As of February 2025, Oil and Natural Gas Corporation (ONGC) is actively pursuing growth and sustainability initiatives. In the third quarter of FY2024-25, ONGC reported a net profit of ₹8,622 crore, marking a 19% decrease from the previous quarter, primarily due to lower crude oil price realizations.
Strategically, ONGC has engaged BP as a Technical Services Provider to enhance production from the Mumbai High field, India’s largest offshore oil field. This collaboration aims to increase oil output by 44% and gas production by 89% over the next few years.
In line with global energy transition trends, ONGC has unveiled a Decarbonization Roadmap, targeting net-zero operational emissions by 2038. The company plans to invest approximately $24 billion in renewable energy projects and carbon capture technologies to achieve this goal.
Additionally, ONGC is exploring the regasified liquefied natural gas (R-LNG) market and strengthening its diversification efforts with a focus on gas and renewables. The company is adopting both organic and inorganic growth strategies, including potential acquisitions in the renewable energy sector.
These initiatives underscore ONGC’s commitment to enhancing production efficiency, embracing sustainable practices, and diversifying its energy portfolio to align with evolving industry dynamics.
A comprehensive SWOT analysis—evaluating its Strengths, Weaknesses, Opportunities, and Threats—provides insight into ONGC’s current position and future prospects.
Strengths
1. Market Leadership: ONGC is India’s foremost crude oil and natural gas producer, accounting for approximately 71% of the country’s crude oil output. This dominant position underscores its critical role in meeting India’s energy demands.
2. Robust Financial Performance: In the fiscal year 2023-24, ONGC reported a standalone net profit of ₹40,526 crore, marking its highest-ever profit and a 1.1% increase from the previous year. This financial strength enables substantial reinvestment into exploration and development activities.
3. Extensive Exploration and Production Capabilities: ONGC’s comprehensive exploration and production infrastructure includes a vast network of drilling rigs and platforms. In FY 2023-24, the company drilled 541 wells—the highest in 34 years—comprising 103 exploratory and 438 development wells, highlighting its commitment to expanding hydrocarbon resources.
4. Government Backing: As a state-owned enterprise, ONGC benefits from strong governmental support, providing financial stability and facilitating strategic initiatives aligned with national energy policies.
Weaknesses
1. Dependence on Fossil Fuels: ONGC’s primary focus on oil and gas exploration and production exposes it to risks associated with the global shift towards renewable energy sources and the increasing emphasis on sustainability.
2. Regulatory Challenges: Being a government-owned entity, ONGC’s operations are subject to bureaucratic processes, which can lead to delays in decision-making and implementation of strategic initiatives.
3. Aging Infrastructure: Some of ONGC’s assets are aging, necessitating significant capital expenditure for modernization to maintain operational efficiency and safety standards.
Opportunities
1. Diversification into Renewable Energy: The global transition towards cleaner energy presents ONGC with opportunities to diversify its portfolio by investing in renewable energy projects, aligning with environmental sustainability goals.
2. Technological Advancements: Adopting advanced technologies in exploration and production can enhance efficiency, reduce costs, and improve safety, providing a competitive edge in the evolving energy sector.
3. International Expansion: Expanding operations through its subsidiary, ONGC Videsh Ltd., into international markets offers avenues for growth and access to new hydrocarbon reserves, mitigating domestic market saturation.
Threats
1. Volatility in Global Oil Prices: Fluctuations in global crude oil prices directly impact ONGC’s revenue and profitability, posing a significant financial risk. For instance, in Q2 FY 2024-25, ONGC’s crude oil price realization fell by 7.7% to $78.33 per barrel, influenced by a 17% decline in global crude oil prices.
2. Regulatory and Policy Changes: Changes in government policies, such as the imposition or removal of taxes like the windfall tax on petroleum crude, can affect ONGC’s financial performance. In Q2 FY 2024-25, the scrapping of the windfall tax contributed to a 6.5% drop in tax expenses for ONGC.
3. Environmental Concerns and Climate Change Policies: Increasing environmental awareness and stringent climate change policies may lead to stricter regulations on fossil fuel extraction and consumption, challenging ONGC’s traditional business model.
Conclusion
ONGC’s entrenched position as India’s leading oil and gas producer is reinforced by its substantial market share, robust financial health, and extensive operational capabilities. However, to sustain and enhance its market position, ONGC must proactively address its weaknesses and navigate the threats posed by market volatility, regulatory changes, and environmental concerns. Embracing diversification into renewable energy, leveraging technological advancements, and exploring international markets are strategic imperatives for ONGC to adapt to the dynamic global energy landscape and continue contributing to India’s energy security.
Anantha Nageswaran is the chief editor and writer at TheBusinessBlaze.com. He specialises in business, finance, insurance, loan investment topics. With a strong background in business-finance and a passion for demystifying complex concepts, Anantha brings a unique perspective to his writing.
