Synopsis : ONGC is undergoing a major transformation as natural gas production overtakes crude oil output in its portfolio. Chairman Arun Kumar Singh said the company should now be viewed as a "gas-and-oil" company, highlighting how rising gas demand, favourable pricing reforms and upcoming projects are set to drive the next phase of growth for India's largest exploration and production company.
Oil and Natural Gas Corporation (ONGC), India's largest oil and gas producer, is witnessing a significant shift in its business model as natural gas emerges as the dominant contributor to its production portfolio. Chairman Arun Kumar Singh recently indicated that the company should increasingly be viewed as a "gas-and-oil" company rather than an "oil-and-gas" producer, reflecting the growing importance of natural gas in ONGC's long-term growth strategy.
According to Singh, natural gas production has now slightly exceeded crude oil production within ONGC's portfolio, marking an important milestone for the state-run energy giant. While crude oil output is expected to remain broadly stable in the coming years, gas production is projected to grow steadily due to rising domestic demand, favourable government policies and the commissioning of several new projects. This transition is particularly significant as India continues to push for a cleaner and more diversified energy mix to support its economic growth.
Natural gas has become increasingly attractive for ONGC due to reforms in the pricing mechanism and strong demand across multiple sectors. The company believes gas offers better long-term growth opportunities compared to oil, especially as industries, power producers and the transportation sector increasingly adopt cleaner fuel alternatives. Singh noted that gas is now a more valued fuel in the Indian context, and the company's future growth trajectory will largely be driven by gas-led expansion.
ONGC's exploration and production business currently contributes around two-thirds of the group's overall operations. Within this segment, gas output already exceeds oil production and is expected to continue expanding over the next several years. The company is targeting annual gas production growth of approximately 7-8 per cent, supported by new developments including DUDP projects, Discovered Small Field (DSF) assets and offshore projects such as the 98/2 wells. Several of these projects are expected to begin contributing meaningfully to production during the next financial year.
A key contributor to this growth is the rapid rise of "new well gas" production. Under the current pricing regime, new well gas enjoys market-linked pricing tied to 12 per cent of crude oil prices, making it significantly more lucrative for producers. ONGC estimates that new well gas currently accounts for around 25 per cent of its total gas production and could increase to between 30 and 36 per cent in the near future. Over time, this segment is expected to become the dominant contributor to the company's gas portfolio as mature fields gradually decline.
Government support has also played an important role in improving the economics of the upstream sector. Reduced royalty burdens, market-linked pricing reforms and initiatives aimed at encouraging deepwater exploration have strengthened the investment environment for producers such as ONGC. These policy measures allow companies to retain a greater share of revenues and reinvest in future production growth.
To support its long-term output targets, ONGC continues to maintain an aggressive investment programme. The company drills nearly 500 wells every year, including both exploratory and development wells. It also reported a reserve replacement ratio of more than 1.1 during FY26, indicating that it is adding more reserves than it produces, a key metric for sustaining long-term growth in the exploration and production business.
In addition, ONGC is currently executing offshore projects worth approximately Rs 33,000 crore aimed at increasing production and improving recovery rates from mature fields. The company's Western Offshore assets remain particularly important, accounting for a substantial portion of current production. To enhance efficiency and recovery, ONGC has partnered with global energy major BP under a large-scale Technical Service Partnership (TSP) programme covering its entire Western Offshore asset base. Management has indicated that early operational improvements from the partnership are already beginning to show positive results.
Beyond its domestic operations, ONGC continues to strengthen its international portfolio. Production from Russia's Sakhalin project remains stable despite global geopolitical challenges, while the Mozambique LNG project continues to progress and could potentially be completed by 2028. The company is also monitoring developments in Venezuela, where production opportunities could improve if regulatory conditions become more favourable.
ONGC's ambitions extend beyond traditional oil and gas production as well. The company expects a turnaround in its petrochemicals subsidiary OPaL and is steadily expanding its renewable energy business through ONGC Green. The renewable energy arm is targeting nearly 3 gigawatts of capacity in the coming year, reflecting the company's broader strategy of becoming a diversified energy player capable of participating across multiple segments of the energy value chain.
The shift toward natural gas highlights a broader transformation taking place within India's energy sector. As demand for cleaner fuels rises and policy support strengthens, ONGC's increasing focus on gas production positions the company to benefit from one of the most important structural trends shaping the country's energy future. With multiple growth projects underway, substantial capital investments and supportive market dynamics, natural gas appears set to play a central role in ONGC's next phase of expansion.
Disclaimer : This content is for informational and educational purposes only and should not be considered investment advice. Investors should conduct their own research and consult a qualified financial advisor before making any investment decisions.
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