ONGC concentrates on reducing operating expenses

17 Oct 2023 , 12:50 PM

According to the finance head of Oil and Natural Gas Corporation (ONGC), operating costs are rising as a result of rising oilfield service prices that have climbed by roughly a quarter in just a year and higher maintenance costs associated with the company’s outdated capital equipment, such as compressors and turbines.

Pomila Jaspal, the head of ONGC’s finance department, told ET that ‘the cost of operation has increased, and as director (finance), my main focus now is how we can reduce the cost.’ Of course, we can’t cut back on upkeep and repair. At the same time, we can cut back on unnecessary expenses like vessel and rig downtime. We’re attempting to lessen that.

According to her, the company intends to increase efficiency through ‘economies of scale, reducing manpower cost, and general administration cost’ in order to keep operating expenses in check.

As stated by Jaspal, ‘The operating cost is also high because our capital equipment has been very old,’ and he added that every year, 28 to 32 compressors and turbines are sent over to exclusive vendors for refurbishment.

Over the past year, prices for oilfield services—including those for rigs, barges, helicopters, and other services—have increased significantly. A record number of rigs have been recruited by Gulf producers, led by Saudi Arabia. Deep-sea rigs have also accumulated in huge numbers in Brazil. Indian explorers are now having a hard time finding enough rigs, let alone ones at reasonable prices.

‘Every time we open the bids for rigs, they come at a very escalated price,’ Jaspal stated.

Rates for oilfield services typically fluctuate along with oil prices. Exploration and development activities are energized by high oil prices, which increases demand for services and raises their costs. Finding offshore rigs is more difficult for ONGC than finding onshore rigs because the latter are more readily available.

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