Oil & Natural Gas Corpn Ltd ONGC dominates India’s oil & gas production with more than two-third share of the country’s production of oil and oil equivalent gas. It contributes ~78% and ~73% to total oil and gas production, respectively, in India. ONGC has 962.9 MTOE barrels of proved (1P) reserves, as on FY10 end. ONGC’s total domestic hydrocarbon production for FY10 aggregated 52.1MMT.
Global crude demand likely to increase on global recovery. Moreover energy consumption in India from natural gas (currently ~9% due to shortage of gas) is set to rise due to production increase from ~132 mmscmd in FY10 to around 230 mmscmd in FY12E. Based on the demand of gas for power and fertilizers, we believe that an increase in the gas supplies can be easily absorbed by the country. In fact, we believe that India may have an appetite for more gas supplies, as the country’s GDP grows above 8.0% CAGR in the next decade which offers serious opportunities in oil & gas sector.
ONGC’s earnings will be positively correlated to the increase in crude prices, as an increasing proportion of its international revenues (through OVL in a deregulated environment) will lead to higher realisations on crude. Also, OVL will be the major driver for volumes in the future and is also currently scaling up its production assets aggressively.
Significant APM gas price hike at one go is definitely positive for ONGC. This is a significant positive for the company and will support the substantial capital investments by it. Further, ONGC’s current exploration acreage offers significant opportunities for increase in reserves. Further, we are enthused by ONGC’s asset, new projects, and potential exploration upsides. However, till clear subsidy sharing mechanism emerges, uncertainty may prevail.
Global crude demand likely to increase on global recovery. Moreover energy consumption in India from natural gas (currently ~9% due to shortage of gas) is set to rise due to production increase from ~132 mmscmd in FY10 to around 230 mmscmd in FY12E. Based on the demand of gas for power and fertilizers, we believe that an increase in the gas supplies can be easily absorbed by the country. In fact, we believe that India may have an appetite for more gas supplies, as the country’s GDP grows above 8.0% CAGR in the next decade which offers serious opportunities in oil & gas sector.
ONGC’s earnings will be positively correlated to the increase in crude prices, as an increasing proportion of its international revenues (through OVL in a deregulated environment) will lead to higher realisations on crude. Also, OVL will be the major driver for volumes in the future and is also currently scaling up its production assets aggressively.
Significant APM gas price hike at one go is definitely positive for ONGC. This is a significant positive for the company and will support the substantial capital investments by it. Further, ONGC’s current exploration acreage offers significant opportunities for increase in reserves. Further, we are enthused by ONGC’s asset, new projects, and potential exploration upsides. However, till clear subsidy sharing mechanism emerges, uncertainty may prevail.
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