Overseas oil & gas fields' output dips 22% in 2 years

Output from India's oil and gas fields overseas has fallen 22% in two years as sanctions on Russia hurt operations, Covid dragged down capex, and purchases of new producing fields stalled even as existing assets matured.

Indian state-run companies' share of output from overseas fields has fallen to 8.1 million metric tonnes of oil equivalent (mmtoe) in April-August, 12% lower than a year earlier, according to the oil ministry data. The output in August was down 16% from a year ago.

The overseas output was about 30% of India's domestic production of oil and gas in the five months through August, compared to 35% in the previous year.

"From Covid to war, there have been too many things, which have dragged us down. But even without these, we would have needed to invest more in existing fields and buy new ones to drive up production," said an executive at a state-run firm.

Investing overseas has been a key element of India's energy security strategy for two decades. ONGC, Oil India, Indian Oil, BPCL and GAIL have spent billions of dollars to buy stakes in producing fields as well as exploration acreages in nearly 20 countries, with a big share of investments going into Russia.

All these companies didn't respond to ET's request for comment.

The invasion of Ukraine and the consequent Western sanctions this year have suppressed output in Russia, with production nearly stopping at Sakhalin-1, a major field in which ONGC has a stake.

Output from Vankor, another major Russian field in which ONGC and three other Indian state firms bought stakes six years ago, has been on a natural decline for years.

Production at Vankor as well as UAE and Azerbaijan fields with Indian stakes were affected last year due to voluntary cuts by host countries as part of OPEC+'s plan to boost prices, according to industry executives. Russia has been the biggest contributor to India's overseas oil production and the war has put at risk not just the output but also the Indian firms' ability to repatriate dividends from there.

Limited capital and operating expenditure in 2020 and 2021, mainly due to Covid, has also hampered the capacity of several fields to ramp up output quickly, executives said. ONGC Videsh, ONGC's overseas investment arm, has spent just ₹1,000 crore in capex so far this fiscal year from its annual budget of ₹8,200 crore. It missed its capex targets by a big margin in both FY21 and FY22.

Indian companies haven't bought any major producing assets in more than four years. Nor has there been any significant output rise by bringing some discoveries to production, an executive said.

Indian companies do not usually bring crude from their overseas fields to domestic refineries due to uneconomical freight but consider investing overseas as a profitable venture.