Q1 of this fiscal. Similarly, there has been a decrease in royalty on natural gas by INR 34 crore on account of decrease in average selling price of natural gas from INR 7,233 per 1,000 cubic meter of gas in Q1 of previous fiscal to INR 5,961 per 1,000 cubic meter in Q1 of this fiscal. The operating expenditure has increased by INR 642 crore -- INR 640 crore. That's an increase of 15.4% from INR 4,158 crore in Q1 FY '21 to INR 4,798 crore in Q1 of this fiscal. The increase in this fiscal -- the first quarter of this fiscal is mainly attributable to the increase in consumption of materials, which happened mainly at Dahej plant by INR 325 crore on account of increase in quantity and prices of spot LNG; contractual payment that is INR 127 crore, mainly at Western Onshore and Offshore due to increase in activities; transport expense INR 83 crores, mainly at Western Offshore; and staff expenditure by INR 232 crore. This increase in operating expenditure has been partly offset by a decrease in repair and maintenance by INR 74 crore, mainly at Western Offshore platform and reduction of other production expenditure by INR 102 crore. The finance cost has increased marginally by INR 10 crore from INR 610 crore in Q1 of previous fiscal to INR 620 crore in Q1 of FY '22. This increase is mainly on account of interest on [ NCDs ], which has been partly offset by a decrease in short-term loan. There is a marginal increase of INR 24 crore in exploration cost written off, survey and unsuccessful well cost in Q1 of this fiscal; that is, INR 1,127 crore in the quarter 1 of previous fiscal has increased to INR 1,151 crore in Q1 of this fiscal. This increase is mainly attributable to increase in unsuccessful well cost by INR 27 crore. DD&I cost for Q1 of this fiscal stood at INR 4,165 crore as against INR 3,822 crore on Q1 of previous fiscal, that's an increase of INR 343 crore, and in percentage terms, it is about 9%. The increase in DD&I cost is mainly attributable to increase in depletion by INR 182 crore, depreciation by INR 55 crore and impairment loss by INR 106 crore. The increase in depletion is mainly at Western Offshore by INR 124 crore due to increase in cost of oil and gas assets and facilities by INR 1,360 crore, Ahmedabad asset by INR 31 crore; Assam asset, INR 63 crore; and RJ-ON-90-1 by INR 84 crore due to increase in production and cost of oil and gas assets and facilities. The increase has been partly offset by decrease in depletion at Vashishta field by INR 47 crore due to booking of impairment loss last year and [ JV Vava ] by INR 45 crore due to increase in reserves and reduction in production. The increase in depreciation by INR 55 crore from INR 931 crore in Q1 of previous fiscal to INR 986 crore in Q1 of this fiscal is mainly attributable to increase in depreciation by INR 28 crore, due to addition of INR 1,433 crore worth of other plant and equipment and increase by INR 23 crore due to increase in depreciation on ROU assets. There is an exchange loss of INR 86 crore in Q1 of this fiscal as against exchange gain of INR 6 crore in Q1 of FY '21. Corporate tax expense of INR 2,415 crore in Q1 of this fiscal has been provided as compared to INR 408 crore in Q1 of previous fiscal. The effective tax rate for Q1 FY '22 is 35.78% as compared to 45.08% for Q1 of previous fiscal. The company at the consolidated level has earned a net profit, that is profit after tax, of INR 6,847 crore during the first quarter of FY '22 as against INR 1,085 crore during the first quarter of previous fiscal. That's an increase of INR 5,762 crores, and in percentage terms, this is roughly 532 -- 531% increase. The increase can be mainly attributable to the addition from ONGC, our subsidiary, OVL, and reduced losses at MRPL, and a positive contribution from JV of OPaL. Let me also add here that for the second successive quarter, OPaL has been [ tax ] positive. Well friends, with this being the highlights, I finish my briefing of first quarter results of financial year '21/'22. We'll be very happy to take questions from you. We will suggest you to restrict your queries on financial results only. Thank you very much, and we look for the questions.
[Operator Instructions] First question of the day we have from Amit Rustagi from UBS Securities.
Sir, if you look at our gas output, that has declined both sequentially from the Q4 of FY '21 and Q1 of FY '21 as well, and similarly, oil output as well. So can we take this run rate as the now quarterly run rate to be annualized for the coming years as well?
Okay. And Amit, any other question till I look for the support for this particular answer -- question in specific?
And sir, second question pertains to the gas prices. Now obviously, we are looking for an upward revision from October 1. So do we have any like estimates where can oil -- gas prices go from October 1, 2021?
Okay. So I think I take the latter one, and I'll request my colleagues to answer on production front while I'll give a generic answer. As far as gas prices is concerned, one is where we would wish to have them. So that you know for certain is much higher than where we anticipate them to. But since they are regulated by a formula, and formula is valid and current as on date, and anybody, since data is out, probably, they are to the north of $280 per MMBtu. So from -- that's a healthy increase compared to where we are today of around more than $1 per MMBtu. That's what we anticipate, and this is consistent with something I shared at the time of declaring our annual accounts, where we anticipated that the increase is going to be more than 50% to 60%. So that's on gas prices. I think as far as gas production is concerned, gas production in ONGC has been a victim of quite a few things. In fact it has got affected because of the constraints of COVID. And there were, to start with, constraints. We -- you are -- as you have noticed, there is a little bit of lack of pickup in actually the production. In fact, actually, we had anticipated to produce 25.7 BCM in '21/'22, but we ended up producing a roughly 1 BCM less. And the reason, beyond the constraints because of COVID actually was more to do with the offtake issues at the gate level. Next year -- now frankly speaking, today, we do not have very clear visibility about the way COVID will go and secondly, about the timeline by when we will have the full production as anticipated from KG-98/2 because I'm sure this is going to be one of the follow-up questions from either you or somebody. So KG-98/2, since it is -- its execution is affected by international supply chain, remains badly affected. And to give you a sense, in different parts of the world, there are 5 contracts, and as the luck would have been, the relevant markets from where materials are being sourced are 5 different markets. And some of it has been seen that when COVID has come down and is under control in one part of the world, it has gone up substantially in another. And today, if you look at Indonesia and Malaysia, where from critical components for the projects are to come, actually, those 2, 3 jurisdictions are very badly affected. So -- and it takes all to combine together to make a project. So there is no way -- even if it is possible -- perfectly possible for somebody in Europe or Italy to supply the material, but if the rest of pieces don't get implemented, so it's an issue. So that's an ongoing thing. And as a result of it, while we had anticipated to produce 27 next fiscal, this from 27 -- 24.7 to 27.3, I think we could end up somewhere in between. We might not reach 27.3 in entirety. And let me also remind in 2021, what we produced was 22.81. '21/'22, despite the hiccups of pandemic, we did produce 24.79. So that was roughly an increase of 2 BCM, which should be considered substantial. In addition to this, as my colleagues are just mentioning actually, [ top tie ] invest in offshore has also been a disturbance for production while we were able to continue the production both oil and gas are substantially the same level. However, there was some impact and that will also affect the numbers. So a long answer to your short question, I thought let me address preempt some of the questions from you and your colleagues. I understand this is Saturday so on your part also there is [ a bit excited ] to have all the answers upfront.
Sir, just a quick question on this. What was the issue with GAIL on the offtake side, could you explain that, if you can help me in that?
So whatever issue we had with GAIL, GAIL had with its customers. At the end of the day, quite a few local industries had to stop the operations. As a result of it, the consumption stopped at the very lowest level and which actually combined together to make resulted in reduced offtake by GAIL. So it was not a deliberate action on part of GAIL.
Next, we have Pinakin Parekh from JPMorgan.
Sir, I have 1 question. If I look at the average realization of growth for the quarter at roughly $55.5, the discount to the average Brent is slightly higher than what historically it has been. Any particular reason for that, sir?
So as you would know, actually, see, we have principally around 2/3 production from Mumbai Offshore, which is then marked to Bonilight. And then in the Eastern Onshore, actually, the oils are actually -- there is a very long list of oils which are used for the purpose of pricing. So while Brent is the right reference to look at how realizations have happened, the exact parallel needs to be drawn with reference to Bonilight, which actually affects our realization to a very large extent.
Understood, sir. And sir, just another question on the gas pricing. While you did mention that at this point of time given where the formula is, it looked at more than $1 increase in the next price reset in October. But given the lag that we have in the pricing formula and given where all the gas prices are globally, would you expect even a larger increase in the next reset in April 2022?
I think the numbers for that are also partly available today. The trend suggests that it could end up being significantly higher. But since it's a numbers game, you can do it faster than me. And by all indications, actually, those numbers are likely to be significantly higher. So no, no -- yes.
Next, we have Probal Sen from Centrum Broking.
Just a clarification on the first answer that you gave. The 24.7 BCM production, sir, was in FY '21. And the FY '22 target is 27, and you're saying it will end up being between 24.7 to 27 BCM. Is that correct?
No. No. Okay. Okay. Let me correct a little bit. Maybe I said that way. 22.81 is what we actually produced in 2021 and 29.7 is something we intend to produce. I only flipped by 1 year actually. The numbers I gave for...
Sorry, sir. So that's why I got confused. So 24.7 sir is the FY '22 target. And FY '22 target was 27%, and we are saying we will end up being somewhere slightly short of that, likely as of now.
Yes, yes. So probably flip was attributable to get out of the corona period. So you are anxious to get out of it. So 1 year ahead each one of our -- no, no. Thanks for addressing. I think that will be very helpful.
No problem, sir. The other question was with respect to the subsidiaries in the OVL production trends that you see. Now any guidance you can give on Sakhalin and Vankor what kind of decline rate should we work with for the next couple of years? Because it has obviously been a -- it's an older field, there's a gradual decline there. So what should we be working with as a run rate, sir, for the next couple of years from OVL?
So Probal, one is that Sakhalin started production in October 2005 and has been operating more or less at the same level. I mean that's an impact too good to be true. There will always certain time in the life of a field when decline despite the best of efforts cannot be contained. Having said that, actually, it will be unfair to take year 2021 as any reference for the purpose of predicting what kind of behavior the fields are going to have. See, it's an extremely constrained environment wherein which the people are operating in field, plus, while Sakhalin project itself is not directly within the framework of OPEC and OPEC+ cut. Actually, the overall intention to cut the production could end up being behind the thinking. And secondly, the oil prices were at ultra low at a point in time and whatever efforts are made by the project group at that level, probably will [ be as ] a result during this period. The decrease in production has been sharp as far as Sakhalin is concerned previous year. But I'm sure that is not a reflection of the kind of decline, which one can build in. Obviously, at one or the other point in time, the decline will set in.
And Vankor sir?
Vankor actually, production has come down from 3.5 to 2.8. So -- and first quarter also, it is holding at around 0.69 MMT. So which actually, if one were to do a straight calculation, would also amount to around close to 3, so slightly less than 3, actually around 2.8 only. So with today's input, that's the likely run rate. Vankor is -- unlike Sakhalin, is not at a stage where one can say that there is a natural decline needs to set in. So this could be attributable more to the supply chain issues rather than the field -- the aging of the field logic.
Okay. Sir, 1 last question, if I may. Overall CapEx guidance, broken up into segments if you have, for '22 and '23?
Okay. So last year, if you remember, we have spent close to INR 27,000 crores. We started the year anticipating that we'll spend around INR 32,500 crores. Corona, when it onset in April, May, we thought we will be able to do only INR 26,000 crores, but we ended up improving a bit on that. This year also, we have -- this year, we -- rather than building a specific number, while for budget purpose, we have a number which is very close to INR 32,000 crores, actually, we also have certain scenarios where we can ramp up the activity. So the number will be, again, something like INR 32,000 crores. So 30 -- we have built 2 scenarios, in fact. The earlier figure which we worked out was INR 29,800 crores but the actual budget we approved later on was INR 32,500 crore. So number, if things improve, it -- much depends on the way things shape up from here. Effectively, you can take it from INR 29,800 crore to INR 32,400 crore. It's a question of the way the whole situation builds up.
So the whole COVID-related supply constraints on KG, if they resolve, then it will be at the higher end. Otherwise, it might get stuck slightly low. Is that a fair way to look at it?
Yes, yes.
Next, we have Sabri Hazarika from Emkay Global.
Sir, I have 3 questions. The first one is relating to OPaL performance. So can you quantify in terms of the profitability and utilization for [ the quarter ] for Q1?
Go ahead with 3. Give me time to think.
Okay. Second one is regarding the court case with [ 98/2 ] bidding round, what is the status of that? And third one is relating to...
Can you repeat the second question?
There is some replication from GMR and GVK regarding the 98/2 bidding round. So it was supposed to go to the High Court or something of that sort. So what is the status of that now?
I'll request my colleague to address that question, second one.
As regarding the court case, the message -- the matter was heard once. And it is still sub [ jure ]. So no conclusion has reached so far. So we are still pursuing it in the court.
[ So these are ] currently on hold, sir, [ is that a correct understanding ]?
Yes, that's correct. There's 2 [ close issue situation ] .
Okay. As far as OPaL is concerned, we had anticipated that FY '21 will be an year with 100% capacity utilization. In fact, it did cross [ for quite ] a few months more than 100, but year-end average ended up being close to 90%, 89.5% to be specific [Technical Difficulty] below or very close to 50%. This quarter also, capacity utilization has been lower. And while I don't have a specific figure in front of me, I think it is around 87% or so. But happy to share that in both the quarters, actually, the last quarter as well as the first quarter, the company is in black.
Any figure regarding the [ netback ]?
So I think last quarter of -- was around INR 270 crore or so. And this quarter is INR 65 crore plus, net back last quarter, [Foreign Language] Last year, last quarter, I think these were the 2...
Sir, INR 274 crore, sir.
Yes, INR 274 crores. That's -- always quick with the numbers.
INR 274 crore for which period?
Q4 of previous fiscal.
Okay. That was INR 274 crore. In this quarter, it was INR 65 crore.
Yes, yes.
Okay, sir. And sir, that last question actually pertains to your CapEx -- it's more like your medium-term CapEx. Is the company trying to like change the CapEx mix in terms of allocating some portion to say, renewable energy or something of that sort? I think there has been talks regarding plant -- sizable plants in, I think, in France and other kind of renewable sources. So are you planning to allocate certain CapEx on that head? Anything on that front?
Okay. So I can say actually 2 things on capital allocation outlook and plan going forward. One thing is probably we have now -- we have nearly concluded our internal discussions and decided that we will be a little more aggressive on exploration. And instead of remaining constant to the 7 or 8 basins where oil has been encountered, probably we may take bets outside them, for the reason that while risk will be higher, the reward expected will also be higher. And for this, we have changed our approach, and we are willing to build alliances with international majors to see that depending on the expertise and value they bring to specific scenarios, we can have them. So that is on the exploration front. The second question pertained to?
Renewables.
Renewables. Yes, you got it right. Actually, we have aspirations. Numbers are -- we want to grow up to 10 gigawatt. So we are mindful of the transition in energy space taking place. However, we also are not in a [ peering ] hurry to do that on a tomorrow basis for the reason that since India continues to import a substantial portion of oil and gas which it consumes. So from marketing perspective or offtake perspective, there is no instantaneous challenge. However, independent of that, in fact, our renewables seem to be making a lot of business sense today. And we are looking at possibility of inorganic investments in renewables, where with the alliances, we could go into areas where beyond being passive investments they end up or they help us accrete value to the overall business scenario. So we, instead of saying that we are moving away from actually fossil fuels, which seems to be the clamor in some of the cases elsewhere, probably we will like to synthesize the 2 and build a stronger business context for ourselves by building in and improving the standing of renewables in our overall business profile. And also to add: If something on renewables were to happen, actually, no significant allocation is there in this INR 32,000 crores or INR 29,000 crores, which I mentioned. There's only marginal allocation today.
Next is Bharat [ Engin ] from [ Antic ] Limited.
Sir, just OVL. Can you give us some idea as to under what conditions we can take a higher crude realization because last quarter, obviously, crude prices globally went up and the realization has been largely flat? So under what conditions we should look at a higher crude price and gas price realizations?
No. Actually, if you know that in case of OVL, actually, the crudes are priced against the local benchmarks and local practices. So -- and for some -- I'm not sure, actually, the oil price realization of OVL would have improved definitely. That's one of the reasons for their improved performance. But improvement might not be that particular because all crudes have not moved in the same fashion. So however, their Q1 FY '22, the realization is 65.59. So I don't exactly get the question, actually. Are you saying OVL realizations are lower?
Yes. It has not moved in line with the global numbers.
No, 65 -- I mean, compared to last year, they realized in the first quarter 28 and then now it is 65.
Sir, can you give [ numbers for 4Q ] also? 4Q as well, what is in the comparison?
Fourth -- could you please repeat your question?
Sir, last quarter vis-a-vis the previous quarter.
Okay. So immediately last quarter. Let me [ work out ] in that number. Sir, I don't have that readily available. Maybe I'll request Prakash to pass it on to you. So any more questions, please?
Yes, sir. Should I read the next question?
Yes, yes.
So next, we have [ Vidyadhar ] from ICICI Securities.
My first question is regarding your gas production. So you -- I think you were suggesting that you will produce around 24.7 BCM in the current year. While the run rate -- if you take the first quarter and assume the same run rate, then it's actually going to be down Y-o-Y. So what is going to drive the rise in volumes from where we are in first quarter to go closer to this 24.7 BCM, which [ have is ] included in FY '22?
So a couple of things. One is that first quarter was affected by COVID. So COVID constraints have continued. And secondly, as I told was also tough which affected the production from Western Offshore. And so one is that in the period going forward, number one, the production will normalize. So that will be one uptick. And secondly, we anticipate that the KG-98-2, at least 3 wells will start producing at full capacity. So that's anticipated to be around 3 MMSCMD, which is -- which are the 2 reasons we anticipate the numbers to go up. Now whether we'll reach 24.79 in totality on an average for the year, that remains to be seen, frankly speaking.
So -- but will you be up Y-o-Y at least, higher than last year?
Yes. Yes. Yes.
And so -- and are you already seeing a significant improvement in July, August compared to last quarter?
So one is top tier-related constants are over, and COVID impact is also reducing. So that's the -- that's how July and August things are building up. See, [ as building see ] actually, frankly speaking, while this question is to me, the answer is with you all. Actually, a lot depends on the way third wave, if any, if it comes. If it comes and is severe, then it may be very difficult to really get down back to these. But if it is okay, and the way we have been lucky now that cases have reduced, probably intensity has also reduced, so that may be a better scenario. A couple of more things actually which affected the production was also we had plant shutdown, which was there for 16 days or so. Then there were certain issues relating to back pressure in 42 and Trunkline, and there were some maintenance work on 1 process platform of [ Pana ]. So there's a host of things. One thing happened, we took up another or one thing trigger another. So there were 5, 6 minor reasons, which contributed to the bigger decline.
Okay. Now coming back to the KG. If you could give us some -- so what is your current production of gas, which is entitled to this deepwater gas price? And how do you see that in the current year and next year? And where is exactly in terms of KG block, where are we right now? And what about Vashishta, how are we doing? Are there any other [ areas ] producing?
So let me ask my colleague, OSD Offshore, to answer this question.
Yes, we are currently total gas price for 2 fields only, that is, one is Vashishta, as you were also mentioning and the other 1 is KG-98-2, wherein we have some production. And put together, these 2 is in the range of 0.6 million to 0.7 million per day. And we expect to increase gas production from 98-2 where the second well is expected to come online maybe this month end or next month. And the third well would depend on the weather condition prevailing over there. We have a vessel over there to connect the third well, too. But again, the weather is picking up in East Coast, too. So these 2 are basically the field which are there getting deepwater gas price.
So if everything goes well, then when do you see KG to get 3 MMSCMD?
If everything goes well, the KG should get 3 MMSCMD definitely by end of maybe this year.
So 3 wells taken together, they are likely to produce slightly more than 3.
This year means calendar year.
Okay. End '21. And what about the plan of further ramp-up in KG? Where do we stand on that? So is the COVID [ an issue ] ...
Plan of ramping up production from KG, oil and gas together that we are planning to ramp up, say, by June '22, from June '22 onwards. But again, there are certain constraints as our CMD has just mentioned. I mean the COVID situation is prevailing in Malaysia, prevailing in Indonesia, and part of even Europe, where some critical equipment are being fabricated and in Malaysia and Indonesia, where they are being consolidated and the fabrication of the platform and the [ piashole ] is going on. So there in these 2 countries, there is a severe restriction of the movement, and in fact, the labor deployment also. And very frequently, the yards are getting completely locked down because of some or other case coming up. So that may impact us still, but still we have a plan to commence and -- ramp up rather, not commence, ramp up production by June '22.
June 20 -- I mean for next fiscal, we anticipate it to be close to 3 BCM?
Today, whatever constants are talked about, we are not -- I mean, we are keeping our fingers crossed in the sense that all these -- we are taking note of whatever developments are there in terms of challenge to our production profile. We are reaching a stage where these restrictions could affect reproduction. Yet today strictly speaking, if everything was to be okay going forward basis, then it's not a problem. We could still get 3 in next fiscal, 3 BCM, I'm saying.
Yes, yes. So if all goes well, you go to 3 MMSCMD worst case by December '21, and you do 3 BCM next year?
Yes.
What about Vashishta? What is the outlook for Vashishta current year and next year? And what about oil also from KG?
Oil from?
Oil from KG.
Oil from KG is June '22. Oil from KG is again, June '22 when we are thinking of bringing FPS on stream. And as far as Vashishta is concerned, Vashishta well is now giving us around 0.3, 0.4. And the other well, which we got to intervene, some kind of intervention is needed, that still is -- maybe sometime [ into ] next year, not before.
But if -- so there, again, if everything goes well, what would Vashishta be next year? Or this could be very small?
May not be very significant. The maximum -- with respect to the 98-2, it may not be so significant.
But still significantly higher than where we are today on Vashishta or no?
Say again?
[ will be ] higher than where Vashishta is today. Will it be 2, 3 MMSCMD or we're not going even there?
As of now, we don't expect that kind of thing. But certainly our -- some of our exploratory effort is the 98-2 have very recently shown positive results though we are still in the process of completing the existing drilled well. And thereafter, maybe we go for development of those positive aspects which we got and we may get some good results there.
Okay. And so oil, if all goes well, what kind of production can you expect in FY '23, KG oil?
KG oil FY '23 should be in the range of 45,000 to 50,000 barrels per day.
Average for the year?
Average is 36,000.
Average would be less because...
36,000. 128 million tonnes is what we anticipate today.
So now just to confirm for FY '23, you said that your production may be somewhere between 24.7 to 27.3 BCM for the gas. That's what you said earlier.
Yes. Yes.
Yes. Now on the -- what we are talking about tying up with international oil majors, so just to clarify, even there, you are basically seeing in over the explored, unexplored fields, you are likely to [ tie in ] everything, not in the commercial fields where already they are commercial. You're talking about tying up mainly in those kind of fields where you are unexplored or overly explored or in all kinds of basins?
So I think one is that technological-based solutions we could look for any one -- any of the fields, including where we are producing. But I think strategic alliances make sense even for those people if we go to the new fields only, new basins only because then what we expect is a discovery of a size and scale.
So it is more likely -- so this will be basically will -- there will be partners in these acreages?
Yes.
Okay. Last question on OPaL. So OPaL, could you give us some numbers also on their interest cost and EBITDA in the current and the last quarter?
So EBITDA for Q1 '21, '22 is INR 969 crores and EBITDA margin is 27%, compared to INR 1,190 crores in Q4 of 2021, when actually, margin was at 32.41%. So margins were really good in the fourth quarter of 2021. And they were ultra low in Q1 of 2021. So that's one. As far as interest is concerned, 2021, which is a fair -- annual number, which is a fair indication is of the order of around INR 1,700 crores.
And any number for the current year, for current quarter?
Current quarter, what? EBITDA is INR 969 crore.
Interest cost in EBITDA number.
And the interest cost is INR 458 crore.
Okay. And is there some changes likely wherever the interest cost could come down significantly? And if that happens, when is it likely?
Well, we have plans, part of which was in news, that we are thinking of increasing our stake. We have quite a bit of CCDs which are currently interest-bearing, would be converted into equity. So that would stay to -- result into a reduction in interest of the order of around INR 600 crores. And more than that, probably what we think that if ONGC were to be on the steering wheel, it would further reduce the interest cost on the rest of loans also by a good 2, 3 percentage points.
Okay. Just to squeeze in one more question on OVL. What is the profit petroleum number for last year and first quarter, if you have that?
I think I'll request Prakash to share with you separately.
Next we have Nitin Tiwari from Yes Securities.
So sir, my question is related to Western Offshore. You mentioned that almost 2/3 of the production is coming from Western Offshore. So in relation to that, what is the kind of decline rate we are observing there? And in terms of results, what are the number of years -- I mean, what is the estimate for reserves in terms of number of years of production? If you can just help me understand that.
Decline rate on an average in Western Offshore had been around 8% to 9%. And in reference to the scenario, which -- through which we are going to raise our levels as per the target given by [ us here ] in adherence to action plan. So therein, if we look at the components from where those things are going to come from, so there are certain projects which are already under implementation. So one part is a major part of that. And second one are related to additional year in the development of schemes that have been [ formulated ]. Additionally, whatever the bottlenecks are there in relation to [ 90 and such in ] the infrastructure, pipeline replacement projects are also going on. So all this would contribute to the increase, and it would be in line with [ the numbers ] which are there in the action plan. And the numbers, if you want numbers, I don't have them right now with me, but numbers can be shared.
And also, I think notwithstanding the fact that individual field prices decline, we are able to bring enough of -- with the help of supplementary investment, we are able to not only contain it but to increase it. So projections going forward -- yes.
And [ also a ] supplement on the confidence note. The Bombay exploration during that 2021 had been very successful and exploratory success in that basin is of the order of [ just about ] which is not less than any other [ field ]. So we are on a positive note.
So if I have to, basically, in a nutshell understand Western Offshore, so how do we like foresee production from the fields over there, whether we see it in terms of a constant decline every year? Or shall we like see it as more or less of stable production because there are few fields which are declining and we have new production coming in from exploration...
No, it's likely to be more of the latter. As you suggested, we would have enough of investment -- supplementary investment to see that production is contained at existing level.
Okay. And sir...
The minimum.
I mean, in the short-term period is like this and in a period of...
So new projects will come. Yes, that...
In the period of 5 years...
But in any case, on an overall basis, despite what happens in oil and gas industry, we will be able not only to contain but only take it forward.
Right, sir. Sir, in terms of KG-98-2, what is the peak production? And what is the plateau period we are looking at?
98-2 peak production is of the order of somewhere in between 45,000 to 50,000 barrels of oil per day. On the plateau may be around 3 years or so.
No. I am talking about gas production.
15 million.
14.5 million.
14.5 million.
14.5 million. And for how many years, sir?
2 to 3 years I think, sir.
2 to 3 years.
Right, sir. And sir, my next question is related to basically ESG activism. So globally, we are observing that there's a lot of activism around adherence to ESG norms and reduction of carbon emission and a lot of oil majors globally are facing like investor basically activism on this front. So have we also experienced anything of that sort? Or -- and what are our plans in terms of basically in order to adhere to reduction of carbon emission and so on and so forth? If you can throw some light on that, sir?
So ESG is a very recent phenomenon. But as far as ONGC is concerned, we always face the problem that we were not spoiled for plenty. In fact, gas flaring, which is one of the major concerns globally. In 1992, with the help of World Bank, we brought in a project of gas flaring reduction project in Mumbai Offshore, not necessarily dictated by the compulsions of ESG at that point in time, but we wanted each molecule to generate revenue. Having said that, we are mindful of what is happening globally. And we are working -- one is that we have been very actively tracking our carbon footprint, which internally we have calculated and is reducing on a year-to-year basis. But just to enter the next stage of taking stock of baseline, we are intending to hire a consultant and do the study. But second thing I may add that the ESG concerns are exactly not same for every company even in the same sector. Because if you really look at when ONGC produces gas in India, it actually could end up in the kitchen of somebody and help replace the [ powerboat ] or [ car dunk ]. So the impact of the same product in case of ONGC could be materially different from somebody who's doing it for purely commercial reasons and exporting elsewhere. Notwithstanding that, we are doing a lot on carbon sequestration where we are going for CO2 EOR. Then in terms of capturing the fugitive emissions on [ water ] front also, we are quite mindful and calculating reducing our [ water ] footprint. Global methane initiatives, we are very actively associated with. And we are also using micro turbines for the purpose of converting the small gas, isolated gas into the electricity to run our projects instead of flaring them, which had been the case earlier. So we are taking a lot of efforts. We will have a much upgraded plan soon where we'll be able to tell you in more detail in the near future. Okay. So I think we can have 1 more question.
Sure, sir. Next, we have [ Swapnil ] from [ Empress ] Capital.
Am I audible?
Yes, yes.
Okay. [ A few ] questions, sir. First is your latest presentation. [ There ] has not only the projections for whatever, 1 or 2 years, but still FY '25 and which you talk about gas production going up [ 24 ] oil production growth 25. So notwithstanding whatever conversations you're having in terms of near-term issues on COVID and stuff like that, if I may ask currently, how seriously should we be taking this longer-term jump of something like 35 BCM for gas and [ 27 20 ]?
Okay. So a couple of things. Actually, see, our near-term plans are affected more by COVID over a period of time, one can figure out how to manage even if COVID continues. And in fact, we believe that COVID is not going to disappear in a way, where only maybe we would need to learn as to how to continue to operate along with it and probably manage it better. So that is one thing. Secondly, I think very clearly, what my colleague shared was that where we aspire to be. So we want to have a 70% share in overall production, 65% to 70% and 65% is what we are planning. So for oil, the number is 40 as far as the country MoPNG has kind of adopted that, so 26 MMT. And very clearly, let me share it here openly that our existing -- actually, this also factors in what we need -- how much of YTF we need to have to achieve a figure of that kind. So it's not necessarily coming out of all the discoveries or all the production we have as on date. It also has some contribution from [ IPF ]. And same is the case with the -- I think in oil front, actually YTF -- oil front, it is close to 1 MMT comes from that. And in case of gas also very similar, 1 BCM to 2 BCM -- in fact, '24/'25, 2.1 BCM comes out of that. And in oil actually in year '24/'25, 1.5. So with the kind of numbers we talked about, there is a gap, and that gap we need to build from YTF. 1.5 in oil and roughly 2 or so -- 2.1 actually in -- 2 BCM in gas. So if you were to say confidence, relatively 100% confidence for the figure, minus 2% as on date. But YTF, as we have seen the way we have historically converted, in fact, the plan is only a little more conservative than what we have done over a period of time.
Great. Second question relates to I think the comment that you made in terms of tie-ups with global companies. I mean actually, even from a global framework, the fact that you have 100% stake in 98-2 is probably an outlier in terms of not sharing the risk with other players. But in terms of the core strategy about trying to get more people on board to share the risk, what I'm trying to understand is how contingent are the plans to sort of go aggressively on [ expansion ]? How are the sort of -- are they really dependent on getting these partners? I mean, i.e., if the international environment continues to remain poor and nobody sort of willing to join you, would you still take those risks or you'd sort of pull back a bit then?
No. So as far as these projects are concerned, we are going ahead irrespective of whether some partner comes or not. I think as KG-98-2, if we are willing -- if we were to be willing to discuss about it, it would be -- one of the reasons would be it would offer a size and scale. Other discoveries or other projects which we are intendinf to take up in the next 2 years are not of probably size and scale, in which an international participant will be happily wanting to come along. So that's the reason. Neither it is yes or no, it's not black and white. It is actually -- we think that it does not fit in with the strategy of some of these big players. KG-98-2, yes, both from a technology perspective, it is a win-win as well as it gives the size and scale, and it is a project which is there for anybody to see and it's readily available. So rest of the discussions on -- with the international majors are contingent upon being able to identify something of interest. Now we know for certain, some of the big names are interested in some specific [ plays ]. The discussions are going on. We know that some of these entities are also curtailing their investments on upstream. But India also has a distinction of being a huge market, and that could be an attraction for them to have a slice of this such a large market, and that's a motivation for them. And in the kind of basins, as we keep on discussing, they have had tested successes in similar basins, analogous basins elsewhere. So we are looking partner on a case-to-case basis. We are not necessarily looking for partner to bridge the investment gap or the risk gap. It is actually the alliance, which we are more interested so that they bring in value, their international knowledge of similar basins where they have succeeded. And we have some parties, the globally best parties talking in terms of specific basins.
Sir, I would like to now hand over the floor back to you for the final remarks.
So I think -- thank you very much. Thank you in person and all the colleagues on the other side of the call, I do appreciate that you have taken your time off. We have taxed you by inviting on Saturday, and we specifically appreciate. And thanks to you once again on behalf of me, my colleagues here and ONGC. Thank you very much, and please have a nice day.
Thank you so much, sir, for addressing the session. Thank you participants for joining in. That does conclude our FY '22 earnings conference call of ONGC Limited. You may all disconnect now. Thank you, and have a pleasant day.
Thank you.
Thank you, sir.