Oil & Natural Gas Corpn Ltd Management Discussions

CO2

faster in advanced economies than in emerging and developing economies for the first time in nearly three decades. Emissions in advanced economies increased by 0.5%, while growth in emerging market and developing economies slowed to 0.3%—a sharp reversal in the geography of carbon pressure³. This shift added urgency to COP30 in Bel?m, Brazil. The summit moved the debate from commitments to delivery, broadening climate-finance ambitions beyond the earlier USD 100 billion benchmark towards an annual pathway of USD 1.3 trillion by 2035, stronger adaptation support and faster transition funding for developing economies⁴.

In this context, the challenge for the energy sector is no longer just to meet demand, it must manage complexity. Investment priorities, technology pathways, and energy security choices are being rewritten in real time. The next phase will be defined not by the quantity of energy the world consumes, but by the speed, discipline, and resilience with which this transformation is managed.

Few commodities sit as close to the fault line of geopolitics as oil. As Leonardo Maugeri quoted, "oil is the worlds most political commodity, and its price is the worlds most political price." Oil prices are shaped not only by supply and demand but also by power, policy, conflict and producer strategy. The market therefore serves as a real-time barometer of global risk, in which demand resilience and managed supply can be quickly overwhelmed by shifts in influence, control and strategic uncertainty.

That risk has materialized with extraordinary force. The closure of the Strait of Hormuz has triggered what has been described as the largest oil-supply shock in modern history, constraining flows by around 15 mb/d, a scale that few market systems were designed to absorb⁵. In response, IEA member countries collectively released more than 250 million barrels from emergency stocks, primarily government reserves in the Americas and Asia-Pacific⁶. Together with reduced stockholding obligations and strategic petroleum reserve drawdowns, these measures helped offset supply shortfalls, stabilise product availability and moderate extreme price volatility.

At the centre of the disruption is an unusual contraction in global oil demand. For the first time since the pandemic, major agencies project a year-on-year decline of around 1.1 mb/d in 2026, driven by high fuel prices, supply disruptions, and policy interventions aimed at curbing consumption. The cycle is further complicated by an unusually wide divergence among agency forecasts, signaling deep uncertainty about market fundamentals. The IEA and EIA both forecast a contraction of around 1.1 mb/d in 2026, while OPEC projects growth of about 1.0 mb/d, a spread of nearly 2.1 mb/d across global demand estimates⁷.

On the supply side, the market remains equally unsettled, reflecting a sharp contraction followed by the prospect of a pronounced rebound. Global oil supply is expected to decline by nearly 3.9 mb/d in 2026, largely due to disruptions in Middle East output and constrained flows through the Strait of Hormuz, before recovering by about 8 mb/d in 2027 as geopolitical conditions ease and Gulf exports normalise⁶. This instability also weakens OPEC+s traditional balancing role. Although the group began unwinding cuts from April 2025, adding over 3 mb/d on paper, market influence is now increasingly shaped by Irans leverage over the Strait of Hormuz. With the UAEs exit further reducing effective spare capacity, Saudi Arabia remains the only producer with meaningful balancing strength. If it continues to carry this burden alone, its strategy may shift from managing the market to defending market share⁵.

A more enduring headwind may emerge from the demand side, as rising global EV adoption through 2030, supported by energy-security concerns, policy support, and declining costs, is expected to displace transport-fuel demand gradually, exerting sustained downward pressure on oil prices over the medium term⁸ .

Source- Rystad Energy

The oil price outlook is defined by a sharp divergence between near-term tightness and medium-term easing, with prices increasingly reflecting geopolitical signals ahead of physical fundamentals. Brent has already retreated from above USD 100 per barrel to the low USD 80s, supported by optimism over a US–Iran agreement and temporary demand-side buffers, particularly inventory drawdowns in China⁹. Market balances nevertheless remain structurally tight through 2026 because of the delayed recovery in Middle Eastern supply. As supply normalises from mid-2026 and expands more strongly in 2027, outpacing a comparatively muted demand recovery; the market is projected to move into a surplus of around 4–5 mb/d, placing downward pressure on prices⁹. In this environment, the industrys challenge is not merely to respond to price volatility but to reposition for a structurally more uncertain market. Energy companies face a dual imperative: maintain capital discipline during a period of near-term price strength, while preparing strategically for a potential supply overhang as markets rebalance. The emerging cycle of "tightness now, surplus later" underscores the importance of timing, portfolio resilience and cost competitiveness. Long-term value will depend less on short-term price gains than on the ability to navigate volatility, optimise supply chains and sustain growth in an increa singly fragmented, risk-prone and strategically contested energy system⁵.

The global natural-gas market in 2026 is characterised by heightened volatility and fragmented regional dynamics, shaped by geopolitical disruption and shifting trade flows.

9 Rystad Energy, Oil Macro Monthly Report – June 2026

Prices across major benchmarks rose sharply following supply interruptions, with European gas and Asian LNG markets particularly affected. The closure of the Strait of Hormuz, through which a significant share of global LNG transits, drove Asian LNG benchmarks up by nearly 94% in a single month, highlighting the sensitivity of gas markets to trade chokepoints⁸. Although prices subsequently moderated, the episode exposed the structural vulnerability of global gas supply chains.

Demand dynamics reveal a more subdued but regionally divergent trajectory. Global gas consumption growth moderated to 0.8 % in 2025⁸, reflecting weaker industrial activity and milder weather conditions in major markets. Asia-Pacific witnessed stagnation in demand, while Eurasian consumption declined by 2%, indicating a cyclical slowdown in industrial gas usage. Europe and the Middle East, by contrast, recorded stronger consumption, driven by power-generation needs and industrial activity, partially offsetting weakness elsewhere.

Source: International Energy Agency (IEA); World Bank

On the supply side, the market is gradually expanding but remains constrained by disruptions and delays. Global gas supply grew by about 1% in 2025, supported by higher LNG exports and increased output in North America and China⁸. However, reduced Russian pipeline exports and disruptions to Middle Eastern LNG flows limited overall expansion. New LNG projects in the United States, Africa and Australia are expected to add supply, although these gains are being offset by war-related infrastructure damage, project delays and changing trade patterns.

The near-term price outlook reflects a delicate balance between easing disruptions and tight fundamentals. European gas prices are projected to surge by around 25% in 2026, driven by reduced Middle East LNG supply and intensified competition with Asian markets for available cargoes⁸. This competition is particularly critical as Europe seeks to rebuild depleted inventories, increasing its dependence on global LNG flows. As supply disruptions ease, however, prices are expected to decline by about 20% in 2027, indicating a shift towards more balanced conditions⁸. Risks to the gas outlook remain tilted to the upside. Continued geopolitical instability, low inventories in major consuming regions and emerging demand drivers, such as rising electricity use by AI-related data centres, could tighten balances more than anticipated.⁸ Competition between Europe and Asia for LNG imports will remain a major source of price volatility. The gas market is therefore likely to remain structurally complex, caught between supply expansion, demand uncertainty and persistent geopolitical risk.

More Wells, Fewer Wins—A Shift from Scale to Selectivity

Global upstream exploration is experiencing a cyclical revival in 2026, but outcomes remains mixed. More than 1,400 exploration wells¹⁰ expected to be drilled during the year, around 6% more than in 2025, as onshore and offshore campaigns gain momentum. Yet the higher well count has not produced a comparable improvement in discoveries. By May 2026, only around 2.26 billion boe¹⁰ had been discovered globally, reinforcing a sharper reality: exploration is becoming more active, but not necessarily more rewarding.

Licensing activity remains notably subdued. By the end of May, global exploration acreage awards totalled around 284,000 sq km, putting 2026 on track to be one of the weakest licensing years of the past decade. Although pockets of activity remain in Southeast Asia and the Gulf of America, the second half of the year will depend heavily on whether larger licensing rounds in countries such as Libya and Indonesia materialise at scale¹⁰.

Source: Rystad Energy

There is, however, a constructive signal beneath the caution: offshore commercial exploration success rates are recovering. After falling to 25% in 2024, offshore success improved to 32% in 2025 and has reached 36% year-to-date in 2026. Disciplined offshore campaigns, particularly in high-quality basins, can therefore still deliver attractive outcomes. The recovery remains incomplete, however, with the success rate still below the 39% recorded at the end of 2023. Exploration is improving, but it has not yet regained its earlier strength¹⁰.

Source: Rystad Energy

Conventional exploration spending has followed a pronounced boom-bust-recovery cycle over the past two decades. After rising at an average of ~13% annually between 2000 and 2013 to peak at around USD 114 billion, before falling by more than 50% to about USD 54 billion by 2016 following the oil-price downturn. Spending then stabilised at around USD 52 billion a year between 2017 and 2019. The COVID-19 shock triggered a further contraction, taking expenditure below USD 45 billion in 2020–21. Since then, the recovery has been gradual: spending returned to about USD 50 billion in 2022–23, remained broadly stable through 2025 and is expected to stay largely flat in 2026, supported mainly by offshore activity¹⁰.

However the deeper challenge lies in exploration efficiency. Although spending has recovered from the pandemic trough and stabilized at nearly USD 50 billion, but discovered volumes have not kept pace. Annual discoveries were about 6 billion boe in 2025, well below the 20 billion boe recorded in 2015. At the same time, finding costs rose from roughly USD 2–4 per barrel during 2015–22 to around USD 6 per barrel in 2025, reflecting lower discovered volumes against a relatively stable spending base. The industry is spending more selectively, but it is not yet finding more effectively¹⁰. This has pushed explorers toward a more selective and disciplined model. Operators are targeting fewer reservoirs, concentrating capital in higher-confidence plays and reducing broad, dispersed exploration exposure. The number of unique reservoirs targeted has fallen from 433 in 2019 to 288 in 2025¹⁰, demonstrating how exploration portfolios are narrowing.¹⁰ This is not a retreat but a refinement. The market increasingly rewards sharper technical screening, deeper basin understanding and the ability to convert selective exposure into commercial barrels at acceptable finding costs.

The exploration landscape is therefore improving cyclically but remains structurally tougher, more expensive, and more selective. Higher activity alone will not guarantee stronger outcomes. The winners will be companies that combine disciplined prospect selection, strong basin positions, cost control, and commercial agility. In this new exploration cycle, portfolio quality matters more than portfolio size. The market is no longer rewarding broad exposure; it is rewarding conviction in the right basins.

Investment in Energy

Shifting investment priority toward Security & Resilience

Global energy investment is undergoing a decisive shift, increasingly shaped by energy security imperatives amid geopolitical risk. Total capital flows are expected to reach around USD 3.4 trillion in 2026¹¹. Although a substantial share continues to flow into clean energy, investment in fossil-fuel supply, particularly coal, oil and gas, and LNG, remains resilient at approximately USD 1.2 trillion¹¹, reflecting the continued importance of hydrocarbons in ensuring supply reliability during a period of heightened disruption. Much of this capital is already committed, limiting near-term flexibility and reinforcing the structural inertia of global energy-investment cycles.

Upstream oil and gas investment remains broadly stable but disciplined. Industry estimates place total upstream investment at about USD 619 billion in 2026, slightly below 2025 levels, as companies prioritize capital discipline despite elevated prices and geopolitical uncertainty¹². Within this restrained environment, deepwater is the strongest growth segment, with investment rising by around 5% in 2026¹² and medium-term growth supported by Brazil and Guyana. Capital is shifting away from aggressive expansion towards short-cycle assets, brownfield developments and selective offshore opportunities as operators prioritise returns, risk mitigation and capital efficiency over volume growth¹². Gas and LNG represent the leading edge of hydrocarbon investment. Capital allocated to natural-gas and LNG developments is projected to reach around USD 330 billion in 2026, the highest level in a decade, driven by demand for flexible, scalable and relatively lower-emission fuel options¹¹. LNG is central to this reset: more than 100 bcm of export capacity was sanctioned in 2025, while spending on export terminals is expected to more than double in 2026 as major liquefaction projects, particularly in the United States, enter peak construction¹¹. More than 230 bcm of LNG capacity is under development outside the Persian Gulf, signalling a strategic shift towards more diversified supply chains and less dependence on traditional chokepoints. This wave of investment will not rebalance markets immediately, however, as cost inflation, project slippages and delays to major Middle Eastern expansions postpone relief. LNG investment is therefore rising not merely to meet demand but to build resilience in a world where energy security again commands a premium¹².

Regional investment patterns point to a redistribution rather than an expansion of capital. While conflict-related disruption is constraining near-term investment in the Middle East, growth is increasingly concentrated in Africa, Central and South America, and offshore basins, where new developments and recent discoveries are attracting capital. At the same time, national oil companies are accounting for a growing share of upstream spending, indicating a shift towards state-backed investment strategies aligned with long-term resource security¹¹.

Alongside conventional energy, investments in low-carbon technologies, energy storage and electrification infrastructure continues to strengthen, reflecting greater emphasis on long-term energy security and decarbonisation. Global investment in renewables, nuclear power, grids, storage, low-emissions fuels, efficiency and electrification is expected to reach around USD 2.2 trillion in 2026, nearly twice the amount directed to fossil-fuel supply. Grid investment is projected at about USD 550 billion, while spending on battery storage is expected to exceed USD 100 billion, underscoring the growing importance of flexibility and reliability in an electricity-driven energy system. Energy security is therefore being pursued not only through hydrocarbons but through a broader portfolio of cleaner, more resilient solutions¹¹.

Overall, the global energy investment landscape is being reshaped by a dual imperative of energy security and energy transition. While capital continues to flow toward conventional sources, investment in low-carbon technologies keeps on accelerating. The result is a more diversified mix in which reliable supply and the transition to lower-carbon energy remain central to the evolving global energy system.

Mergers & Acquisition

Consolidation Deepens as Capital Chases Scale

The upstream M&A market continues to be shaped by three dominant themes—North American mega-consolidation, growing investor appetite for gas-linked assets, and strategic portfolio repositioning. In a disciplined capital environment, buyers are prioritising resource quality, inventory depth, operating synergies and LNG-linked growth over production expansion alone. North America has consequently reinforced its position as the centre of gravity for upstream dealmaking, while international transactions remain more selective and strategically focused.

A series of large transactions has reshaped the competitive landscape. ExxonMobils USD 64.5 billion acquisition of Pioneer Natural Resources, Chevrons USD 60 billion acquisition of Hess, Shells USD 16.4 billion acquisition of ARC Resources, the Devon–Coterra merger and Mitsubishis USD 7.5 billion acquisition of Aethon Energy illustrate the markets preference for high-quality shale resources, scalable gas positions and basin-level operating synergies. Shells ARC transaction was its largest acquisition since the BG deal in 2015, while the Devon–Coterra merger helped lift US shale M&A activity to approximately USD 39 billion in the first quarter of 2026, reinforcing consolidation as a route to value creation¹³.

Although deal flow has been uneven in 2026, underlying momentum remains constructive. Global upstream M&A value fell to around USD 5.55 billion in March, rebounded to USD 20.4 billion in April and moderated to approximately USD 6.8 billion in May. The opportunity set nevertheless remains substantial: the marketed deal pipeline was estimated at roughly USD 144 billion in June 2026, with nearly USD 90 billion concentrated in North America.13 Appetite for inorganic growth therefore remains strong, even as buyers and sellers navigate uncertainty and changing valuation expectations¹³.

Source: Rystad Energy

Valuation trends indicate an active but increasingly disciplined market. The average valuation of producing resources declined from USD 4.5/boe in the first quarter of 2026 to USD 3.8/boe in the second quarter, while valuations for resources under development fell from USD 3.1/boe to USD 2.4/boe. Discovery resources, by contrast, attracted stronger interest, with valuations rising from USD 1.5/boe to USD 2.1/boe, reflecting renewed appetite for future growth. Reserve-based valuations also softened: 1P reserves declined from about USD 10.6/boe to USD 9.6/boe, and 2P reserves from approximately USD 8.6/boe to USD 7.2/boe.¹³ Together, these movements reflect sustained valuation discipline amid macroeconomic uncertainty¹³.

North America remains the centre of gravity for upstream M&A, accounting for nearly 85% of global deal value in April 2026 and around 80% in May, supported by deep shale inventories, portfolio high-grading and continued consolidation. Elsewhere, dealmaking is smaller but more targeted, focusing on farm-ins, exploration acreage and strategic portfolio moves. BPs 40% interest in six blocks in Uzbekistan, its entry into offshore Namibia, Inpexs 10.67% stake in Australias Browse project and selective transactions in Latin America and Africa show that capital continues to pursue advantaged resources, gas growth and strategic optionality. In short, scale leads the market, but selectivity defines it¹³.

The upstream M&A outlook remains firm, supported by shale consolidation, rising LNG demand, private capital

14 MoSPI, PIB, June 2026

15 PIB, Union Budget 2026–27: Sustaining and Strengthening Economic Growth and portfolio optimisation. Valuation gaps, Middle East tensions and regulatory scrutiny may slow execution, but they are unlikely to alter the direction of travel. The market is clearly consolidating around scale, gas competitiveness and portfolio quality—with North American shale and LNG-linked assets leading the chase.

3. Indian Economy

Growth holds firm as Inflation returns to centre stage

As the global economy contends with slowing growth, geopolitical fragmentation and recurring disruptions to trade and supply chains, India continues to stand out as a source of stability, resilience and opportunity. Its strength lies in the convergence of scale, demography and domestic demand, supported by a rapidly expanding manufacturing and services ecosystem. A young workforce, a growing middle class, accelerated digitalisation and sustained policy reforms are transforming India from a high-growth emerging market into a pivotal pillar of global economic expansion. In a world searching for new engines of growth, Indias structural strengths and long-term development trajectory position it among the most compelling economic stories of the decade.

Indias momentum is reflected in its economic performance. Real GDP is estimated to have grown by 7.7% in FY26¹⁴, keeping the country firmly positioned as the worlds fastest-growing major economy. The expansion was supported by robust consumption, continued public expenditure and a stable financial system, while GST rationalisation in FY25 provided additional support by improving affordability and reinforcing demand momentum.

A key pillar of Indias economic resilience continues to be the Governments sustained emphasis on infrastructure-led growth and long-term value creation. Reinforcing this commitment, the Union Budget 2026–27 increased public capital expenditure to a record Rs.12.2 lakh crore¹⁵ marking a further step-up from the previous years elevated levels. This continued capital formation push is not merely building assets; it is raising productivity, creating jobs, and generating wider multiplier effects across the economy. However, the macroeconomic narrative in FY27 is increasingly being shaped by the balance between growth resilience and inflation management, with Inflation returning to the centre of the policy debate. After a period of benign price conditions, renewed pressures from elevated crude oil prices, supply disruptions and weather-related uncertainties arising from El Nino have complicated the outlook. While headline inflation remains within the RBIs tolerance band, costlier imported commodities and geopolitical tensions are narrowing the policy comfort zone. The challenge ahead is therefore not the absence of growth, but the ability to preserve its quality while keeping inflation expectations firmly anchored.

16 RBI Monetary Policy Statement and MPC Resolution, June 2026

17 International Energy Agencys (IEA) Oil 2025

This delicate balance is reflected in the RBIs measured policy approach, which seeks to preserve growth momentum without losing sight of inflation and external-sector risks. In its June 2026 policy review, the RBI retained the repo rate at 5.25% and maintained a neutral stance, signalling confidence in domestic fundamentals while acknowledging rising external risks. At the same time, the central bank revised its FY27 GDP forecast downward to 6.6% and raised its inflation projection to 5.1%, reflecting concerns over higher energy prices, supply-chain disruptions and monsoon-related uncertainties¹⁶.

Beyond rate action, the RBI has also focused on strengthening Indias forex reserves and safeguarding balance-of-payments stability amid rupee pressure and higher energy import costs. Through calibrated interventions, regulatory easing and SWAP support to banks for mobilising FCNR deposits and ECB, the central bank has sought to attract foreign exchange inflows. These measures are expected to add an important layer of resilience as global volatility and geopolitical shocks continue to test Indias macroeconomic stability.

For India, FY27 will be less about chasing speed and more about holding the line—keeping growth steady, prices contained and policy agile in a world that remains hard to predict.

4. India Energy Snapshot

Balancing Security, Sustainability and Scale

Indias growth story is being written in megawatts, molecules and mobility, with energy at the epicentre of its economic transformation. As India advances toward a USD 5 trillion economy, rapid industrialisation, urbanisation and infrastructure expansion are converging with the aspirations of 1.4 billion people—driving energy demand at an unprecedented scale. Yet, Indias energy journey is more than powering growth; it is about democratizing access, lifting millions out of energy poverty and ensuring that development reach every corner of the country.

As the worlds third-largest energy consumer and a country that imports more than 88% of its crude oil, India stands at the crossroads of vulnerability and opportunity. Every oil-price shock tests its growth, inflation and external balances. Higher crude prices widen the import bill, increase foreign exchange outflows, pressure the rupee and transmit quickly into transport, industry and household costs. Yet Indias demand story remains unmatched, with oil consumption projected to rise from 5.6 mb/d in 2025 to nearly 6.6 mb/d by 2030¹⁷.

Indias energy strategy is therefore moving beyond supply management toward a broader reset: widening import basket, enhancing strategic reserves and accelerating critical infrastructure to cushion the economy from external shocks. At the same time, Indias commitment to achieve net-zero emissions by 2070; is moving from ambition to acceleration. Installed renewable capacity has crossed 230 GW, supported by the addition of more than 50 GW¹⁸ in the last fiscal year, while the country remains firmly on course toward its 500 GW non-fossil fuel capacity target by 2030. The shift is no longer confined to large-scale projects; through PM Surya Ghar: Muft Bijli Yojana, rooftop solar- its carrying the transition into homes, democratising clean energy access and turning millions of consumers into active participants in Indias distributed energy future.

Even as renewables scale rapidly, coal continues to provide the backbone of Indias power system, meeting the bulk of electricity demand and ensuring grid stability during period of strong seasonal demand. Recognising the need for a balanced energy mix, India is pursuing a pragmatic approach that combines the reliability of conventional energy with the sustainability of emerging technologies. This strategy is further reinforced by a renewed push for nuclear energy. The GoI proposed Rs.20,000 crore SHANTI (Strategic Hydrogen and

Advanced Nuclear Technology Initiative)¹⁹ aims to accelerate the development of advanced nuclear technologies and small modular reactors, supporting the broader national objective of achieving 100 GW of nuclear power capacity by 2047.

As Indias share of global energy demand continues to rise, the real challenge is no longer meeting demand alone, but building an energy ecosystem capable of withstanding future shocks while supporting long-term prosperity. Through a combination of conventional energy security, clean energy expansion and technology-led transformation, India is steadily redefining the contours of its energy future. In doing so, it is emerging not only as a major energy consumer, but also as a key architect of the global energy landscape in the decades ahead.

Crude Oil & Natural Gas production

Domestic crude oil production in FY26 stood at 27.95 Million Metric Tonnes (MMT)²⁰ compared with 28.70 MMT in FY25. ONGCs crude production in FY26 was 20.50 MMT against 20.89 MMT in FY25. ONGC accounted for more than 73% of domestic crude oil production.

Natural Gas output in FY26 stood at 34.78 Billion Cubic Metres (BCM), compared with 36.11 BCM in FY25. In FY26, ONGCs domestic output stood at 19.97 BCM, against 20.19 BCM in FY25. ONGC contributed approximately 57% of Indias natural gas output²⁰.

Consumption of Petroleum Products

Domestic petroleum products consumption in FY26 increased by around 1.7% to approximately 243.2 MMT²⁰. Petrol consumption rose by 6.5% to 42.6 MMT²⁰, while diesel sales grew by 3.6% to 94.7 MMT²⁰. LPG consumption increased by 6% to 33.2 MMT²⁰, supported by government initiatives for clean cooking. Meanwhile, ATF demand rose by 3.9% to 9.2 MMT²⁰, driven by robust growth in aviation traffic and the near-complete recovery of air travel. Despite headwinds in the final month of the fiscal year due to the war, consumption across these commodities maintained an upward trend.

Import and Export

In FY26, Indias crude oil imports rose marginally by 0.9% to 246.4 MMT²⁰, compared with 242.1 MMT in FY25. Despite the increase in import volume, the import bill declined to USD 123.1 billion²⁰, from USD 137.2 billion in previous year, owing to lower international crude prices. Import dependence, on a consumption basis, edged higher to 88.7% in March 2026, reflecting stagnant domestic output and growing fuel

20 PPAC Ready Recknor 2025-26 demand. On the export front, petroleum product shipments declined slightly to 61.4 MMT in FY26²⁰, from 65.1 MMT a year earlier, primarily due to higher growth in domestic consumption, relative to production. LNG imports stood at 34.216 BCM in FY26, compared with 35.72 BCM in FY25²⁰, mainly due to disruption in trade flow arising from war.

Crude oil Price: Indian Basket

Dated Brent crude prices remained largely subdued during most of FY26, trading broadly in the USD 60–70/bbl range through mid-2025 and early 2026. Overall, crude prices displayed significantly higher volatility due to geopolitical crisis. Despite this, the average Dated Brent price during FY26 stood at USD 70.45/bbl, lower than the previous years average of USD 78.91/bbl. Similarly, the Indian basket averaged USD 70.99 per barrel in FY26, compared with USD 78.56/bbl in the previous year.

Domestic Upstream Reforms and Initiatives

The Oilfields (Regulation and Development) Amendment Act, 2025 marks a significant reform of Indias upstream regulatory framework, aimed at attracting investment and accelerating domestic hydrocarbon development. The Act introduces a unified petroleum lease regime, expands the scope of "mineral oils" to include unconventional resources such as shale oil, shale gas, tight oil, tight gas and gas hydrates, and provides greater clarity across the exploration-to-production value chain. It also encourages infrastructure sharing, strengthens environmental and safety standards, and simplifies administrative processes to create a more predictable and investor-friendly ecosystem. Complementing this reform, the Petroleum and Natural Gas Rules, 2025 operationalise the new framework by introducing time-bound approval mechanisms, including a 180-day deadline for key approvals. Together, these measures are expected to reduce procedural delays, improve ease of doing business, accelerate HELP implementation, encourage greater upstream investment and support Indias broader energy security objectives.

In 2025, the Government of India launched "Samudra Manthan" (National Deep Water Exploration Mission), a bold push to unlock Indias offshore hydrocarbon potential and reduce import dependence. Focused on deepwater and ultra-deepwater basins along Indias coastline, the mission seeks to accelerate exploration through advanced technologies, expanded acreage offerings and increased offshore drilling activity. As Indias energy demand continues to rise, Samudra Manthan represents a strategic effort to transform untapped ocean resources into long-term energy security, strengthening domestic production while supporting the countrys broader vision of energy self-reliance.

The Government has also undertaken a significant royalty rationalisation exercise to improve the investment attractiveness of Indias upstream sector and create a more predictable fiscal regime. The revised framework harmonises royalty methodologies across contractual regimes, reduces the effective royalty burden on crude oil and natural gas producers, and introduces a uniform formula for determining post well-head cost. By eliminating long-standing inconsistencies, the new royalty regime is expected to enhance investor confidence, improve returns on upstream investments, stimulate E&P activity and support the broader objective of increasing domestic hydrocarbon output and strengthening Indias energy security.

In April 2023, the Government revised the domestic gas pricing framework by linking prices to 10% of the Indian crude basket, improving transparency and alignment with market conditions. For gas produced from the nomination

fields of ONGC and OIL, the framework prescribed a floor price of USD 4/MMBtu and a ceiling of USD 6.50/MMBtu, which was later revised to USD 6.75/MMBtu for FY‘26 and USD 7.00/MMBtu for FY27. To encourage incremental output, the policy also provides a 20% premium for gas produced from new wells. Meanwhile, gas from HPHT and deepwater fields continues to enjoy pricing freedom within a higher ceiling of USD 8.9/MMBtu for April–September 2026, supporting E&P in technically challenging areas.

Operational Performance:

At the heart of Indias oil and gas story stands ONGC; an energy anchor strengthening the countrys domestic energy base and long-term energy security. Amid shifting market dynamics and operational headwinds, the ONGC Group continued to demonstrate adaptability, sustaining steady performance across its domestic and international portfolio. For FY26, Oil & Gas production of ONGC Group, including PSC-JVs and from overseas Assets has been 50.14 MMTOE, compared with 51.36 MMTOE in FY25. The oil and gas production profiles from domestic and overseas assets over the last five years are given below:

Proved reserves

** includes reserve for equity instruments fair valued through other comprehensive Income

Notes:

The Debt Equity ratio for FY 2025-26 is 0.02 against 0.03 in FY 2024-25 i.e. reduction by 33.33%, this is cumulative impact of decrease in Total Borrowings by Rs. 5,843 million and increase in Total equity by Rs. 154,869 million. The decrease in Total Borrowings is mainly due to repayment of 5.25% ONGC 2025 Series I Non-Convertible Debenture amounting to Rs. 5,000 million and decrease in Working Capital Loan by Rs. 3,279 Million during FY26. Financial performance: ONGC (Consolidated) Rs. ( Million)

* includes reserve for equity instruments fair valued through other comprehensive income # Return on capital employed (ROCE) is calculated without considering the impact of exceptional items. In case "exceptional items" is also considered for calculating PBIT, ROCE would be 22.49% for FY26 and 20.61% for FY25.

5. Strength & Weakness

For decades, ONGC has stood at the forefront of Indias quest for energy security, turning geological promise into flowing barrels. Since inception, ONGC has produced 2,152 MMTOE of oil and gas, underscoring its pivotal role in powering the countrys energy needs. In FY26, ONGC reinforced this leadership by producing 73% of Indias crude oil and 57% of its natural gas, commanding a 64.3% share in the nations total hydrocarbon output. Its strength lies not only in the scale of its resource base, but also in its deep technical capability and proven ability to sustain production in an increasingly complex upstream environment. Backed by a skilled workforce, strong reservoir management and technology-led field optimisation, ONGC continues to unlock value from both mature and frontier assets, mitigating natural decline while maximising recovery from existing reserves.

As the frontier of hydrocarbon exploration shifts into deeper and more challenging waters, ONGC continues to leverage its technical expertise and offshore capabilities to unlock Indias next promising basins. During FY26, the Company drilled four exploratory wells in the ultra-deep waters of the Andaman Basin and acquired 508 LKM of 2D and 3,377 SKM of 3D seismic data in the Mahanadi Basin. It also undertook AND-P-1, the first stratigraphic well in the ultra-deep waters of the Andaman Basin under a Government-sponsored initiative. These efforts reinforce ONGCs strategic position in frontier exploration and its ability to create future resource opportunities in support of Indias long-term energy security.

Further strengthening its E&P portfolio, ONGC made three hydrocarbon discoveries during FY26 in its operated acreages, comprising two new prospects and one new pool discovery in the shallow-water region of Mumbai Offshore. These discoveries underscore the Companys ability to replenish its resource base and unlock value from mature as well as emerging hydrocarbon provinces, strengthening its long-term production outlook and reinforcing its position as Indias leading exploration and production company. ONGCs downstream and petrochemical presence through its subsidiaries adds strategic depth to its business model, cushioning the inherent volatility of E&P. During FY26, HPCL achieved refinery throughput of 26.04 MMT and expanded its retail network to over 25,000 outlets, reinforcing its position in Indias competitive fuel-marketing landscape. MRPL delivered refinery throughput of 17 MMT, reflecting steady operational efficiency, while OPaLs steady operational performance and exit from the SEZ framework unlocked greater commercial flexibility and margin potential. As chemicals and petrochemicals emerge as anchors of long-term hydrocarbon demand, these businesses position ONGC beyond the wellhead and support the evolution of a more balanced, future-ready energy enterprise.

As the international E&P arm of ONGC, ONGC Videsh continues to serve as the Groups gateway to the global energy landscape beyond Indias domestic basins. With participation in 29 projects across 14 countries—spanning producing, development, exploration and pipeline assets—ONGC Videsh contributed 9.67 MMTOE in FY26. Its international portfolio brings geographic diversity, resource optionality and long-term resilience to ONGCs growth story.

However, ONGCs scale and asset maturity also bring structural challenges. With a significant share of domestic production coming from ageing fields, maintaining output now demands sharper technology deployment, sustained capital investment and disciplined field management. Natural reservoir decline, ageing infrastructure and rising lifting costs continue to pressure production performance, while reserve replacement depends on exploration success in a geological setting where large discoveries are increasingly harder to find. In this environment, enhanced recovery, reservoir optimisation and frontier exploration remain central to ONGCs long-term growth. This challenge is further compounded by Indias oilfield services ecosystem, which has not fully kept pace with the rising technical complexity of upstream operations. Continued dependence on imported advanced technologies, specialised services and global equipment supply chains raises costs, slows access to cutting-edge solutions and exposes projects to foreign exchange volatility. Bridging this gap will require faster domestic capability building and deeper technology partnerships with global OFS leaders.

6. Opportunities & Threats

Against the backdrop of rising import dependence, ONGCs next growth opportunity lies in a dual mandate: unlocking frontier basins while maximising value from proven assets. Indias sedimentary basins span nearly 3.4 million sq. km, yet less than 10% has been adequately tested through drilling. With estimated hydrocarbon potential of around 42 BTOE, of which only about 12 BTOE has been discovered, nearly 30 BTOE remains yet to be found—offering a sizeable runway for future exploration and production growth. At the same time, ONGCs legacy producing assets remain a powerful near-term growth lever. The Western Offshore Basin continues to offer significant value-accretion opportunities. Having powered Indias hydrocarbon growth for over five decades, Mumbai High and the Bassein & Satellite fields still account for nearly 60% of the Companys production and retain significant untapped potential. The extensive reservoir knowledge, operating experience and technological expertise built through managing these complex brownfield assets provide ONGC with a distinct advantage in enhancing recovery, extending field life and unlocking additional reserves. Equally, learnings from these legacy assets provide a strong foundation for pursuing emerging opportunities in more challenging offshore plays, including deepwater and ultra-deepwater areas.

With maturing Western Offshore fields and progressive natural decline in output, ONGC has moved from conventional field management to a more partnership-led production-revival strategy. A key step in this direction was the deployment of bp as Technical Services Provider (TSP) for the Mumbai High field in 2024. Based on early positive results, ONGC has now onboarded bp as TSP for the entire Western Offshore portfolio. Through this arrangement, ONGC aims to draw on bps global expertise in mature-field operations, advanced reservoir management and technology-led intervention capabilities to arrest decline, enhance recovery and unlock incremental barrels from the existing resource base. This initiative presents a significant opportunity for ONGC to revitalise mature fields and convert legacy offshore assets into renewed engines of production growth.

ONGC is entering FY27 with a clear pathway to strengthen its production trajectory through a focused mix of discovery monetisation, digital transformation and cost optimisation. The Daman Upside Development Project (DUDP), monetised during the last fiscal year, along with the commissioning of the Eastern Offshore project, is expected to support incremental gas output and improve production. At the same time, digital initiatives such as SANJAI, IDAS and the newly installed POCC are sharpening real-time decision-making, asset surveillance and operational efficiency. On the cost front, ONGCs shift toward a more pragmatic approach, driven by efficient demand planning for high-value cost elements such as rigs and vessels, reflects a more agile and competitive procurement strategy. Together, these initiatives strengthen the foundation for enhancing production, improving operational efficiency and unlocking greater value from the Companys asset base.

Considering the need for having sufficient domestic strategic oil reserves capacity to meet the demand during uncertain times, GoI has entrusted ONGC with the responsibility of creating Strategic petroleum reserves capacity at Mangalore. ONGC Board has accorded in-principle approval for the development of 1.75 MMT capacity Strategic Petroleum Reserves as a project of national importance along with associated facilities at Mangalore (Phase-I Extension) in line with the directives of MoP&NG.

Indias petrochemical sector is set to move from promise to scale by expanding capacity, deepening refining integration and emerging as one of the worlds most compelling demand-led growth markets, with demand growing at 10-12%. ONGC maintains a significant presence in petrochemicals through OPaL, MRPL, HMEL and HRRL, which are integral not only to its diversification strategy but also to Indias ambition of self-reliance in this sector. However, the opportunity is not without near-term pressure.

Despite strong domestic demand, Indias petrochemical industry is grappling with the unintended consequences of Chinas aggressive capacity build-out. Years of capacity expansion in China have created a global supply glut, flooding regional markets with low-cost petrochemical products and exerting sustained pressure on prices and margins. Indian producers, already constrained by limited domestic capacities in several product segments, are increasingly competing against cheaper imports rather than fully benefiting from rising local consumption. The result is a paradoxical market environment: demand remains healthy, yet profitability stays under strain as oversupply suppresses spreads and erodes pricing power. While stricter environmental norms are narrowing the long-term space for fossil fuels, Indias heavy reliance on imported hydrocarbons, 88% of crude demand and 50% of gas demand, offers a strategic window for domestic energy producers to redefine their growth trajectory. ONGC is seizing this opportunity by balancing energy security with sustainability. With annual emissions of approximately 8.8 million tonnes of

to achieving net-zero Scope 1 and Scope 2 emissions by 2038, supported by planned investment of Rs. 2 trillion to offset emissions. As part of this roadmap, ONGC is