PTI quoted Moody`s Investors Service as saying that defying a global trend, India`s flagship national oil company ONGC did not cut its capital spending on exploration and development after oil prices collapsed between 2014-16. In a report, Moody`s said while ONGC did not reduce capital spending on oil and gas exploration and production, it halted the pace of its international expansion as a response to the oil price slumping from USD 140 per barrel to under USD 40.
The rating agency said in a report that "National oil companies (NOCs) worldwide strived to cut costs, adjust growth strategies or sell assets since the 2014-16 collapse in oil prices, just as oil companies without state sponsors have done."
The decline in oil prices did not significantly affect Oil and Natural Gas Corporation (ONGC), which saw its consolidated EBITDA for 2015-16 decline by only 16 per cent compared to the same period three years earlier.
Moody`s said this because ONGC`s share of India`s fuel subsidy burden offset that decline.
It said that "ONGC was more exposed to the decline in natural gas prices, which nearly halved in India during that period as gas prices fell internationally."
Despite the oil price decline, ONGC did not reduce its capital spending on exploration and development, Moody`s said. "However, the company halted the pace of its international expansion from early 2014 to mid-2016, when it resumed overseas acquisitions, including its completion of a 26 per cent stake in CSJC Vankorneft, the owner of (Russia`s) Vankor Field and North Vankor license, for USD 1.9 billion (after adjusting for cash profits)," it said.
All of ONGC`s overseas acquisition activity has been in line with the Government of India`s strategic objective of ensuring energy security for the country, which relies on imports for nearly 80 per cent of its oil consumption.
Moody`s estimated a capex of USD 7-7.5 billion for ONGC in the year to March 2019. This compares to USD 5.6 billion spending in 2014-15 and USD 12.3 billion in 2017-18. ONGC`s spending in 2017-18 was higher because of one-off acquisition of the government`s stake in Hindustan Petroleum Corp Ltd (HPCL).
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