Newsletter
If you’ve tracked Oil and Natural Gas Corporation (ONGC) over the years, you know the story has mostly revolved around one thing: finding and producing hydrocarbons. That’s what it has done for decades. But something interesting is happening now.
The company still drills a lot of wells, actually more than ever, but it’s also making big moves in renewables, tweaking its pricing mix for gas, and even thinking about owning ships. And its latest numbers give us a peek into how that playbook is working.
In Q1 FY26, ONGC’s standalone revenue from operations came in at ₹32,003 crore, down from ₹34,982 crore in Q4 FY25, while profit after tax rose to ₹8,024 crore from ₹6,448 crore, thanks to a jump in operating margins from 28% to 37%.
On a consolidated basis, profit stood at ₹11,554 crore as refining and overseas operations chipped in. But if you zoom out to FY25, the picture changes. Standalone profit was ₹35,610 crore, down about 12% from the previous year, mainly because the company wrote off a lot of exploration costs from wells that didn’t hit oil or gas. Management calls it “investment into the future” because no drilling means no discoveries.
The management was particularly vocal about something it hasn’t been able to say for a while: oil production finally grew. It was a modest 0.9% increase to 18.56 million metric tonnes in FY25, but it reversed a long-term decline. Gas volumes dipped slightly to 19.65 BCM, but there’s a plan to hit 21 BCM in FY26 and 22 BCM in FY27.
Those production growth targets hinge on a few major projects. The first is KG 98/2, an oil and gas field in the Eastern Offshore region (off the coast of Andhra Pradesh). It’s currently producing about 33–34 thousand barrels of oil per day (kbopd) and 2.8 million standard cubic metres of gas per day (mmscmd).
ONGC expects this to climb to around 45 kbopd and 10 mmscmd once all the planned wells are up and running. Then there’s the Daman project in the Western Offshore (near Mumbai), which should add another 5 mmscmd of gas from early 2026.
A small “Discovered Small Field” or DSF block in the same western waters could bring in 4–4.5 mmscmd by late 2026. Finally, ONGC has teamed up with BP at its flagship Mumbai High oilfield under what’s called a Technical Services Partnership essentially bringing in BP’s expertise to boost recovery from mature wells. Early results from this collaboration are expected in FY26, with bigger gains in FY27–28.
Another big change is in how some of ONGC’s gas is priced.
Traditionally, most domestic natural gas in India has been sold under a government-controlled rate called the Administered Pricing Mechanism (APM), which is currently about $6.75 per million British thermal units (mmbtu), a standard measure of energy.
But “new well gas” refers to gas from more challenging projects, such as deepwater or high-pressure, high-temperature wells, and it gets a premium price, roughly 12% of the prevailing crude oil price.
So, if crude is at $65 a barrel, that works out to around $8 per mmbtu. Right now, this premium-priced gas makes up about 20% of ONGC’s daily sales, but management expects it to grow by 15–20% each year and replace all APM-priced gas in the next 5–6 years. The impact is already showing in FY25, this better pricing brought in about ₹700 crore in extra revenue, and in FY26, it could be as much as ₹1,500–2,000 crore.
Cost control is another theme. Rig rates, one of ONGC’s biggest expenses, have dropped from $90,000 a day to $35,000, a big saving when you run about 30 rigs. Logistics costs are also being trimmed, a new base at Pipavav, Gujarat, is cutting travel time for offshore crews and vessels. And the company is considering buying its own vessels instead of chartering them, betting that ownership could save money and generate rental income.
Subsidiaries and downstream operations are also turning a corner. OPaL, the petrochemicals unit in which ONGC now holds more than 95% after an ₹18,000 crore infusion, exited the SEZ in April 2025, saving 8–9% in duties or roughly ₹700–800 crore annually. Gas feedstock is now available at new well gas rates, reducing costs further. HPCL and MRPL, the refining arms, are performing better this year as margins improve.
Then there’s the green energy push. This isn’t about ticking ESG boxes, ONGC’s renewable capacity jumped from 192 MW in January 2025 to 2.5 GW by May, thanks to acquisitions and partnerships. The target is 10 GW by 2030, which means adding 1.5 GW a year. A fresh ₹4,963 crore investment has been approved for a 0.6 GW solar-wind hybrid project to be completed by 2028.
Overseas, Mozambique LNG is back on track for late 2027 or early 2028 commissioning. In Russia, production at Sakhalin-1 is back to 150–160 kbopd, though the transfer of abandonment funds remains stuck due to banking restrictions. Sanctions in Syria have been lifted, and ONGC is assessing the situation before resuming operations. In Colombia, South Sudan, Azerbaijan, and Lower Zakum, production is up 9% year-on-year.
Strip away the accounting noise and the one-off exploration write-offs, and ONGC’s core story right now is about incremental production gains, better pricing for its gas, and a rapid build-out in green energy.
It’s also showing a willingness to rethink its asset base, whether by owning vessels, scaling renewables, or restructuring subsidiaries. The risks are still there, exploration results can be unpredictable, global oil prices remain a swing factor, and some big projects have moving timelines but the management’s confidence, reinforced by a generous dividend payout even in a lower-profit year, suggests they believe the next few years will be about growth, not just holding ground. Or, as one executive put it on the call, “We hope to remain positive for years to come.”
FAQs
What was ONGC’s revenue and profit in Q1 FY26?
In Q1 FY26, ONGC reported standalone revenue from operations of ₹32,003 crore, down from ₹34,982 crore in Q4 FY25. Profit after tax rose to ₹8,024 crore from ₹6,448 crore, driven by higher operating margins.
Why did ONGC’s FY25 profit fall despite higher production?
Standalone profit in FY25 fell about 12% year-on-year to ₹35,610 crore mainly because the company wrote off significant exploration costs from unsuccessful wells, even though oil output grew for the first time in years.
How much oil and gas did ONGC produce in FY25?
ONGC produced 18.56 million metric tonnes of oil in FY25, a 0.9% increase, and 19.65 billion cubic metres (BCM) of natural gas, slightly lower than the previous year.
What are ONGC’s gas production targets for FY26 and FY27?
ONGC aims to produce 21 BCM of natural gas in FY26 and 22 BCM in FY27, supported by new offshore projects in the Eastern and Western regions.
What is the significance of ONGC’s KG 98/2 project?
The KG 98/2 oil and gas field in the Eastern Offshore is producing 33–34 kbopd of oil and 2.8 mmscmd of gas, with plans to scale up to 45 kbopd and 10 mmscmd once all wells are operational.
How is ONGC changing its gas pricing strategy?
ONGC is increasing the share of premium-priced “new well gas” from deepwater and high-pressure projects, which sells at roughly 12% of crude prices, replacing lower APM-priced gas over the next 5–6 years.
What cost-cutting measures is ONGC implementing?
The company has reduced rig rates from $90,000 to $35,000 per day, trimmed logistics costs with a new Gujarat base, and is considering owning vessels to save on charter expenses.
What is ONGC’s renewable energy target?
ONGC has expanded renewable capacity from 192 MW in January 2025 to 2.5 GW by May 2025 and aims to reach 10 GW by 2030, adding around 1.5 GW annually.
Which overseas projects are driving ONGC’s growth?
Key overseas projects include Mozambique LNG (targeting 2027–28 commissioning), Sakhalin-1 in Russia, and increased production in Colombia, South Sudan, Azerbaijan, and Lower Zakum.
What are the main risks to ONGC’s growth plans?
Risks include volatile global oil prices, uncertain exploration outcomes, shifting project timelines, and geopolitical challenges in some overseas locations.
