ONGC Targets 15% Cost Reduction to Prepare for $60 per Barrel Crude Price

Oil and Natural Gas Corporation (ONGC), India’s largest oil and gas explorer, is planning to reduce its overall costs by 15 per cent over the next two years as it braces for crude oil prices potentially sliding to around $60 per barrel in an oversupplied global market.

The company has set a target to achieve Rs 9,000 crore in total cost savings by FY2026–27 (FY27), with around Rs 4,300 crore expected by March 2026 through the rollout of 20 initiatives aimed at boosting operational efficiency, said Pankaj Kumar, Director (Production), ONGC, at a press conference on Monday.

“We are implementing 20 key initiatives to improve cost efficiency, covering all major operational areas—from drilling and logistics to inventory management and fuel use,” Kumar said.

Efficiency and New Business Ventures

ONGC’s cost-cutting roadmap includes offshore resource optimisation, enhanced drilling efficiency, logistics route rationalisation, inventory reduction, and fuel efficiency improvement measures.

The company is scaling up operations at its Pipavav supply base in Gujarat, which alone is expected to contribute over Rs 1,000 crore in annual savings. Additionally, ONGC plans to enter the oil trading business, which could unlock up to $1 billion in yearly savings. The company is reportedly in talks with several overseas firms to establish a joint venture for oil trading operations.

Production Growth and BP Collaboration

Having managed to reverse the declining trend in crude production, ONGC reported a 1% year-on-year (YoY) increase in crude output in FY2024–25 (FY25). In FY2025–26 (FY26), the company continued to see positive growth, with oil production rising 1.2% in Q1 and 1.1% in Q2.

A major growth driver is ONGC’s collaboration with global energy major BP to enhance recovery from the Mumbai High field. The partnership, formalised in January 2025 with BP as the Technical Services Provider (TSP), is projected to unlock up to $15 billion in incremental revenue over the next decade.

Long-Term Production Outlook

ONGC is targeting a 44% increase in oil production to 65.41 million metric tonnes (mmt) and an 89% boost in gas production over the next 10 years. The company also expects higher output from the KG-DWN-98/2 block in the Krishna-Godavari Basin, projecting 12 mmt of oil and 13.5 bcm of gas in the coming years. BP is assisting ONGC as a subject matter expert in diagnosing root causes and identifying well interventions to enhance production from the block.

Key Highlights:

• 15% overall cost reduction planned by FY27

• Rs 9,000 crore total savings, with Rs 4,300 crore by March 2026

• 20 efficiency initiatives under implementation

• Oil trading business to save $1 billion annually

• BP collaboration at Mumbai High to add $15 billion revenue in 10 years

• Production up 1% YoY in FY25; growth continues in FY26