ONGC to launch crude trading unit, build strategic reserve in Mangalore, and invest Rs 1 lakh crore in deepwater drilling by 2031

ONGC plans to enter crude and petroleum product trading operations soon. A new strategic petroleum reserve will be built in Mangalore. Exploration and production remain ONGC's central strategic focus. The company will spend one lakh crore on deepwater drilling by 2031. This expansion aims to strengthen supply security and extract more value.

New Delhi: State-owned Oil and Natural Gas Corporation (ONGC) plans to enter crude and petroleum-product trading and build a new strategic petroleum reserve as it seeks to strengthen supply security and extract more value across its energy portfolio, while continuing to make upstream exploration its central focus.

ONGC's new trading unit is expected to begin operations "end of this year", Chairman and CEO Arun Kumar Singh told reporters here.

The will initially handle the group's own crude and product requirements, while also pursuing third-party business.

Read more: ONGC to invest Rs 1 lakh crore for deepwater exploration, says chairman

The unit, which ONGC is considering locating in Dubai or Singapore, could create opportunities worth about USD 1 billion a year through better crude sourcing, freight management and risk management, Singh said.

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"We are very close to it (setting up trading desk). Already 95 per cent work is done. We are waiting for one or two boxes to be ticked," he said.

A partner and location of the desk is yet to be decided, he said.

Hindustan Petroleum Corp Ltd (HPCL), Mangalore Refinery and Petrochemicals Ltd (MRPL), and an international trading partner that ONGC is currently selecting are expected to have stakes in the trading venture.

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The unit would also coordinate with ONGC Videsh Ltd, the group's overseas investment arm, and ONGC Petro Additions Ltd.

The move would give ONGC and its group companies a single commercial interface in global oil markets, replacing a fragmented model in which individual businesses source, sell and procure crude and feedstock separately.

While ONGC produces the barrels, its subsidiaries HPCL and MRPL import crude independently. Its overseas arm OVL sells its own equity production, and OPaL sources its own feedstock.

A single trading face gives one commercial interface, better bargaining power, and an end to value leakage.

STRATEGIC STORAGE

ONGC is also developing a 1.75 million tonnes strategic petroleum reserve in Mangalore at the request of the government. The project, already approved by ONGC's board, would increase India's dedicated emergency crude storage capacity by about one-third from its current 5.33 million tonnes.

The facility will be built on ONGC's balance sheet, marking a shift from the conventional model of government-funded strategic storage, Singh said.

"We already have land parcel at Mangalore SEZ. Business model is now being worked... we will shortly commence process of construction," he said.

Half the capacity will be reserved for strategic use under the government's plan, while ONGC has sought permission to use the remainder commercially.

India's existing strategic reserves cover about 9.5 days of net oil imports, while crude and petroleum-product stocks held by state-run oil companies provide a further 64.5 days of coverage, according to petroleum ministry data.

DEEPWATER PUSH

Despite the expansion into trading and infrastructure, Singh said exploration and production will remain the foundation of ONGC's strategy.

The company plans to spend Rs 1 lakh crore in drilling 87 wells in deepsea by 2031.

The government's decision in July to provide Rs 84,000 crore over five years to support offshore exploration is expected to reduce the financial burden on ONGC as it pursues more expensive deepwater resources.

The programme, announced under the National Offshore Exploration Scheme, is intended to support reserve additions of more than 600 million tonnes of oil equivalent by 2030-31, according to the petroleum ministry.

ONGC's response is "Project DeepX" under which the company plans to double its deepwater drilling effort over two years.

Much of India's domestic crude production comes from mature fields, prompting ONGC to deploy enhanced oil-recovery techniques and seek partnerships with international producers, including BP, Exxon Mobil, Chevron, TotalEnergies, Petrobras, Petronas, Equinor, and Shell.