ONGC Profit More Than Doubles as Oil Prices Surge

India’s Oil and Natural Gas Corporation (ONGC) experienced a significant boost in profit during the last quarter, with net income reaching 170.34 billion rupees, or approximately $1.8 billion, surpassing the anticipated average of 152.67 billion rupees. The company's revenue increased by 45% from the previous year, totaling 464.60 billion rupees.

ONGC's earnings per barrel of crude oil sold rose by 50.4% due to a surge in oil and natural gas prices, coupled with the weakening Indian rupee. Brent crude averaged 50% above its year-ago levels, driven by the ongoing U.S.-Iran conflict, which disrupted Persian Gulf oil flows and tightened crude and fuel markets. ONGC's earnings from gas production at legacy fields grew by 5.4%, while those from deepwater fields surged by 61.5%.

Despite a 3.4% decline in its standalone oil and gas output to 9.4 million metric tons of oil equivalent, the price windfall proved crucial for the company. ONGC supplies roughly two-thirds of India's oil and over half of its gas, making it a vital player in New Delhi's strategy to reduce the nation's reliance on oil imports. With India importing nearly 90% of its oil and half of its gas, the Middle East conflict exposed the vulnerability of this dependency.

India has intensified its reliance on Russian oil, with imports reaching a record 2.8 million barrels per day in July, accounting for 55.5% of total imports. ONGC is also tasked with expanding its storage capacity, constructing a 13-million-barrel storage facility in Mangaluru, with half of it earmarked for strategic reserves. Currently, India's strategic reserves can only cover approximately eight days of demand.

The company's reduced production highlights the necessity for increased exploration efforts, while the price increase from the war provides ONGC with the necessary funds for such expansion.