OIL and ONGC Recorded Lower Outputs affecting Oil & Gas Production in India

Crude Oil Prices

• Oil prices gained slightly during early trade on Monday, boosted by concerns conflict in the Middle East may impact supply in the key producing region and expectations the U.S. interest rate cut last week will support demand.

• Brent crude futures for November were up 20 cents, or 0.3% at $74.69 a barrel at 0045 GMT. U.S. crude futures for November were up 22 cents, or 0.3%, at $71.22. MCX Crude oil prices opened at 5998 with a gain of 0.38%.

Crude Oil Demand and Supply

• India's reliance on imported crude oil intensified this August with a significant 6.4% increase compared to the same month last year, while domestic oil production fell by 2.9%, according to the latest report from the Petroleum Planning & Analysis Cell (PPAC) under the Ministry of Petroleum & Natural Gas. This trend underscores the mounting pressures on India's energy security amidst escalating global oil prices.

• The report indicates that the total net import bill for oil and gas escalated to $11.4 billion in August 2024, up from $9.0 billion in August 2023. The increase was primarily driven by higher imports of liquified petroleum gas (LPG), petcoke, and lubricants. Over the April-August period of FY 2024-25, crude oil imports also saw a rise of 3.3%, highlighting the growing demand as the economy continues to recover.

• On the domestic front, oil and gas production faced setbacks, with Oil India Limited (OIL) and Oil and Natural Gas Corporation (ONGC) recording lower outputs, leading to a 2.9% decrease in indigenous crude oil and condensate production in August 2024. This decrease is a part of a continuing challenge in boosting domestic output, which is critical for reducing dependency on volatile global markets.

• The refining sector mirrored this downturn with a 1.9% decrease in total crude oil processed in August 2024 compared to the previous year. Despite this monthly dip, the sector saw a slight 1% increase in processed crude from April to August 2024 compared to the same period last year, suggesting a tentative recovery in refining operations.

Crude Oil News

• The production of petroleum products showed a slight decline of 1% in August 2024 year-over-year, totaling 22.7 MMT. However, this sector also reflected a more positive trend over the five-month period from April to August, with a 1.8% increase in production. The consumption patterns followed suit, registering a 3.3% increase, driven largely by a rise in lubes, aviation turbine fuel (ATF), and motor spirit (MS) usage.

• Deep Industries Ltd (DIL) has secured an order worth ₹1,402 crore from Oil and Natural Gas Corporation (ONGC) for production enhancement operations in its Rajahmundry Asset. The contract, spanning 15 years, is the largest project awarded to the company, more than doubling its current order book, which stood at ₹1,246 crore as of June 30, 2024.

• The contract focuses on Production Enhancement Contracts aimed at increasing hydrocarbon production from ONGC's ageing fields by deploying advanced techniques and safe operating practices. The PEC framework is expected to broaden Deep Industries' revenue streams and improve profitability.

Expert Opinion

In contrast to crude oil, the natural gas segment showed promising growth, with an 18.4% increase in consumption for the fiscal year up to August 2024. However, monthly data from August revealed a 1% decrease in consumption, highlighting the variability and challenges in aligning supply with demand fluctuations.