Oil and Natural Gas Corporation Ltd

NSE:ONGC

Earnings Call Transcript 2021-Q3

[Operator]

Good day, ladies and gentlemen. I am Umit, your host for today's call. Thank you all for standing by, and welcome to the Third Quarter Financial Year 2021 Earnings Conference Call of ONGC Limited. [Operator Instructions]So now without any further delay, I would like to hand over the proceedings to Mr. Subhash Kumar, Director of Finance, ONGC Limited. Welcome to the call, sir. Now you are ready to begin. Thank you.

[Subhash Kumar, MD, Director of Finance & Chairman]

Thank you very much. Good morning, ladies and gentlemen. I'm Subhash Kumar, Director, Finance, ONGC. And on behalf of ONGC, I welcome you all in this ONGC earnings call for the quarter 3 and 9 months of FY '21. Thank you all for joining us on the call.I'm joined here by my colleagues, Mr. Anupam Agarwal, Chief Corporate Finance; Mr. Rajeev Kumar, Chief Corporate Accounts and Financial Reporting Services; [ Mr. Vinod Harlan ], CGM Finance; Mr. Rajarshi Gupta from Corporate Planning and Strategy; Mr. Sanjay Bharti from Corporate Accounts; Mr. Nirmal Kumar and Mr. Chandra Shekhar from ONGC Videsh, and Mr. Prakash Joshi from Investor Relations.ONGC has compiled its financial results for the quarter ended December 31, 2020, which have been reviewed by statutory auditors. The financial results have already been released on 13th of February '21 through a press note and sent to stock exchanges. These have also been sent to the analysts who are there on our mailing list.Here is a brief synopsis of the results. The company has earned a net profit, that is profit after tax, of INR 1,378 crore during the third quarter of FY '21, as against INR 4,226 crore during the third quarter of FY '20. This is a decrease of INR 2,848 crores. And in percentage terms, this is roughly 1/3, meaning thereby that this is a reduction of around 2/3.Similarly, profit after tax for the 9-month period FY '21 has also decreased by INR 11,791 crores. This, again, is a reduction of 71% or so from the profit after tax of INR 16,543 crore in 9 months FY '20 to this year's 9-month figure of INR 4,752 crores. The decrease in net profit during the current quarter and 9-month period is mainly on account of lower sales revenue, lower crude price as well as gas realization and lower other income.The sales revenue for quarter -- third quarter of FY '21 has decreased by INR 6,645 crore. That's a reduction of 28% at -- and it is at INR 16,977 crore as against INR 23,622 crore in the corresponding quarter of the previous fiscal.The sales revenue in the current quarter has decreased mainly on account of lower sales revenue from crude oil by INR 3,992 crore, natural gas revenue by INR 2,053 crore and lower sales revenue from value-added products by INR 705 crore. So if you really look at -- ONGC has suffered lower revenue because of the lower price realizations on all 3 fronts, crude oil, natural gas as well as value-added products.There is a reduction in Government of India share of profit petroleum by INR 105 crore from INR 515 crore in Q3 FY '20 to INR 410 crore in Q3 of this fiscal. The decrease is mainly at RJ-ON-90/1 block by INR 87 crore and the PMT JV by INR 31 crore. Similarly, sales revenue in 9-month period has also decreased by INR 27,703 crores. That's a reduction of 37% from INR 74,461 crore in 9 month of previous fiscal to INR 46,758 crore in 9-month period of current fiscal. The sales revenue in 9 months has been lower mainly on account of -- again, the reasons that are very similar, on account of decrease in sales revenue from crude oil by INR 19,316 crore, natural gas revenue by INR 6,232 crores and lower sales revenue from value-added products by INR 2,746 crore. There is reduction in Government of India share of profit portfolio by INR 591 crore from INR 1,463 crore in 9 months of previous fiscal to INR 872 crores in 9 months of this fiscal. The decrease is mainly at RJ-ON-90/1 block, CB/OS-2 and PMT JV block by INR 283 crore, INR 218 crore and INR 83 crore, respectively.The billing net of VAT and CST for crude during the third quarter of current fiscal was at INR 43.20 (sic) [ $43.20 ] per barrel as against dollar -- so this figure was in dollars, and as against $59.3 per barrel in the same period in the last year. That said, a decrease of $16.53 per barrel. And in percentage terms, this is a reduction of 28% or so. The exchange rate of rupee versus dollar, which has actually partly helped the -- retain the -- or helped positively the revenues stood at INR 73.74 per dollar versus INR 71.23 per dollar in the third quarter of FY '20. Thus realization for crude in rupee terms stood at a INR 3,186 per barrel in Q3 FY '21, vis-à-vis 42 -- INR 4,255 per barrel in Q3 of this previous fiscal, which amounted to a decrease of 25.1% or so. So it means that, whatever was the reduction in oil prices, actually, to the extent of weakening of Indian rupee, there is an abating impact by around 3% or so.Similarly, gross billing for crude during the first 9 months of current fiscal stood at USD 37.74 per barrel as against USD 62.08 per barrel in the same period of last year. That's a substantial decrease of USD 24.34 per barrel. And in percentage terms, this is close to 40% reduction. The exchange rate of rupee versus dollar stood at INR 74.63 vis-à-vis -- versus INR 70.38 in the first 9 months of previous fiscal. Thus, realization of crude in rupee terms stood at INR 2,816 per barrel in 9-month period of this fiscal versus INR 4,369 per barrel in 9-month period of previous fiscal, which amounted to a decrease of 35.6% in INR terms. So again, the weakening rupee has actually provided some sort of comfort by around 3%, 3.5%.During Q3 FY '21, the statutory levies stood at INR 4,097 crore as against INR 5,667 crore in Q3 of previous fiscal. That's a decrease of INR 1,570 crore. And in percentage terms, this is about 28%. The decrease in royalty on crude oil INR 666 crore and cess by INR 663 crore is mainly attributable to decrease in average selling price of crude oil from INR 31,899 per MT in Q3 of FY '20 to INR 23,928 in Q3 of '21. Similarly, there has been a decrease in royalty on natural gas by INR 225 crores on account of decrease in price of natural gas from INR 9,650 per thousand cubic meter in Q3 of FY '20 to INR 5,600 -- INR 5,763 per thousand cubic meter in Q3 of FY '21.Similarly, the statutory levies have also decreased by INR 6,750 crore. That's a reduction of 38% from INR 17,764 crore in 9 months of previous fiscal to INR 11,014 crore in 9-month period of this fiscal. The decrease in royalty on crude INR 3,032 crore and cess by almost a similar amount of INR 3,093 crore is mainly attributable to decrease in average selling price of crude oil from INR 32,708 per MT in 9-month period of FY '20 to INR 21,110 per MT in 9-month period of this fiscal. Similarly, there has been decrease in royalty on natural gas by INR 680 crore on account of decrease in price of natural gas from INR 10,320 per thousand cubic meter in 9-month period of FY '20 to INR 6,748 per thousand cubic meter in 9 months of FY '21.The operating expenditure has decreased by INR 1,028 crore. That's a reduction of 18% from INR 5,604 in Q3 of previous fiscal to INR 4,576 crore in Q3 of this fiscal. The decrease in Q3 FY '21 is mainly on account of decrease in consumption of materials, INR 174 crore, mainly at Dahej plant, actually, which -- this alone contributed around INR 146 crore out of that INR 174 crore, which I alluded to just now. On account of decrease in prices of spot LNG, repair maintenance reduction is INR 233 crore, water injection INR 118 crore, transport and -- of oil and gas expense INR 108 crore mainly at Mumbai Offshore, and manpower expenditure has come down by INR 105 crore or so. This reduction in operating expenditure has been partly offset by increasing workover expenditure by INR 99 crore due to increase in number of workover wells, which -- more jobs were taken during this year than the previous fiscal, similar period in the previous fiscal.Similarly, operating expenditure in 9-month period of this fiscal has also decreased by INR 2,048 crores. That's a reduction of 13.4% from INR 15,311 crore in 9-month period of '20 to INR 13,263 crores in 9 months of this fiscal. The reduction in 9-month FY '21 is on account of decrease in consumption of material, mainly at the Dahej plant. And the explanation for the same is very similar to what I gave for 3-month period, which is actually the reduction in spot prices. Repair and maintenance INR 464 crore, water injection INR 225 crores at Mumbai Offshore, and manpower expenses by INR 232 crore, due to major superannuation/separation last year and decrease in other staff-related expenses. Finance cost has decreased by INR 148 crore. That is a reduction of 23.6% from INR 626 crore in Q3 FY '20 to INR 478 crore in Q3 FY '21. Similarly, the finance cost has also decreased by INR 667 crore. That's a reduction of 34.1% from INR 1,954 crore in 9-month period of '20 to INR 1,257 in 9 months '21. This decrease is mainly on account of decrease in short-term loans, the lower risk realized on account of commercial papers and unwinding of discounts on decommissioning liability. In fact, this whole situation has emerged both because of the base is low, our borrowings are lower, as well as the rate at which we have borrowed are significantly lower. So we have benefited from the prevailing low interest regime for 2 -- on account of 2 factors. One is that we have converted most of our short-term loans into long-term loans and also have locked in much lower interest rates than what we had experienced last year.There's an increase of INR 121 crore. That is roughly around 7% in exploration cost written-offs. Survey and unsuccessful well cost in FY -- Q3 of FY '21. That is INR 1,718 crore in Q3 FY '20 has gone up to INR 1,839 crore in Q3 of FY '21. This increase is mainly due to increase in seismic data acquisition activity at Western Offshore and AAFB. And this needs to be seen in context of the prevailing constants we have due to COVID. You would realize that, notwithstanding the challenges of COVID, we had not only continued our activity level. But wherever it was possible, we actually increased activity.However, during 9 months FY '21, there is a decrease in exploration cost written off. Survey and unsuccessful well cost by INR 1,234 crore. That's a reduction of 22% or so from INR 5,645 crore in 9-month period of previous fiscal to INR 4,411 crore in 9-month period of this fiscal. The decrease is mainly due to decrease in assets -- unsuccessful well cost by INR 1,051 crore.DD&I cost for Q3 FY '21 stood at INR 4,427 crore as against INR 5,302 crore in Q3 FY '20, a decrease of INR 875 crore, that is roughly around 16% or so. The decrease in DD&I is mainly due to decrease in depletion by INR 1,346 crore. The decrease has been partially offset by increase in depreciation by INR 146 crore, mainly at Mumbai Offshore, due to increase in ROU assets that is a direct consequence of implementation of in Ind AS 116 and the increase in impairment loss by INR 305 crore. Similarly, there's also a decrease of INR 1,689 crore, 12.4%, in DD&I cost during 9 months FY '21 from INR 13,618 crore in 9 months FY '20 to INR 11,929 in 9 months of FY '21. The decrease in 9-month period of this fiscal is mainly attributable to a decrease in depletion by INR 1,968 crore. The decrease in depletion is mainly at Mumbai Offshore field by INR 1,802 crore due to upgradation of reserves and Panna-Mukta JV INR 402 crore due to closure of the JV. The decrease has been partially offset by increase in depletion by INR 372 crore due to downgradation of reserves at Assam asset. This has been partially offset by increase in depreciation of INR 292 crore from INR 2,605 crore in 9-month period of FY '22 to INR 2,897 crore in 9-month period of FY '21. The increase is mainly attributable to increase in depreciation at Mumbai Offshore by INR 211 crore due to increase in ROU asset.There is an increase in exchange gain by INR 662 crore from an exchange loss of INR 226 crore in Q3 of FY '20 to exchange gain of INR 436 crore in Q3 of FY '21. Similarly, there's an increase in exchange gain by INR 1,419 crore from an exchange loss of INR 564 crore in 9-month FY '20 to exchange gain of INR 855 crores in 9 months of FY '21.Now corporate tax provision of INR 1,433 crore in Q3 '21 has been provided as compared to INR 1,828 crore in Q3 of FY '20. Actually, this particular item does contain a one-off kind of thing. The effective tax rate of Q3 is 51.15% versus previous fiscal figure of 30.18% and the applicable tax rate 34.94%. This is attributable to, as I said just now, is mainly on account of tax provision for earlier years amounting to INR 506 crore towards [indiscernible].So there is a similar corresponding impact to 9-month period also, where the effective tax rate for 9-month period is 38.40%, 4-0 percent, as compared to 31.81%. This, again, are on the same reason. So the tax shown in the books would appear to be somewhat higher, so I thought I'll give this explanation. Well, friends, with this, I finish my briefing of the third quarter results of financial year 2021. We'll be very happy to take questions from you. We would request you to restrict your queries on financial results only.Before I hand over, actually, I'd like to share 2 things which were covered in the press. One is that ONGC has decided to have its wholly owned subsidiary for the purposes of marketing gas, and we have also taken in principal decision to take 5% equity in IGX. Now both these things actually gel well with the government's ambition to transition towards a gas-based economy. Honorable Prime Minister has shown his ambition and has asked different bodies to come up with action plan to see that the gas share in economy increases from current 6% to 15%. We as ONGC are very advantageously placed to benefit from the whole scenario. Because besides having stake in all kinds of gas within the country, because we are there in nominated fields, we are there in NELP, pre-NELP, [indiscernible]. But not only that, we have stakes in downstream processing plants through P&L. We also have upcoming potential projects in regas through HPCL in Chhara terminal. And besides that, actually, ONGC Videsh has taken sizable stake in overseas projects. So I think, as far as coming years are concerned, the story of gas is going to unfold, which is going to be critical to the sustained positive performance of the company.IGX, similarly, you would have noticed that IGX been a tremendous success in the country, and IGX is very well positioned to benefit from that. And that we have had intention to join the same -- over the past few months, and we have taken that decision in principle. We will be activating that.You would have also noticed in renewables also we have -- we had announced last quarter or so that we have decided to come up with joint venture with NTPC. So these are some of the things, the benefits of which we'll reap over the years.So with that, I actually I hand over for the questions and answers. Thank you very much.

[Operator]

[Operator Instructions] So the first question coming from the line of Nafeesa Gupta, Bank of America.

[Nafeesa Gupta, Research Analyst]

Sir, my question is on the status of the KG-98/2 basin, firstly, on the gas production and also on oil production. There are some media reports suggesting that the FPSO contractors has declared force majeure. So what kind of delays are we expecting out of that?

[Subhash Kumar, MD, Director of Finance & Chairman]

So a couple of comments. One is that the project is going on well. COVID has actually created quite a few disruptions. And as a consequence of which, there was difficulty. So more than actually Indian supply chain, what got affected was the international supply chain. Consequently, there were difficulties for suppliers of all major pieces of -- there were 5 major subcontracts, subprojects in the overall KG-98/2. FPSO was also one of them. But the situation is well under control. The production from KG-98/2 Cluster 2 already started. It's relatively insignificant production today at around 320,000 cubic meters of gas today. But from May onwards, we believe that it will ramp up to 2.5 million to 3 million cubic meters per day. So from May onwards, actually, it will be a slow build -- ramp up of capacity both on gas and oil front.So -- and as far as specifically you said about FPSO, there were news. But at the end of the day, all contractors are working to beat their kind of time lines. So that progress is happening at the work front. And some of the disruption in international supply chain are also the reason why in the previous conference call and today -- I'm not kind of specifically committing to specific dates on which the operations or adjusted levels of production will be achieved. But what I said about May '21 is more than likely to happen. Thank you.

[Nafeesa Gupta, Research Analyst]

Got it. And sir, on my second question, just on this -- on your initiatives on the gas and the subsidiary and the equity participation in IGX. Does that, in any way, hint at repricing of gas very soon? Because as I understand IGX domestic gas is out of the purview of IGX to begin with. So are we looking at like [ pre-pricing zone ]? And what is happening on the gas pricing rate?

[Subhash Kumar, MD, Director of Finance & Chairman]

So far actually, hence, we rely more on people like you who sense the environment more than us. But on a serious note, I believe that government has come out with policy initiatives to transition towards a gas-based economy. There is -- government has taken a number of steps. And I believe that it is only a matter of time by which the gas prices will be -- the anomaly in gas prices for the nomination periods will be set right.Now what shape and size that kind of increase, consequential increase in the prices with realized rate, that's a matter of time and future will unfold exactly what we'll get. But it is pretty likely that there will be a battle regime, which gives us at least remunerated price. And when I talk of remunerated price, frankly speaking, it has been in public domain that our cost of production of gas is in the range of around $3.50 to $3.70, depending on exchange rate and contribution from a particular field in a given year. And if one were to build, actually the cost of investment on gas also, it would be to be north of $5 per MMBtu. So those are the kind of rates, the cost levels at which we are. I'm not no way hinting that these are the levels we are likely to get. But these are just some of the references we have in mind. We read the same price. I believe there was some committee. Committee probably has given its report, and it should be under active consideration. But it is entirely consistent, and there is no reason not to expect that the gas prices will be revised.

[Nafeesa Gupta, Research Analyst]

Sir, just last thing for me. Any tentative time lines on this? Will it happen before April? Will it not happen before? Anything on that?

[Subhash Kumar, MD, Director of Finance & Chairman]

No, the -- I'm not the one to give the time line. There's no way because it's not within my control. I wish it were yesterday.

[Operator]

The next question is the line from Amit Rustagi, UBS Securities.

[Amit Rustagi, Analyst]

Sir, could you give us an update on the performance of OPaL? What is happening there and are they consolidated with us? And what is happening with the capital raise in that company as well?

[Subhash Kumar, MD, Director of Finance & Chairman]

So actually, I mean -- so let me actually also take this opportunity, because one thing I did not highlight in the call was a much better performance by all the entities in the group, actually. You have specifically talked about OPaL, but our great opportunity to also cover a few others. Just give me a minute. So OPaL actually has done well. And during the 9-month period, if you really see the OPaL was only 1 of the 2 firms that continued operating during this period. The OPaL has, for the most period of the last year, operated -- towards the last 3 months or so is operating close to 100% capacity. This problem continues to be a highly leveraged capital structure because it is predominantly [ coming ] while back and there has been much less equity infusion. And the 9-month performance, it has -- its losses have reduced significantly from INR 832 crore during the previous 9-month period to INR 529 crore. And this is -- you have to actually factor in 2 adverse consequences. One is, of course, the impact on performance, where it did operate but operated at less than -- around 50% capacity for some periods of the year. And secondly, since it's SEZ unit, when it sells its products in domestic market, actually, it reversed in custom duty. So notwithstanding that problem, both on operational as well as on potential performed significantly better.So in our group, actually, the losses of [indiscernible] limited have reduced. [ I'm not saying ] that is doing well comparatively. It is a similar performance to last year. DSL is positive. OTPC has done almost their 9-month period. Profit was INR 46 crore in previous fiscal, which is 85%, so almost 100% improvement. And so all have done well. HPCL profits during the 9-month period is significantly higher. MRPL profits are lower. So this is the overall story. So not only ONGC has been stress-tested and come out with good performance despite the COVID, actually the whole group has turned out to better performance. ONGC numbers are lower. But given the constraints, it stands -- its business context stands tested. Others have actually turned out to a much better performance than the 9 months of the previous fiscal. So thanks for the question. That actually gives me an opportunity to clarify on some of other entities also.

[Amit Rustagi, Analyst]

Yes. And sir, my second question relates to, can you give us a target for the next year production for both oil and gas?

[Subhash Kumar, MD, Director of Finance & Chairman]

Production, see, this year, we are likely to finish in the range of, as far as oil is concerned, around 22 to 22.5, gas around 22.8 to 23 that is the likely production for this year. And so value-added products will be also similarly affected. For next year, the oil, we anticipate to be 23 MMT also, 22.971 to be specific. That's the number I have in front of me. Gas, we will go back to 25. So that's the likely. Around 48 in terms of ONG, that is likely level of production next year. Value-added products also will be at a very similar level at 3.3 to 3.5 or so.

[Amit Rustagi, Analyst]

And sir, could you explain the capital structure for OPaL? And are we consolidating it? And what is the plan to raise capital? This was actually part of my first question.

[Subhash Kumar, MD, Director of Finance & Chairman]

So actually, if you recall, the build-up capital of OPaL is INR 2,022 crore, which consists of some INR 39 crores contributed by GSPC, INR 995 crore by OPaL -- by GAIL and INR 998 by ONGC. So as a result of which, our equity percentage is less than 50% and it is a joint venture. It's jointly managed by us and GAIL is also associated, and they are also represented on the Board. So the equity is just INR 2,022 crores. The total cost of plant is to be north of around INR 30,000 crores. As that is funded through either CCDs or [ PAT ]. So even CCDs are interest-bearing. From a very technical point of view, there are CCDs of INR7,778 crore, but they carry their interest. So consequently, virtually everything other than this equity of INR 2,022 crore and some bonds, we have contributed around INR 1,908 crores, the rest everything is interest-bearing. So INR 4,000 crores roughly is noninterest-bearing and the rest is all interest-bearing, which is what I was mentioning that is resulting in a huge interest burden on the company.

[Amit Rustagi, Analyst]

Sir, in the current environment, when the interest rates are low, I think it has a case for turning around because the profitability on some of the gas-based sectors is right now super normal. And if you look at the realizations across Europe and Asia, they are much higher than the Indian ration. So I don't know why we are forcing ourselves to sell only to domestic market, while it's [ international ] unit. Because if you look at European relations, they're around $1,700 on [ LLD ]. So which is like one of the best-case scenarios which we'll ever get in the industry.

[Subhash Kumar, MD, Director of Finance & Chairman]

So Amit, actually, you raised a good point. This industry is very cyclical, and we are very advantageously placed. We are on the coast. So as and when the situation improves on either of the -- either fronts, we take benefit of that. And Q3 is a reflection of that, where our EBITDA is in excess of, if I remember correctly, I may be wrong, by 1 or 2 percentage points, I think it is around 23%, 24% as far as OPaL is concerned, which is -- which may be considered very healthy looking at the history of OPaL's performance.We are looking at the economics of sales. And as and when opportunity presents it, we do use both the markets. So today, we are advantageously placed as a [indiscernible] unit. We would love to export as much as possible. But also, we are preparing for a scenario where government has taken initiative for [indiscernible] and luckily offtake for these products in India has also improved. Our realization and margins even in India are strong. Because even Indian prices are not entirely detached from international prices, so -- and third quarter performance is a reflection of that. So you're right, the cycle seems to have turned a bit in favor of petrochemicals, previous cycle has been much shorter. Same is to OMPL, we believe and we are keeping our fingers crossed that this time we have a little longer cycle to our [indiscernible] and we capitalize on that. And as you also alluded to lowering interest rates. Yes, you're right. We did replace some of the CCDs, one tranche of CCDs, whose all-in cost was 9.13% earlier, with the all-in cost of 7.02%. So we did get the 211 basis point reduction in the interest rates in OPaL in one of the CCDs. And we are conscious of it. We are managing -- we are -- as we have said that on the longer term, we have a much better plan for how OPaL and ONPL integrated into the overall value chain of the company.

[Operator]

[Operator Instructions] So the next question coming from Sabri Hazarika, Emkay Global.

[Sabri Hazarika, Senior Research Analyst]

Yes. I just wanted to know what would be your stand-alone debt as on December 2020 end?

[Subhash Kumar, MD, Director of Finance & Chairman]

It's lower than what figures we have on 31,000 -- I mean, 31st of March 2020, it was INR 12,860 crores as on 31st of December. So I mean, 31st March was INR 13,949 crores. And now it is INR 12,860 crores. Today, it is -- again, you can take INR 1,000 crores less, roughly.Our stand-alone debt-to-equity ratio has come down to around 6%. And group debt-to-equity ratio is of around 45%, 46%. So the each successive quarter, we have been able to be arrest the figure.

[Sabri Hazarika, Senior Research Analyst]

Right, sir. And secondly, what has been the 9 months CapEx and guidance for this year and next year now that oil price is also up?

[Subhash Kumar, MD, Director of Finance & Chairman]

So CapEx, actually, if you really recall, our budget was INR 32,502 crores. And when COVID started, we started reviewing as to what it would be even practically feasible because there is -- let me clarify a couple of things because there could be a thing need to clarify a fact or 2. One is that ONGC per se over the last 10, 12 years, of which I have very strong memories, has never constrained any activity because of the lack of availability of funds. It has never happened in the past. It has not happened when we had the highest debt in 2018, and it is unlikely to happen anytime soon because our fundamentals remain very strong.However, our debt has remained -- our capital spending has remained anywhere between INR 26,000 crore, INR 27,000 crore to INR 30,000 crores or so. Our budget for the year '21 was also of the order of INR 32,502 crores. But when COVID started, we started taking a very realistic view as to what would be the likely level of expenditure. So the initial figure we came to in around May, June time frame at the time when COVID was at its peak, and we had a fairly good sense into what was likely level of activity, we came up with a number of INR 26,000 crores or so, plus/minus INR 100 crores here and there.Subsequent to that, we realized that the country, as well as the company, had managed COVID quite effectively, and we have figured out ways of continuing business as usual despite the challenges of COVID. And we did, at that time, review -- and we realized that this is an opportunity to put in more CapEx and probably bring in more activity, as a result of which, actually, I also talked about our increased activity on survey, et cetera, you would have noticed during my call at Mumbai. So we upgraded this figure to around INR 29,000 crores or so. I believe we will end up spending somewhere very close to that. It could be any figure of plus/minus 5% to 10%. That's the story about 2021.'21/'22 continues to be a similar story because this is a year where we will be completing the ongoing projects and probably launching quite a few of new projects. As a result of which, actually, on the completing projects, the payments required to be made are marginal. And for new projects, actually, you make very small payments in the beginning. So while whatever we start during the current year, the impact will be felt in coming years. But despite that, our CapEx is likely to be in the order of around INR 32,000 crores or so. So that is what we anticipate. Consistently, it has went to the north of $4 billion. We will continue to be somewhere in $4 billion to $4.5 billion.Having said that, we would also look at any additional opportunity to identify and if we can expedite some of these projects. So we would not mind coming up with the midterm review should there be an opportunity to kind of expedite some of these activities. You could take some activities in parallel, where we, in the past, could have gone in a sequential manner. So we figure definitely for '21/'22, initial figure is INR 31,000 crores to INR 32,000 crores, but probably we will end up -- this could be an exceptional years where actual year-end figure could be higher. Normally, we end up utilizing anywhere between 92% to 95% or so. We have been less than 100%. But '21/'22 is likely to be an exception, where we could be higher than our initial estimates. So the budget figure is unlikely to be constraint for starting any activity for which we would be ready with all studies. I hope I have answered your question.

[Sabri Hazarika, Senior Research Analyst]

Yes, sir. And last question is regarding your tax outlook. So you mentioned that it was around 34.94% for quarter 3 adjusted for the...

[Subhash Kumar, MD, Director of Finance & Chairman]

No, that is the applicable tax rate for corporate which is in -- yes.

[Sabri Hazarika, Senior Research Analyst]

Right. So you are -- are you looking at going to the new regime? Or should we currently consider this rate only for the next few years?

[Subhash Kumar, MD, Director of Finance & Chairman]

So that's a subject which we review probably either on a Monday or a Friday each week, right? So either we get up and start with that review or we sleep for the week with that last topic on the mind. I think on a serious note, actually, we are very carefully considering the pros and cons. It's a matter of a couple of years at best. So it could be this year or it could be next year that we will transition. It could be '21/'22 or it could be '22/'23. It can't be delayed beyond that because we have certain legacy credits, not credits, it's a question of taking a view. And those MAT credits arise because of certain factors. So things are neither white nor black. Things are at times grey. Then it becomes a matter of taking a view. Probably this year, we'll have a very, very serious consideration on whether we'll transition to a lower interest rate or not. But '22/'23 end, definitely, it looks near certainty at this pace that we'll transition to a lower rate. But it's a work in progress. Let me caution that notwithstanding that it looks futuristic, I think it's a clear assessment of the situation on ground today.

[Operator]

Next we have question from the line S. Ramesh from Nirmal Bang Institutional Securities.

[S. Ramesh, Chairman]

So my first thought, if you can give us the update on what is the capitalized cost in KGDC -- sorry, KG-98 as of now?

[Subhash Kumar, MD, Director of Finance & Chairman]

As of now -- I mean, the project was approved in $5.07 billion. But exact spending, maybe I'll request -- so exact figure will be shared actually. I think it is somewhere around INR 10,000 crores, slightly less than that. But exact figure, I'm requesting Prakash to share with you since you probably want a more precise number to share with you.

[S. Ramesh, Chairman]

Yes. And related to that, if you can share some details in terms of how your KG P&L move? While we understand the sensitivity in terms of your pricing and costing, we need to have some details so that we can make some estimates. So if you can share something in the line, so what will be the operating cost per MMBtu or per SCM? And what will be the profit share of the government, that will be useful?

[Subhash Kumar, MD, Director of Finance & Chairman]

So while I share the CapEx, actually, I can share only that much, which we have been sharing in the past. Probably, it will not be possible to share the specifics on OpEx, et cetera. I think you can take your own view. I'm sure you have a view. And we will probably surprise you on the lower side. But other than that specific numbers, we may not share. CapEx as of today is INR 9,785 crores.

[S. Ramesh, Chairman]

Okay. The second part is, if you're looking at your CapEx of INR 32,000 crores next year, you work out the current year's cash flows and you get about operating cash flows of around INR 16,000 crores. So do you envisage any external funding for next year's CapEx? Or are you expecting improved cash flows based on higher oil prices? What is the assumption behind your funding plan for next year?

[Subhash Kumar, MD, Director of Finance & Chairman]

So I think as we have shared on a couple of occasions early, actually at around 47 to 48 that's -- like $50 price and fair price for gas, which is around $3, we kind of breakeven in terms of cash flow at around $50 and $3. That's the number. At $55 or so, we are in a position to pay dividend at the historical rates, with the gas price of around $3. So those are the numbers. We anticipate that price range notwithstanding the fact that today Brent is at $63, I still hold that planning case is still $45 to $55. But gas do -- I do anticipate a substantial uptick because our realizations are historic low. So $1.79, if it goes to $3.50 or so also, then there is a substantial upside. So it's a function of what kind of prices we realized. Depending on that, we would have a funding requirement. But one thing is certain, no item of work or expenditure will stop simply because of lack of resources today. We -- our debt-to-equity ratio is 0.6%. It's a wasting asset, actually. It's a nice feeling as a finance person to have 0 debt position. But at the end of the day, the more value is added by carrying out the E&P activity in time because one loses substantial value by delaying those. So we -- in case required, we will use our leverage to fund the capital expenditure as and when and we are...

[S. Ramesh, Chairman]

So let me just squeeze the last one. So in the KG gas development project, can you give us a sense in terms of when it will actually turn EBITDA positive in next year, FY '23, when do you expect that?

[Subhash Kumar, MD, Director of Finance & Chairman]

We don't have those numbers readily available. But see, these projects are extremely attractive, large-size projects. Depending on how the things unfold, because as you would recall, even in terms of specific dates on which things will resume at scale, I have been slightly cautious in giving specific dates or specific quarters in which we'll be able to come up to exact speed. So -- but our numbers -- actually, the regime is attractive enough, progressive enough. And even if there is a little bit of setback, we would actually kind of breakeven much earlier than -- if for any reason, there is a little delay also, quite a bit of -- it gets compensated by lower sharing to be made with the government. While the exact -- probably we, in the past, have never shared the exact dates by which we will be breakeven -- breaking even. So consistent with that, we would have difficulty in sharing any specific information on that.But the -- if it's actually sharing -- revenue sharing is based on IM and to progressively at a very high level, it starts with 85%. And in case, for any reason project gets delayed, we continue to benefit from much higher contractual share till the IMS less than 1.5. So that's the likely situation. So a little underperformance in the initial phase or delay, which, if at all, is likely to be extremely temporary, it's unlikely to affect the project economics in a big way. At the end of the day, the quite a bit of impact gets awaited by the lower sharing to be made there by the government. So we are not unduly alarmed. We only believe that as and when this supply chain resumes, we had -- we will have better visibility on the exact time lines by which we will be able to finish the project.

[Operator]

The next question coming from the line Pinakin Parekh from JPMorgan.

[Pinakin M. Parekh, Associate]

Sir, my first question is maybe you have addressed it and I missed it. My first question relates to the creation of the gas subsidiary. Now going forward, sir, can ONGC's gas subsidiary bid for the gas that ONGC produces, similarly to what we have seen the other gas producers' subsidiary doing it and hence consuming internally?

[Subhash Kumar, MD, Director of Finance & Chairman]

Yes. Yes. I mean, very definitely, that's the prime purpose for which we have it. Actually, see, we have a number of entities in the group already. So one of those entities could have done this task for us. But we wanted -- we believe that gas is a growing business. We have pretty much every kind of gas in our basket, which nobody else in the country has. We can create a synthetic stream, which nobody else can do. We have international exposure to large projects like Mozambique, Sakhalin, we are already through -- joined -- our 100% subsidiary ONGC ratio. So we have quite a bit of preparedness all around. We have stake in PLL, through which we have access to regasification. HPCL is a big partner in Chhara terminal. So all these positions us very, very advantageously. And the gas subsidiary is to put -- consolidate this entire business possibly under one unit and run it as a huge, huge business profit center.

[Pinakin M. Parekh, Associate]

So just to clarify, sir, this -- the subsidiary can bid for the incremental gas produced from the deepwater, not from the existing gas that is being produced from the nominated fields?

[Subhash Kumar, MD, Director of Finance & Chairman]

So it depends how the regimes change, transition. There were certain things with legacy oil and gas, which were not possible on a yesterday basis but are likely to happen in the future. So similarly -- I mean, a lot is happening on gas front. You would have read the way things are taking shape. It's an advanced step in preparedness. Should be -- there be a change in regime -- applicable regime, we will try to capitalize on that. You are right to start with, probably it is delta, not necessarily the 100% which will be the growth.

[Pinakin M. Parekh, Associate]

Understood, sir. But sir, the regime changes for the underlying production also, then this would help us?

[Subhash Kumar, MD, Director of Finance & Chairman]

Yes. And as far as I connected with something like, say, Mozambique or Sakhalin, that is always possible for us. We don't require anybody's enablement for that.

[Pinakin M. Parekh, Associate]

Sure, sir. Sir, second question is the OMPL stake sale to MRPL was approved, and the transaction is completed. Sir, what would be next after this? Or this is the only thing on the overall reorganization of the broader group?

[Subhash Kumar, MD, Director of Finance & Chairman]

No. So it's like triggering a chain. So the first step has been taken. The merger will take place sometime during this calendar year. And then we'll be prepared as to integrate MRPL business 100% with HPCL. So that's what I can say at this stage. That's what I have been said already also. So that's what I can say.In terms of specific time lines, once we get -- we merge OMPL, at that stage, we'll take a critical look on what exactly and when exactly to trigger the things. Theoretically, we would have the complete process by '24 -- '23/'24 or so. But there are ways and means of preponing it if that was the requirement. I'm sure we will come out with specific time lines once we are able to merge MRPL with OMPL.

[Pinakin M. Parekh, Associate]

Sure, sir. And sir, lastly, more of a request, if you look at ONGC consolidated and the EBITDA and the stand-alone EBITDA, the difference is as much as INR 5,000 crores to INR 6,000 crores or roughly 60% to 70% of stand-alone. Now sir, while we focus on OVL and MRPL, there are multiple group companies where they are substantially large now in terms of size. Can we get a better walk or presentation going forward on a quarterly basis which highlights all the other entities in the consolidated group as well so we know how they are changing and how they are moving about?

[Subhash Kumar, MD, Director of Finance & Chairman]

No, we'll be very happy to do that. In fact, if you still want, if anybody is interested, we can -- if I -- at a very summary level, for the benefit of all. See our own profit first 9 months is INR 4,752 crores. OVL is INR 867 crores. MRPL, which was -- which had a loss of around INR 1,800 crores last year is at INR 999 crores loss this year, so practically half. HPCL has done phenomenally well. In fact, that's an entity, which is the largest profit-making. And it actually does well with the strategic nature of this acquisition. When it was made in 2018, there were quite a few talks were there. But at the end of the day, we have started benefiting from the integration. And HPCL profits are at INR 7,602 crores, and this is in 3 quarters. So one can kind of estimate what kind of numbers it is going to make in next quarter.PMHBL is profit-making small -- nearly 100% owned, nearly because there are some few shares held by some other entities, some 26,000 shares in this entity. Otherwise, 99% or so held to buy ONGC and HPCL equally. So that has -- that continues to be in black. It is generating profit of around INR 38 crores, INR 40 crores or so. P&L, INR 288 crores. Pawan Hans lower losses. [ MSC ] had lower losses. OPaL, again, compared today 30 losses last 9 months. Actually, it is 5 29. DSL is in black. OTPC is nearly 100% in more than last year. IPGL and OTBL, these are small entities, making some small contribution. So these are -- this is the kind of situation. But you are right, actually, from next quarter onwards, we'll include a section in the initial brief itself. That's very helpful suggestion from your side. Thank you.

[Operator]

So next question is coming from the line Mayank Maheshwari from Morgan Stanley.

[Mayank Maheshwari, Research Analyst]

Question from my side was more related to the first point you had talked about in terms of investing in renewables and gas. Out of your total $4-odd billion, is there something you're setting aside now for these new energy kind of areas? Or is there something that the Board is looking at?

[Subhash Kumar, MD, Director of Finance & Chairman]

So 2 things. One is as far as gas is concerned, it will not be an incremental investment. It actually -- as and when we have this entity, actually, it will be carrying out the same job, which, today, we are doing it through ONGC 100% operations or probably it will do additionally. It could buy our volumes wherever it is feasible. So it is not additional business. It is running the same business, more -- in a more targeted manner.As far as renewable is concerned, it will be an incremental investment. We have announced JV. We are looking at some projects. At the end of the day, actually, whatever investment we will make -- right now, we have a very token provision in our budget for this, but it won't be a constraint. If we get a good project or good target, budget won't be a constraint. And what we will look for will be obviously an opportunity of size and scale. We will not be going after smaller entities because as of today, we have close to around 200-megawatt capacity. Our perspective plan requires us to scale it up to close to 5 gigawatt to 10 gigawatt. So those could be the kind of numbers. We are not in a hurry either. We are not kind of in a hurry to do it tomorrow, but we are looking at all available opportunity set in the country. Right now, there is not much of provision for this, but that's what I alluded to that, as and when the opportunity comes, budget won't to be a constraint.

[Mayank Maheshwari, Research Analyst]

Got it, sir. And sir, just an extension to this, like considering OVL's presence in countries outside India, is there a place where you would be looking for renewable opportunities? Or you're just focusing on India right now?

[Subhash Kumar, MD, Director of Finance & Chairman]

So I mean, our base case will be India because renewables -- see, whatever OVL also does theoretically, there is a possibility for those volumes to be either brought to India to or to be sold there and those revenues to be utilized for energy security in country. Probably same kind of flexibility will not be there when it is a question of renewables.In renewables, our focus will be more to invest within country and help solve the energy puzzle within the country. But if there is a great opportunity, we will not shy away, but I must say, see it's unlikely to be the kind of first thing on the radar.

[Operator]

The next question is from [ Akshay Vashisht ] from ICICI Securities.

[Unknown Analyst]

So my question is on KGD exporter gas. So you just mentioned that the production has already started. Just wanted to understand when is the production expected to peak?

[Subhash Kumar, MD, Director of Finance & Chairman]

No. So that's what I told. I gave you 2 numbers: one is existing level of production; and second is, in May, we will be able to go too close to the 3, 3.5 MMSCMD. As far as the peaking date is concerned, that's what I would be very cautious about committing today for the reasons we discussed earlier. But it will happen something in 2023 or '24. That's likely scenario. But I am myself very cautious of giving a date and then explaining in the next call if there is a delay because as rightly pointed out, while some of the other people on the call, they did say that there were certain disruptions. Yes, the international supply chain was affected adversely in a big way. So we are taking a stock. And before giving any specific dates, we want to be pretty certain. So -- but time lines don't change materially. It will be somewhere in '23 or '24.

[Unknown Analyst]

Okay. So this production is expected to ramp up to 3 to 3.5 in May this year. So any number you would like to put in the production? What will the production be, let's say, next year and FY '23?

[Subhash Kumar, MD, Director of Finance & Chairman]

So give me -- may not if you specifically want -- so '21/'22, today, I mean, this figure, this you can take with plus/minus 10%. '21/'22 average, we anticipate to be close to 3.4 or so. '22/'23, we anticipate it to be 8.5 or so.

[Unknown Analyst]

Okay. And in '24, it will be the peak, basically?

[Subhash Kumar, MD, Director of Finance & Chairman]

Yes. Yes.

[Unknown Analyst]

Okay. And my second question is on the gas price formula. So I recently mentioned that there are no particular time lines for any change in gas price formula. But I just wanted to get your sense on, let's say, if the gas price formula does not change in April this year, is it possible that it won't change at all?

[Subhash Kumar, MD, Director of Finance & Chairman]

No. I have 2 things. One is that I don't know specifics on what is happening and when it will happen. I don't believe that it will not change at all because if you really look at a couple of days in the past, actually, gas has seen huge volatility in prices, which would have not been probably noticed by a few of you. Few actually molecules have been sold at as high as more than $100 per MMBtu, and 1 cargo has been sold at $39 per MMBtu. Having said that, probably long-term averages are close to around 5 to 6, 6 to 7. So it's era of more benign gas prices than what we have seen in the past. Notwithstanding that, that the benign level is also at least 5 to 6x higher than where -- what we are getting. So sooner or later, I am sure everybody who is in know of things and who deals with the issue will be aware of the urgency, and it will be addressed soon. I think customarily since prices get revised in October and April, I do anticipate that things will happen much before that.

[Operator]

Next, we have Manikantha Garre from Axis Capital.

[Manikantha Garre, Assistant Vice President of Energy]

Such a great presentation so far. So I just wanted to check on the gas side again. Have you done any analysis in terms of what could be the total gas consumption across all of our businesses and subsidiaries currently?

[Subhash Kumar, MD, Director of Finance & Chairman]

So we have done it. I mean, we have done depending on what level HPCL -- see, let me first identify the major consumers. So we have consumers in terms of OMPL and MRPL. OPaL is a major consumer of gas. Then we have CGDs through HPCL, and then there are refineries of HPCL. I think, taken together, the level of requirement is anywhere between, on a conservative basis, 2.5 MMT to 4 or so as on date. So these are the kind of level and which actually means translates into 1 expansion of any regasification terminal in India or 1 liquefaction plant overseas. So this gives actually a kind of size and scale. We have readymade consumption that's within the group. We don't have to go outside if we were to put in a capacity of this magnitude on whether on regasification or on production side.

[Manikantha Garre, Assistant Vice President of Energy]

So just an extension to that, sir, would you have any rough estimate of how much this can go up to in the next 3, 4 years if you have such kind of estimates?

[Subhash Kumar, MD, Director of Finance & Chairman]

No, I don't think with the existing operation, it will change materially. And the reason for that, I can count today, MRPL already has completed expansion Phase 3. Expansion Phase 4 is pretty much, while we have acquired the land, we have -- it is held up. We are taking a view on what kind of trends set on petrochemical complexes, et cetera. So probably Phase 4 expansion is still quite some time away. So MRPL, OMPL product consumption is already at peak. OPaL also unlikely to expand within the next 1 or 2 years. Expansion will happen at OPaL level, but more in a staged manner, and probably we will -- by that time, we will have the ability some of our internal gas.As far as HPCL refineries are concerned, they are taking position in Chhara terminal. And consequently, they have 2 consuming large refineries. Refineries capacity is almost doubling, that you would know that 7.5 is going up to 9.5 and 7.3 is going up to 15 or so. So that is doubling. And then in addition, we also have downstream joint venture of HPCL by the name of HMEL. Here also, the expansion is good. So we have strong potential to consume internally. So we are -- the initial target would be consolidating our own business and then probably looking at others.None of them, except for the ongoing expansion phases, so everything is expanding. Both HPCL refineries are expanding, HMEL is under major expansion phase. So beyond that, I think it will stabilize in a year or 2. [ Birla ] refineries, the additional thing, which is coming up, which obviously, 3, 4 years down the line, as and when it comes, will be kind of staged increase. Other than that, there is no major increase likely.

[Manikantha Garre, Assistant Vice President of Energy]

And just 2 more questions. I just wanted to confirm the peak production at KG-98/2 is still 15 MMSCMD right, sir? That's the first question. And second one is if you can throw some light -- some color on the HCNG and gas to power businesses that they are highlighted as part of your gas business subsidiary, what kind of investments would be there? And what do you have currently in this in terms of the technology? And what kind of progress we have made there?

[Subhash Kumar, MD, Director of Finance & Chairman]

Could you repeat your question?

[Manikantha Garre, Assistant Vice President of Energy]

Sir, the first question is, is the peak production at KG-98/2 is...

[Subhash Kumar, MD, Director of Finance & Chairman]

No, that's yes, directionally yes.

[Manikantha Garre, Assistant Vice President of Energy]

Okay. The second question is, if you can throw more color on the HCNG and gas to power businesses, which were mentioned as part of the gas business subsidiary, now what kind of progress we have made so far? And what is the technology that we have? And what kind of time lines and investments are required here?

[Subhash Kumar, MD, Director of Finance & Chairman]

Okay. So 2 things, actually. One is that we already have gas to power within the group. As you would know, PPC's joint venture where we have 50% stake. It has 726 megawatts of production capacity. So we have a very strong presence, actually. This entity meets around 35% to 40% of entire energy requirements of Northeast. So we know the business. We have a very strong foothold in it. So as and when possible, we can always scale up this production.As far as hydrogen part you suggested, HCNG, both we have something called ONGC Energy Center, which has taken up projects and is at advanced stage in terms of figuring out as to how to commercialize some of these developments happening on hydrogen front. So we are in preparedness. But as and when we go, probably, we will also be having some joint venture partners of established credentials internationally or nationally so that we have -- we can hit the ground running, as they say, on the day 1 basis. So it probably might happen. I'm only talking as a possibility of doing it in conjunction with somebody rather than doing it alone. But knowledge of this, prepared like this at prototype level we have those experiments at ONGC Energy Center.

[Operator]

So there are no more participants at this time.

[Subhash Kumar, MD, Director of Finance & Chairman]

Thank you very much. So I think with that -- thank you very much. I think we had a wonderful opportunity interacting with everybody on the call. Thanks for organizing. And we look forward for similar opportunities. If anybody has any information requirement, I would reiterate an offer. Please write to IRC. You can reach me also through them. We'll be very happy to share as much detail as is possible within the ambit of rules and regulations, but we'll be very happy to receive your information requirement because that also gives us an idea as to how to kind of prepare for the next call. So we have noted a couple of points. Probably we'll incorporate, especially group performance is one thing which we noted was a request, and we'll include it from the next quarter also.With that, thank you very much. And please have a nice day, everybody.

[Operator]

Thank you so much, sir. And thanks to our respected speaker and the participants. With this, we conclude the conference call for today. Thank you for joining in. Have a pleasant day ahead. Thank you so much. You may all disconnect now.

[Subhash Kumar, MD, Director of Finance & Chairman]

Thank you. Thank you very much.