ONGC to Invest Rs 2 Trillion for Net Zero Emissions by 2038: A Paradigm Shift in India’s Energy Sector

ONGC to Invest Rs 2 Trillion for Net Zero Emissions by 2038: A Paradigm Shift in India’s Energy Sector

Oil and Natural Gas Corporation (ONGC) chairman and CEO Arun Kumar Singh stated during a news conference following the company’s annual general meeting on Tuesday that the company expects to invest Rs 2 trillion to satisfy Scope-I and Scope-II emission objectives by 2038.

“We have said that we will shift to Scope-I and Scope-II by 2038. By 2030, our several green efforts will cost Rs 1 trillion. Green ammonia, hydrogen, solar, PSP, and offshore turbines are only a few of the components, he claimed.

In order to take advantage of numerous low-carbon energy options, such as renewable energy, green hydrogen, green ammonia, and other derivatives of green hydrogen, ONGC is aggressively investigating partnerships with top players.

The state-owned business has implemented a number of decarbonization strategies that have allowed it to reduce its Scope-I and Scope-II emissions by 17% over the past five years. From 9.14 MMTCO2e in FY22 to 8.89 MMTCO2e in FY23, it decreased emissions by 2.66%.

By 2030, it wants to increase the size of its renewable energy portfolio to 10 GW. To reduce emissions from current processes, more attention is being paid to research and development in carbon capture, utilisation, and storage (CCUS) systems.

Given the impending carbon market, Singh said it made excellent financial sense to invest in green activities. Green products also provide a significant export possibility, and they may be financed at significantly reduced costs.

In Rajasthan, ONGC has already agreed to build 5 GW of solar power capacity, and it is currently looking for 5 GW more. To reach its goal of 10 GW, it is open to all possibilities, including wind energy and acquisitions, based on “economics and return”.

The company would continue to concentrate on its traditional upstream and downstream activities, the chairman made clear. In his opinion, the next 10 to 20 years will see India’s energy narrative stay unique. For the next five to ten years, ONGC has the financial strength to continue both the transformation and the energy stories in India. With a debt-to-equity ratio of 2:1 and an estimated net value of Rs. 2.5 trillion, we have a borrowing capacity of Rs. 5 trillion.

Speaking at the AGM, Singh predicted that over the next years, domestic production will increase thanks to the increased output from the KG deep-water field in the eastern offshore.

It has sent out two drill ships and started drilling exploratory wells in the eastern offshore Mahanadi basin’s deep waters.

An empowered internal “production squad” has been formed by the firm to revitalise western offshore. The multidisciplinary team will prioritise project acceleration, equipment availability, reservoir pressure control, and production enhancement.

ONGC has a capex budget of more than Rs 30,000 crore with a goal of bringing 500,000 sq km of territory under active exploration by 2025.

The production level of Sakhalin-1 has reportedly reached approximately 180,000 barrels per day, which is similar to the pre-crisis production level of about 200,000 barrels per day, according to its overseas branch ONGC Videsh (OVL).

Construction workers are on the ground in Mozambique, where OVL is carrying out its largest project, and the security situation has continued to improve. According to Singh, the business anticipates the force majeure to be lifted at any point this fiscal.

In a groundbreaking development, the Oil and Natural Gas Corporation (ONGC), India’s largest public-sector hydrocarbon exploration and production company, has committed to investing Rs 2 trillion (approximately $27 billion USD) to achieve net-zero emissions by the year 2038. This is a milestone not only for ONGC but also for India’s transition towards a more sustainable energy landscape.

ONGC is one of the largest contributors to India’s carbon footprint. The company is a vital player in India’s energy sector, accounting for 70% of the country’s crude oil production and nearly 62% of its natural gas. Consequently, its decision to go net-zero is a significant step towards reducing greenhouse gas emissions and combating climate change, aligning with India’s commitment to the Paris Agreement.

The investment of Rs 2 trillion is slated for a multi-pronged approach, focusing on both technology and infrastructural development.

ONGC plans to invest a large sum in renewable energy projects, including solar and wind farms, to offset carbon emissions.A portion of the funds will be allocated to advanced carbon capture and storage technologies.

Investments will be made in research and development activities aimed at making existing operations more energy-efficient.Capital will be poured into upgrading existing infrastructure to minimize emissions and improve efficiency.

ONGC will gradually move away from conventional drilling techniques to more eco-friendly methods, such as managed pressure drilling and coiled tubing drilling, which not only minimize carbon emissions but also enhance operational efficiency.

ONGC is also planning on forming alliances with global energy companies and research institutions specializing in green technologies. These collaborations aim to bring in technological know-how and expertise in developing more sustainable methods of hydrocarbon extraction and energy production.

The transition requires significant financial commitment and economic recalibration. Though Rs 2 trillion is a considerable amount, the challenges in implementing new technologies and operational shifts could escalate costs further.

Regulatory frameworks need to be updated to facilitate the massive transformation that ONGC is planning. This requires seamless coordination between various government bodies and the organization.

The shift to greener technologies might impact the short-term profitability of ONGC, and therefore, the market’s response remains uncertain.

The government, as the largest stakeholder, stands to benefit significantly from ONGC’s initiative, as it is in line with India’s national strategy to reduce carbon emissions.

Though there may be short-term uncertainties, the long-term gains of moving towards a more sustainable model will likely make ONGC a more attractive proposition for ethical and long-term investors.

The communities around ONGC’s operations will benefit from a cleaner environment and the potential for job creation in the renewable energy sector.

ONGC’s Rs 2 trillion commitment for net-zero emissions by 2038 is an unprecedented move in India’s energy sector. While the challenges are substantial, the benefits, both in terms of sustainability and stakeholder value, cannot be overstated.

This initiative signifies a paradigm shift and sets the stage for other players in the industry to follow suit. If successful, ONGC’s transition could serve as a model not just for India but for hydrocarbon companies globally, pushing the world a step closer to a sustainable future.