Can ONGC future-proof itself beyond oil?

For decades, Oil and Natural Gas Corporation (ONGC) has been India's flagship upstream oil producer-a profit-generating machine that met a sizable chunk of the country's hydrocarbon needs. But the energy world is shifting rapidly, and so is ONGC's playbook. Underneath its decades-old oil and gas empire, the company is quietly building a hedge against what it sees as an inevitable future: a world awash in oil but short on profits. Why ONGC's oil-only model is no longer safe The writing on the wall is clear, and ONGC's management has not shied away from admitting it. In a candid interview, ONGC's Director (Strategy), Arunangshu Sarkar, acknowledged: "It will be difficult for a company like ONGC to survive in a low oil-price regime. The new businesses provide a hedge for such a scenario." This is not corporate posturing. It is an acceptance of a structural shift in global oil dynamics. Structural risks to oil demand The oil market has begun to show visible signs of long-term stress. Globally, 45 per cent of oil demand comes from road transport-diesel and petrol that power vehicles (according to Vitol, a multinational energy and commodity trading company). This demand is projected to peak as soon as 2027-2030 (according to BloombergNEF and the International Energy Agency), thanks to the rapid adoption of electric vehicles (EVs), biofuels and alternative mobility solutions. For an upstream oil company that sells crude to refiners, this is a ticking time bomb. Rising supply, falling prices Adding to the worry is the abundance of global oil supply. Discoveries over the past two decades and production ramp-ups, particularly in the US and the Middle East, mean that oil prices are unlikely to be sustained at the highs seen in the past. Even when prices spike temporarily due to geopolitical events, they are unlikely to hold. ONGC management has clearly said that the era of structurally high oil prices may be behind us. Domestic headwinds On the home turf, ONGC's problems are equally pressing. Its crude oil production has been stagnant to declining for years. Mature fields in Mumbai Offshore and elsewhere are yielding less, and maintaining output has become costlier.

This article was originally published on April 05, 2025.