Oil and Natural Gas Corp Ltd (ONGC) Q3 FY22 Earnings Call Transcript

Oil and Natural Gas Corporation Limited  (NSE:ONGC) Q3 2022 Earnings Conference Call dated Feb. 14, 2022

Corporate Participants:

Anurag Sharma — Director, Onshore & Director, Finance

Rajeev Kumar — Chief of Accountants & Financial Reporting Services

Nirmal Kumar — General Manager, Corporate Planning & Strategy, ONGC Videsh

Vinod Hallan — Chief Financial Officer, ONGC Videsh

Analysts:

Unidentified Participant — — Analyst

Kirtan Mehta — BOB Capital Markets — Analyst

Probal Sen — ICICI Securities — Analyst

Gagan Dixit — Elara Capital — Analyst

Mayank Maheshwari — Morgan Stanley — Analyst

Puneet Gulati — HSBC — Analyst

Vishnu Kumar — Spark Capital — Analyst

Presentation:

Operator

Ladies and gentlemen, a very good morning. Thank you for standing by, and welcome to the IR call for ONGC Limited. During the entire course of presentation, all participants’ lines will be in listen-only mode. Later, we are going to connect you with the question-and-answer session and instructions on how to participate will follow at that point of time.

I would like to welcome and hand over the call proceedings to the esteemed speaker, Mr. Anurag Sharma, Director of Finance, to the conference call. Sir, a very good morning. You can begin now.

Anurag Sharma — Director, Onshore & Director, Finance

Good morning, ladies and gentlemen. I am Anurag Sharma, Director Onshore. I’m holding additional charge of Director Finance, ONGC. I welcome you all on this ONGC earnings call for Q3 and nine month FY22. Thank you all for joining us on the call. I’m joined here by my colleagues, Mr. [Indecipherable], ED OSD; Mr. Anupam Agarwal, Chief Corporate Finance; Mr. Mukul from Corporate Planning session; Mr. Rajiv Kumar, Chief Accountants and Financial Reporting Services; Mr. Atul Chaturvedi, Chief Commercial and Treasury; Mr. Rakesh Kaul, Chief of BD JV Group; Mr. Sanjay Shrivastava, Chief of CM Energy Group; Mr. Sanjay Bharti from Corporate Accounts; Mr. Vinod Hallan, CFO from ONGC Videsh; Mr. Nirmal Kumar, also from ONGC Videsh; and Mr. Prakash Joshi from Investor Relations side.

ONGC has compiled its financial results for the quarter and nine months ended 31 December 2021, which had been reviewed by the statutory auditors. The financial results have already been released on the 11 February 2021 through a press note and sent to the stock exchanges. This has also been sent to the analysts who are there on our mailing list.

Here is a brief synopsis of the results. The company has earned a net profit that is profit after tax of INR8,754 crores during the third quarter of FY22 as against INR1,258 crores during third quarter of FY21, which is an increase of INR7,506 crores or 596.7%. The profit after tax for nine month FY22 has increased by INR26,923 crores, which is 596.9% that is from the restated profit after tax of INR4,512 crores in nine with FY21 to INR31,446 crores in nine month FY22. The increase in net profit during the current quarter and 9 month FY22 is on account of higher sales revenue mainly due to has crude oil, natural gas and price realizations, higher other income that is dividend income and opting for lower tax regime, under Section 115BAAA of Income Tax Act,1961.

The sales revenue for Q3 FY22 and 9 month FY22 has increased by INR11,375 crores, which is 67% and by INR28,810 crores, which is 61.6% as against the corresponding quarter and 9 month of previous year. The billing and net of VAT and CST for crude during the third quarter of the current fiscal was at USD75.73 per barrel as against USD42.2 per barrel in the same period of last year. That is an increase of USD32.53 per barrel. The exchange rate of rupee versus dollar stood at INR74.96 vis-a-vis INR73.74. This realization of crude and rupee terms stood at $5,677 per barrel in Q3 — INR5,677 per barrel in Q3 FY22 vis-a-vis INR3,186 per barrel in Q3 FY21, which is an increase of INR2,491 per barrel, 78.2% in INR terms.

Similarly gross billing for crude during the first 9 months of the current fiscal was it the USD70.26 per barrel as against USD37.74 per barrel in the same period of last year. That is an increase of USD32.52 per barrel. The exchange rate of rupee versus dollar stood at INR74.27 vis-a-vis INR74.60. This realization of crude in rupee terms stood at INR5,218 per barrel in 9 month FY22 vis-a-vis INR2,816 per barrel in 9 months FY21, which amounted to an increase of INR2,402 per barrel, which is 85.3% and in INR terms.

Other income for Q3 FY22 and 9 months FY22 has increased by INR709 crores, which is 90.7% and by INR2,017 crores which is 63.9% as against the corresponding Q3 and 9-month period of previous year, mainly due to increase in the dividend income. The expenditure on the statutory levies that is royalty and cess have increased during Q3 FY22 by INR2,893 crores, which is 70.6% and by INR8,053 crores, which is 73.2% in comparison with similar period of previous year. This increase in statutory levies is attributable to increase in sale price of crude oil and natural gas. There is a decrease of INR721 crores, which is 39.2% in exploration cost so written off in Q3 FY22 and INR1,443 crores, which is 32.7% in 9 month FY22 versus corresponding Q3 and 9-month period of previous year. This is due to decrease in expenditure on unsuccessful well cost, which is dry wells charged off and survey expenditure due to reduced seismic data acquisition activity denomination block of western offshore basin.

The operating expenditure has increased by INR883 crores, which is 19.3% from INR4,576 crores in Q3 FY21 to INR5,459 crores in Q3 FY22. The increase is mainly on account of the increase in consumption of materials, which is INR380 crores mainly at Dahej C2-C3 plant on account of increase in prices of spot LNG. Other factors being staff expenditure INR133 crores, repair and maintenance cost, INR139 crores and transport of product, INR71 crores mainly at Mumbai offshore. Similarly, the operating expenditure in 9 month FY22 has also increased by INR2,019 growth this 15.2% from INR13,263 crores in 9 month FY21 to INR15,282 crores in 9 month FY22. The increase was mainly on account of the increase in consumption of materials INR962 crores, mainly at Dahej C2-C3 plant by INR855 crores on account of increase in purchase quantity and prices of spot LNG, stop expenditure by INR446 crores, water injection of INR122 crores due to increase in activities, contractual payment INR155 crores and transport of product INR117 crores mainly at Mumbai offshore.

DD&I cost for Q3 FY22 stood at INR4,337 crores as against INR4,427 crores in Q3 FY21, which is a decrease of INR90 crores. However, there is an increase of INR517 crores in DD&I cost during 9 month FY22 that is from INR11,929 crores to INR2,446 crores in 9 month FY22. During the second quarter, the company decided to opt for lower tax regime under Section 115BAA of the Income Tax Act, 1961 with effect from FY 2021. Accordingly, the company has recognized provision for tax expenses and re-measured its net deferred tax liabilities. The net impact due to availing the option has resulted in decrease in deferred tax by INR8,689 crores and decrease in current tax by INR2,107 crores in 9 month FY22.

The company at the consolidated level has earned a net profit that is profit after tax of INR11,637 crores during the third quarter of FY22 as against INR3,637 crore during third quarter of FY21, that is an increase of INR8,000 crores, which is 220%. This increase can be mainly attributable to ONGC and our subsidiaries OVL and MRPL. Similarly, the company at a consolidated level has earned a net profit that is profit after tax of INR37,233 crores during 9 month FY22 as against INR10,397 crores during 9 month FY21. That is an increase of INR26,836 crores, which is 258.1%. This increase can again be mainly attributable to ONGC and better performance of our subsidiaries OVL, MRPL and OPAL, which is a joint venture.

Well, trends with this, I finish my briefing of the third quarter results for financial year 2021-22. We’ll be very happy to respond to any questions which you might have. We would request you to restrict your queries on financial results only. Thank you very much.

Operator

Sir, should we start the question-and-answer session?

Anurag Sharma — Director, Onshore & Director, Finance

Yes, please.

Questions and Answers:

Operator

[Operator Instructions] Sir, the first question is coming up from Amit from UBS. Amit, your line has been unmuted. Please go ahead.

Unidentified Participant — — Analyst

Thank you, sir. Congratulations for the super performance. Sir I have two questions. Relating to the production growth and we understand that you’re from onshore and you have this additional responsibility of Director Finance. So I think you can give a slightly better picture what — how we should think about output growth in both oil and gas from here? What are the efforts we are making and when we see the purification of those efforts?

Anurag Sharma — Director, Onshore & Director, Finance

Your question pertains to our plant for the production in times to come.

Unidentified Participant — — Analyst

Yes, because we are still witnessing a de-growth in production, particularly gas and so if you can give some color, so that what are our plans to raise that output from here?

Anurag Sharma — Director, Onshore & Director, Finance

ONGC along with the Ministry of Petroleum, we have already drawn an action plan, which is a short-term plan to start with which goes up to the 2024-25. So under this plan, we have set enhanced production targets both for oil and gas. So this action plan has already been submitted and so we are in the process of implementing this and hence production action plan.

Unidentified Participant — — Analyst

Sir, when do you see that it will come under implementation? And do you think that and what are the targets put in those plan, if you can give some color on that?

Anurag Sharma — Director, Onshore & Director, Finance

This action plan has already been implemented. We have already started implementing. So you can say this is the first year and then the enhanced targets against this plan, they go up to 63.11 MMTOE, which include our joint venture production as well.

Unidentified Participant — — Analyst

Sir, from which year?

Anurag Sharma — Director, Onshore & Director, Finance

This is for 2024-25.

Unidentified Participant — — Analyst

And for 2024?

Anurag Sharma — Director, Onshore & Director, Finance

There is a smooth progression, starting with the — starting from 2021-22. Then in 2023-24 targets should be around 60 MMTOE.

Unidentified Participant — — Analyst

Sir, sorry, what is the — the 60 MMTOE what — the target is for which financial year?

Anurag Sharma — Director, Onshore & Director, Finance

2023-24.

Unidentified Participant — — Analyst

60 MMTOE. But sir, then you said 53 MMTOE for 2024-25 then are we looking to —

Anurag Sharma — Director, Onshore & Director, Finance

No, what I said for 2024-25 of a target for 63 MMTOE and then you ask about 2023-24, those are slightly less at about 60 MMTOE.

Unidentified Participant — — Analyst

Okay, yes. Sir, second question I have is relating to the capital allocation. So now we are in a position where we’re generating lot of cash. So what do you see is the optimum utilization of this cash apart from investing into our production targets? Do you think that like global oil and gas companies are pursuing a buyback program so we can go on the same path and retain some capital to the shareholders?

Anurag Sharma — Director, Onshore & Director, Finance

We have already drawn the plan for capital. It would like utilization first of all, our capital expenditure, as you might be aware, it is always in the range of IN30,000 crores, which will on maintaining for about past 5 years and the action plan, which I just shared with you, it also demands capital expenditure of at least the same amount, if not more. That is one. Then you are also aware that we are a good dividend paying company. We have already announced first dividend of 110% and the remaining amount will also have to be paid. Then we also have our stand-alone debt at the start of the year, which was around INR15,023 crores and over and above that, we have plans for increased exploratory expenditures, debottlenecking of our aging development facilities. So in a nutshell, this is the plan, which we have.

Unidentified Participant — — Analyst

Okay, sir. Thank you. Sir, best of luck.

Anurag Sharma — Director, Onshore & Director, Finance

Thank you.

Operator

Thank you so much. The next question is coming from Kirtan Mehta from BOB Capital Markets. The line has been unmuted, please go ahead.

Kirtan Mehta — BOB Capital Markets — Analyst

Hello? Am I audible?

Operator

Yes.

Anurag Sharma — Director, Onshore & Director, Finance

Hi, yes, please.

Kirtan Mehta — BOB Capital Markets — Analyst

Yeah. Would you be able to give us more — taking back on the Amit’s question, would you be able to sort of give us a bit more color in terms of where are the areas where you are targeting the increase in the production? Would you be able to share more detailed insight into it?

Anurag Sharma — Director, Onshore & Director, Finance

The production plans are divided onshore and offshore and the major cost remains to be on our East Coast projects. So is that sufficient?

Kirtan Mehta — BOB Capital Markets — Analyst

Right. Would be good if you can give us a bit more sort of timeline in color about some of —

Anurag Sharma — Director, Onshore & Director, Finance

The KG 98/2 project, I think you would be very well aware of which is already in the process of implementation. It is about 65% complete and by sometime during next year, we would be achieving first oil. And then this project is going to be the mainstay in terms of oil and gas production from where the major increase is likely to come for the company. Are you satisfied, Kirtan?

Kirtan Mehta — BOB Capital Markets — Analyst

Yes, sir. One more question, if I may, in terms of the OVL realization, when we looked at this Q3 quarter, realization net of statutory levies being paid were almost flat quarter-on-quarter despite sort of the increase in the oil price. Could you explain us the drivers in terms of how the realizations move on the OVL front?

Anurag Sharma — Director, Onshore & Director, Finance

Vinod, can you answer that?

Vinod Hallan — Chief Financial Officer, ONGC Videsh

Total income we have recorded in 9 months is INR13,004 —

Anurag Sharma — Director, Onshore & Director, Finance

Kirtan, are you able to — audible?

Kirtan Mehta — BOB Capital Markets — Analyst

Yes.

Vinod Hallan — Chief Financial Officer, ONGC Videsh

Am I audible?

Kirtan Mehta — BOB Capital Markets — Analyst

If you can come bit closer, it would be better.

Anurag Sharma — Director, Onshore & Director, Finance

Mr. Vinod Hallan, the CFO of ONGC Videsh, he’ll respond to this question.

Vinod Hallan — Chief Financial Officer, ONGC Videsh

Your question is on the 9 months realization, right?

Kirtan Mehta — BOB Capital Markets — Analyst

Third quarter realization in terms of a dollar per BOE terms. If I sort of the realization minus statutory levies and duties, if I look at it, so there has not been really a material net increase quarter-on-quarter, despite sort of the increase in the oil and gas realization.

Vinod Hallan — Chief Financial Officer, ONGC Videsh

Okay. So you see we have actually 3 months quarter price. Our 9 month average price is $68.40 and — $68.40 but with the increase of price, the royalty component also increases in every project. So that is why the net you don’t see that kind of increase. So there is some decline in the production 5% decline in the production and as well as sales, so the quality — negative quantity variance is actually the contributor.

Kirtan Mehta — BOB Capital Markets — Analyst

Thanks, sir. Thank you.

Anurag Sharma — Director, Onshore & Director, Finance

Thank you, Kirtan.

Operator

Thank you so much. The next question is coming from Probal Sen from ICICI Securities. Line has been unmuted, please go ahead.

Probal Sen — ICICI Securities — Analyst

Thank you for the opportunity. Probal here, sir. Staying on OVL, you mentioned about the ambitious production plans for the domestic assets. For OVL, any update you can give in terms of the production plan for the next couple of years in terms of where production growth can come from? And second part is that any updates you can share on what is happening on Mozambique? Has there been any update or any progress in resolution of the political problems there?

Anurag Sharma — Director, Onshore & Director, Finance

Mr. Nirmal Kumar is representing ONGC Videsh. He is responding to this question.

Nirmal Kumar — General Manager, Corporate Planning & Strategy, ONGC Videsh

Coming to the first part of the question, and that is with regard to production. If you see our previous performance, we reached the highest ever our production of around 15 MMTOE that was fiscal year before that was 1920. And then in 2021, there has been OPEC plus and the pandemic impact leading to capex deferrals because of OPEC our production went down to around 13 MMTOE. This year, some of that impact also remains both in terms of capex deferrals and also some component of the OPEC. So this year also we might not be in a position to reach the 13 MMTOE that we produced last year, it would be slightly lesser, but you also have to consider the major impact of our gas production. We had 10% of our production comes from Vietnam on an overall basis and 30% of our production of gas comes from Vietnam and this particular project, which was acquired way back in 1989 is reaching a trend of its peak and its contractual life that directly impacts our production going forward. Therefore, summing up all this, till the time that Mozambique expense, which would be 25, 26, the gas production will lag and our projections continue to be for the next 2 years around this 12.5 MMTOE that I’m projecting presently before it picks up further with Mozambique.

Now, coming to your second specific question on Mozambique situation. Mozambique, as you know, went into force majeure in April 2021 with the consortium deciding under the EPC to declare a force majeure and later as far as exploration contract to declare it in May. Since then there has been a lot of progress as part of the security situation in the Cabo Delgado province is concerned because of which the deployment of the Southern African workers and also that of the Rwandan forces, the situation has improved dramatically. Operator, which is Total is calibrating the situation closely. However, the consortium is very clear that still, there is a sustainable solution to the security situation we cannot start operations. In other words, we cannot start operations, again just to stop it again. Therefore, we are hopeful that going forward, in 2022, we would be in a position to resume those operations. However, Mozambique force majeure as has been declared by the operator publicly also will impact the production at least by a year.

Probal Sen — ICICI Securities — Analyst

Got it, sir. So if I can just ask a small follow-up. So till date, if you can get a sense of how much investment has been made in this asset till date and is there any thought of, sort of taking — have we taken any impairment on this, given that the production is still remains fairly uncertain from this project as of now?

Nirmal Kumar — General Manager, Corporate Planning & Strategy, ONGC Videsh

The production does not remain uncertain. The reserves are some of the biggest in the world, 63 Tcf of oil and gas production is not an issue. There is no question of taking impairment on this business alone. However, as far as the production — as financing is concerned, you know broadly our acquisition costs and apart from that, we have made some cash flows. But the major part of the project financing which comes from major part of the financing in the project comes from project financings. Therefore, there is no direct exposure of ONGC related capex through any further capex commitment to Mozambique.

Probal Sen — ICICI Securities — Analyst

Okay, sir. I’ll come back if I have more questions. Thank you very much.

Anurag Sharma — Director, Onshore & Director, Finance

Thank you.

Operator

Thank you so much. The next question is coming from Gagan Dixit from Elara Capital. Line has been unmuted, please go ahead.

Gagan Dixit — Elara Capital — Analyst

Yes, thanks, sir. So there is a news that is your consortium will also start working on some basic discovery in Brazil, for the old recovery. So can you throw some light that what are the reserve potential estimate for you and if everything goes right, so when you expect anything from the first joint and what is the oil production and you can expect, if you have anything view over rate there?

Anurag Sharma — Director, Onshore & Director, Finance

You are referring to some media news, I will have to check and will come back on this.

Gagan Dixit — Elara Capital — Analyst

Okay. Actually this is about, I think some 8-10 years old discovery of OVL in Brazil. Sir, other than that, I would just checking the presentation, so it mentioned something 4 major redevelopment projects that you are working. There is the cluster 8 and then Mumbai High and south redevelopment base score and Heera redevelopment so can you throw some light on the — what is the, I mean, the incremental production expected from these units, sir?

Anurag Sharma — Director, Onshore & Director, Finance

Okay, give me a minute. Okay, the first project which you referred was Mumbai High South redevelopment phase 4. This project, this has an oil production gain 2.4 million tonne of oil and by 7 BCM of gas. This project is 88% complete. Second project was cluster 8 marginal field project. This has oil gain of 4.38 million tonnes of oil and bind 46 BCM of gas. This project is 94.19% complete. Then Mumbai High not redevelopment place 4 and besides oil production gain is 4.19 million tonne of oil, 0.51 BCM of gas, this has shifted 3% complete.

And one more item which one was that?

Gagan Dixit — Elara Capital — Analyst

Heera redevelopment, sir. Heera redevelopment Phase 3, sir.

Anurag Sharma — Director, Onshore & Director, Finance

Heera, as far as I remember, it is already complete and it is not — it has been implemented.

Gagan Dixit — Elara Capital — Analyst

Okay, sir. And also, sir, if you can give some idea about this are also under development?

Anurag Sharma — Director, Onshore & Director, Finance

Okay, just a minute. Heera redevelopment project. I’m sorry, Heera Phase 3 project, it has oil production targets of 3 million tonne of oil and 5.82 BCM of gas. This is 78% complete, this is still ongoing.

Gagan Dixit — Elara Capital — Analyst

Okay. R Series, sir.

Anurag Sharma — Director, Onshore & Director, Finance

R Series is complete. R Series is completed.

Gagan Dixit — Elara Capital — Analyst

Okay, sir. That’s from my side.

Anurag Sharma — Director, Onshore & Director, Finance

Thank you.

Operator

Thank you so much. The next question is coming from Mayank Maheshwari from Morgan Stanley. Line has been unmuted, please go ahead.

Mayank Maheshwari — Morgan Stanley — Analyst

Hi sir, I had few questions in the production side. Can you just help us understand where the production run rates are for 98/2 on gas? And how are you thinking about the ramp up now have been the product — the supply chain and logistics issues around that any resolved and any update around that? Can you help us with that?

Anurag Sharma — Director, Onshore & Director, Finance

Yes. 98/2 gas production presently is 0.6 million standard cubic meter per day. And third well is also complete and it is shortly going to be hooked up. And by the end of March, it is likely to contribute another 1.75 million standard cubic meter per day. But otherwise, this project will start its peak production from 2022-23 onwards. Are you interested in any more figures?

Mayank Maheshwari — Morgan Stanley — Analyst

Yeah. If you can just give us the ramp up, sir, in 2022, 2023 and 2024. How are you thinking about it and where are we in terms of your capex plan and logistics side as well? How much is those issues resolved now or it’s still work in progress?

Anurag Sharma — Director, Onshore & Director, Finance

There have been some issues, which we are trying to resolve at various levels, but still we are hopeful that we would like — we would be able to achieve peak production of 2.2 million tonne, which is around 44,000 barrels of oil per day and 3,798 million standard cubic meter of gas, which is 10.41 million standard cubic meter per day in the year 2023-24.

Mayank Maheshwari — Morgan Stanley — Analyst

Got it, sir. And that’s very helpful. And sir, the other question was on the production side was more related to, I think you had in the press release talked about some issues around Typhoon as well as the Sagar Samrat side plus I think the field on gas side and the has been a problem, where are we on those of production right now?

Anurag Sharma — Director, Onshore & Director, Finance

Are you referring to impact of top tier on our production or because these 2 issues are in the market.

Mayank Maheshwari — Morgan Stanley — Analyst

Yeah. Sir, I think there were couple of issues that you had kind of laid out in your press release around what led to lower production this quarter on the standalone basis. So I just wanted to check of where we are in terms of some of those issues things normalized currently in terms of production volumes.

Anurag Sharma — Director, Onshore & Director, Finance

Yeah, one of the issue in the press release was delay in mobilization of Sagar Samrat because we had some issues pertaining to its modification work and now we have been assured that this modification work has been complete and Sagar Samrat will be mobilized soon and 0016 cluster project, which was affected because of it, so that will come on stream soon as it arrives.

Mayank Maheshwari — Morgan Stanley — Analyst

Got it, sir. I think, and sir, the last question which I had was more on related to an auditor comment on OMPL in your notes to accounts, if you can just highlight what it is and can you just help us understand of how you guys trying to resolve that? It was note 4.

Anurag Sharma — Director, Onshore & Director, Finance

Mr. Rajeev Kumar, Chief of our Accounts Group, he will explain it.

Rajeev Kumar — Chief of Accountants & Financial Reporting Services

Yeah. There is a point relating to OMPL. OMPL has carried out some impairment test. And as per the impairment testing, the cash flow position suggests there is no impairment. OMPL auditor as such has not commented on the aspect in their report. However MRPL auditor, because MRPL is the holding company for OMPL, so MRPL auditors were not convinced with that exercise, and they had commented on the investment impairment in OMPL, which right now is a comment. However, in the next quarter, the issue will be reviewed at ONGC level in totality, and we’ll ensure that this comment is taken care.

Mayank Maheshwari — Morgan Stanley — Analyst

Okay, thank you.

Anurag Sharma — Director, Onshore & Director, Finance

Thank you.

Operator

Thank you so much, The next question is coming from Ramesh from Nirmal Bang Institute. Line has been unmuted, please go ahead.

Unidentified Participant — — Analyst

Hello, thank you very much and congratulations. I am from Nirmal Bang Institutional Equities. So the first thought it what is the kind of getting on the likely changes in the domestic gas price, because there is a steep increase expected and there are some concerns about the end users for the preferential allocation segments like the CNG and domestic PNG segments? Or any thoughts or any discussion between the government and the industry to possibly ameliorate the impact of this is, as you get on that?

Anurag Sharma — Director, Onshore & Director, Finance

The issue pertaining to domestic gas price has been affecting ONGC because the gas price, which was on the basis of APM formula, it was calculated 1.79. It has now been revised to 2.9 and the it was barely enough to meet our production cost. So we had been taking it up with the Ministry, and we had been requesting for pricing and marketing freedom. And this is what we have been trying, and we hope that it will be implemented as early as possible by the government.

Unidentified Participant — — Analyst

Yeah. So, no, I understand that for you, it is a benefit and if it’s implemented, what the sense we get is the domestic price can exceeding $6. The steep increase or in terms of the end users of CNG and domestic still imply a steep increase in their prices so you saw your view is that formula will continue for the April price reserve? Is that a correct understanding?

Anurag Sharma — Director, Onshore & Director, Finance

As far as we are concerned, we have to produce oil and gas and we would like to be remunerated at least the production cost, which we are incurring otherwise, it will be very difficult to continue to explore and produce oil and gas. So this is why we had requesting that market process should decide what the price of oil and gas should be.

Unidentified Participant — — Analyst

Okay, fair enough. So on in terms of the production plant, can you give us the breakup for gas production increase between ONGC excluding KG Gas and what is the number you said for FY24 and 25 from KG Gas?

Anurag Sharma — Director, Onshore & Director, Finance

You are asking for the next year’s figures or the —

Unidentified Participant — — Analyst

Yeah, if you can get a sense in terms of the increase in gas production for FY23 and ’24 including KG Gas and what is the number you expect in KG Gas?

Anurag Sharma — Director, Onshore & Director, Finance

For 2023-24, our gas production is expected to be 32.16 out of which 3 BCM is expected from KG 98/2 alone.

Unidentified Participant — — Analyst

Okay. This is for ’24. How about ’23? 2022-23? How about for 2022-23?

Anurag Sharma — Director, Onshore & Director, Finance

It will be 26.36.

Unidentified Participant — — Analyst

And how much will be from KG?

Anurag Sharma — Director, Onshore & Director, Finance

KG contribution would be about 3 BCM.

Unidentified Participant — — Analyst

3 BCM attributable they also. Okay. Yeah. So are you still confident of that peak of 15 million cubic meters a day from KG and when do you expect that assuming the capex progress as per your expectation?

Anurag Sharma — Director, Onshore & Director, Finance

There have been some delays, but we are making all efforts in the third well, as I said, little bit earlier, is likely to come on stream later by the end of March. So we are trying to maintain figures, and we are trying to expedite and minimize delays, wherever they are taking place.

Unidentified Participant — — Analyst

So by 2025, it should get to that 15 MMSCMD. Is that a correct assessment?

Anurag Sharma — Director, Onshore & Director, Finance

It would be around 10 million standard cubic meter per day. The gap between 10 to 15, we are trying to look into those things to expedite so that it goes up to 15, but as of now, the forecast is about 10 million standard cubic meter per day.

Unidentified Participant — — Analyst

Okay. And what is the capex you’ve incurred in KG year-to-date? What is the number now?

Anurag Sharma — Director, Onshore & Director, Finance

So far investment is around in the range of INR15,500 crores.

Unidentified Participant — — Analyst

Okay. And what is the full capex expected over the life of the field to achieve that 10 or 15, whichever you are working on right now?

Anurag Sharma — Director, Onshore & Director, Finance

The plan estimate was INR34,000 crores.

Unidentified Participant — — Analyst

Okay. And this will happen over the next 3 years. The difference between 15 and 34.

Anurag Sharma — Director, Onshore & Director, Finance

Yes.

Unidentified Participant — — Analyst

Okay. So, just one last thought in terms of the OPAL performance, can you give us but what is the revenue and profit from OPAL for third quarter and 9 months?

Anurag Sharma — Director, Onshore & Director, Finance

Yeah. Just a minute. For third quarter of 2022, OPAL was EBITDA positive with INR939 crores, but it incurred a loss of INR365 crores. And for 9 months, it was EBITDA positive with INR2,229 crores, but had a negative PAT of INR153 crores.

Unidentified Participant — — Analyst

So EBITDA three months was INR929 crores?

Anurag Sharma — Director, Onshore & Director, Finance

INR2,294 crores for 9 month FY22.

Unidentified Participant — — Analyst

Yeah. And what was it for 3 months?

Anurag Sharma — Director, Onshore & Director, Finance

For 3 months, this was INR939 crores.

Unidentified Participant — — Analyst

INR939 crores. Okay, thank you very much. I’ll join back the queue.

Anurag Sharma — Director, Onshore & Director, Finance

Thank you.

Operator

Thank you so much. The next question is coming from Puneet Gulati from HSBC. Line has been unmuted, please go ahead.

Puneet Gulati — HSBC — Analyst

Yeah. Thank you so much and congratulations. My first question is with respect to you’ve talked about production growth. Do you foresee any risk for material decline in production from any of your gas or royalties?

Anurag Sharma — Director, Onshore & Director, Finance

Yeah. The forecast is based on the analysis, whichever institutes carry out, whichever engineers carry out and for the past few years, we have been successful in attaining those targets and we continue to be optimistic about the future as well.

Puneet Gulati — HSBC — Analyst

Right. So are you saying that the gas production for the company per se in FY23 can go up by 10.4, which is the KG big delta coming from KG basin or any should we be worried to put any negative surprises there?

Anurag Sharma — Director, Onshore & Director, Finance

Yes. 10.4 million corresponds to KG 98/2 coming on stream, and we are trying our best to realize this target.

Puneet Gulati — HSBC — Analyst

My second question is, is there a capital allocation plan towards your renewable business as well? And if you can elaborate a bit on that as well?

Anurag Sharma — Director, Onshore & Director, Finance

Yes, we do have a plan. Just a minute. On renewables, as you would be aware that we already have installed capacity of about 184 megawatts, which includes both wind energy and solar energy and other 20 megawatt solar projects are already underway. Besides this, we had 2 major initiatives, we signed an MOU with the of Solar Energy Corporation of India and end of December. This is for development of renewable energy-based power and environmental societal governance projects. Also, we signed an MOU with NTPC. It was done last year and once this joint venture is approved, we plan to take renewable projects along with NTPC. Besides that, we have taken some other initiatives. We have already concluded a steady for offshore wind projects. We are also looking into carbon capture utilization and storage projects along with the IOC for CO2 EOR Gandhar and Ankleshwar. Then we have also taken up the countries made on geothermal field development project in Ladakh. So these are some of the projects, which we are taken up, and this will take shape in times to come.

Puneet Gulati — HSBC — Analyst

Is there a target for the total capacity that we have in line?

Anurag Sharma — Director, Onshore & Director, Finance

I’m sorry, I couldn’t get. We have 184 megawatt.

Puneet Gulati — HSBC — Analyst

Yeah. But is there a target? So most of the firms have now started giving target for 2025, 2030, 2040. Is there something that you crystallize as of now?

Anurag Sharma — Director, Onshore & Director, Finance

Under our energy strategy 2040, we have a target of 10 gigawatts for renewable energy.

Puneet Gulati — HSBC — Analyst

Okay. Thank you. Understood. That’s very helpful. Thank you so much, and all the best.

Anurag Sharma — Director, Onshore & Director, Finance

Thank you.

Operator

Thank you so much. The next question is coming from [Indecipherable] Rajan from Axis Mutual Fund. Line has been unmuted, go ahead.

Unidentified Participant — — Analyst

It is Antique Limited, sorry. So my question is about the capex in KG that talking 4,000 number, is there an escalation which is expected?

Anurag Sharma — Director, Onshore & Director, Finance

For the KG project, which is about 65% complete, the wells have already been drilled and since all the contracts are at an advanced stage and these are LSTK type of contracts, we don’t anticipate any delay at this stage. Any escalation of cost at this stage.

Unidentified Participant — — Analyst

Secondly, about the INR30,000 crores of annual capex and plus incremental capex like, you know what, when we talk about plus incremental capex that essentially the first two your KG plus all the other redevelopment expenses or any idea can you give in terms of what could either on an annual basis over the next few years?

Anurag Sharma — Director, Onshore & Director, Finance

As I said earlier, our capital expenditure has been in the range of INR30,000 crores in maintaining and last 5 years. So this is — we are hopeful of maintaining the same and this might go up if we get some exploration opportunities and some debottlenecking of our existing facilities comes up. So we are expected to maintain in the range of INR30,000 crores.

Unidentified Participant — — Analyst

Okay. As I understand, like you know this basically includes all the new development plus KG, all put together, we will continue to maintain INR30,000 crores kind of a run rate? Is it correct?

Anurag Sharma — Director, Onshore & Director, Finance

Right. Yeah, that’s correct.

Unidentified Participant — — Analyst

Thank you. On OVL load you will be able to give something of a guidance in terms of capex?

Anurag Sharma — Director, Onshore & Director, Finance

Yeah, just a moment. OVL capex has been consistent at around the USD1 billion for the past 3, 4 years. This year, we had a higher allocation for capex because of Mozambique development, however, because of the force majeure there. We have cut back on that, but going forward, this capex is supposed to pick up and it would be around USD1.2 billion or so for the next one or two year. Beyond that, this capex of course does not take into account any potential acquisitions that we might do.

Unidentified Participant — — Analyst

Fair enough. So this 1.2 ex Mozambique, will it be significantly lower or that will be still around a billion?

Anurag Sharma — Director, Onshore & Director, Finance

It has been for this year, almost 55% of our capex at INR8,000 growth come from Mozambique. And because of the Mozambique deferral of capex, our figures has come down substantially. Next year, we have again plan for Mozambique and hopefully we’ll be able to reach the target of INR8,000 crores next year.

Unidentified Participant — — Analyst

And sir, one last question on OPAL, any volume guidance plus current utilization and any feedstock you would like to share? Thank you.

Anurag Sharma — Director, Onshore & Director, Finance

Yeah, just a moment. For 9 months, the capacity utilization of OPAL was 93%. And for this quarter, third quarter, it was 99%.

Unidentified Participant — — Analyst

The feedstock mix, sir?

Anurag Sharma — Director, Onshore & Director, Finance

The feedstock mix is dependent butane and NAFTA?

Unidentified Participant — — Analyst

Yeah. Any breakup in terms of mix of percentage wise

Anurag Sharma — Director, Onshore & Director, Finance

60-40 approximately.

Unidentified Participant — — Analyst

60 in favor of for gas?

Anurag Sharma — Director, Onshore & Director, Finance

Yeah.

Unidentified Participant — — Analyst

Thanks a lot.

Anurag Sharma — Director, Onshore & Director, Finance

Thank you.

Operator

Thank you so much. The next question is coming up from Vishnu Kumar from Spark Capital. Line has been unmuted, please go ahead.

Vishnu Kumar — Spark Capital — Analyst

Thanks for the time, sir. This is Vishnu Kumar from Spark. Sir, just wanted some clarity, again, on the production numbers that you have given. Sir, if you could just split for FY23 standalone oil and gas numbers again?

Anurag Sharma — Director, Onshore & Director, Finance

Okay. For FY22-23, the standalone numbers which you asked, these are estimated at 20.98 for oil and 24.28 for gas.

Vishnu Kumar — Spark Capital — Analyst

Sorry, your voice was cracking sir. 24?

Anurag Sharma — Director, Onshore & Director, Finance

24.28 for gas.

Vishnu Kumar — Spark Capital — Analyst

Okay. This is for ’23. Okay, got it, sir. For FY24, what would the oil and gas number again be, sir?

Anurag Sharma — Director, Onshore & Director, Finance

It will be 24 and 32.

Vishnu Kumar — Spark Capital — Analyst

24 and 32. Okay. This will be 56. Understood. So close to 45. So more or less 22 and 23, we don’t think a major except for marginal increase in gas production, oil will remain flat.

Anurag Sharma — Director, Onshore & Director, Finance

Yes. Oil, we will be able to arrest the decline and gas with the KG 98/2 coming on stream and some more projects coming on stream, the gas production is expected to increase.

Vishnu Kumar — Spark Capital — Analyst

Understood. OVL, you expect the number to — hello?

Anurag Sharma — Director, Onshore & Director, Finance

Yes, please.

Vishnu Kumar — Spark Capital — Analyst

So for OVL, you expect the number to be around 12.5 for the next few years million tonne?.

Anurag Sharma — Director, Onshore & Director, Finance

Yes, you’re right. In that range.

Vishnu Kumar — Spark Capital — Analyst

Understood. And second, you mentioned INR30,000 crores capex more or less will continue, but you did say that also, we may consider something. If you consider additional capex, would it be another INR10,000 odd crores the magnitude will be very high. Or do you expect only a few thousand crores up and down?

Anurag Sharma — Director, Onshore & Director, Finance

That will depend on the projects, which we might have. So right now, the likelihood is of maintaining INR30,000 crores, but if we get some interesting projects or some under oil be around some exploration blocks. So the investment required for those licenses would initiate — would necessitate some more investments.

Vishnu Kumar — Spark Capital — Analyst

Okay. Any next update would come by, when if you are going to give the capex as in like do you take a midterm review by June, July or is it again next year? Just trying to get a sense.

Anurag Sharma — Director, Onshore & Director, Finance

We will let you know about this because that review will be carried out once we get all that information, which we require for this review.

Vishnu Kumar — Spark Capital — Analyst

Understood. On the KG 98, what is the gas price that you’re currently getting and what do you expect it in April, specifically on KG? And also if you could just highlight to us what will be the APM price that Indicatively that you are seeing in the interim?

Anurag Sharma — Director, Onshore & Director, Finance

For KG 98/2, we, as of now, have allocation of about 1 billion standard cubic meter per day and the gas price, which we are getting is which was discovered during the tender process, but it is limited by the ceiling price, which for deepwater and HVST fields is published. So as of now, we are getting the ceiling price for 98/2.

Vishnu Kumar — Spark Capital — Analyst

What is the price, sir, sorry?

Anurag Sharma — Director, Onshore & Director, Finance

6.1.

Vishnu Kumar — Spark Capital — Analyst

6.1. And the ceiling will remain so or will it will increase in April?

Anurag Sharma — Director, Onshore & Director, Finance

So as we understand, this is expected to increase, but how much it is going to increase that will come to know only when this exercise is complete.

Vishnu Kumar — Spark Capital — Analyst

Understood, sir. What is the price that you are seeing in APM, sir? Is it between 6, 6.5 or high or less than that? What do you see as a gas price for APM in April?

Anurag Sharma — Director, Onshore & Director, Finance

This again because it is calculated based on the hub prices, this is again expected to increase, but again this will depend on the formula and the inputs, which are required for calculation of the formula.

Vishnu Kumar — Spark Capital — Analyst

Understood, sir. One final question from me, given the steep increase in prices in crude, which we are seeing almost after 2014-15, any thoughts on subsidy sharing specifically on LPG side, any thoughts on that essentially and cash utilization, do you think the government will claw back some through subsidy sharing that you are see today? Any thoughts on that.

Anurag Sharma — Director, Onshore & Director, Finance

This information, I cannot give, but we have been requesting the Ministry and advocating for a market-based pricing for oil and gas.

Vishnu Kumar — Spark Capital — Analyst

Okay, got it, sir. Thanks, and all the best.

Anurag Sharma — Director, Onshore & Director, Finance

Thank you.

Operator

Thank you so much. The next question is coming from Sowmya from Spark Capital. Line has been unmuted, please go ahead.

Unidentified Participant — — Analyst

Yeah. Thanks for the opportunity. Can you just help us with the debt numbers, both at standalone and subsidiary level?

Anurag Sharma — Director, Onshore & Director, Finance

You asked for debt numbers?

Unidentified Participant — — Analyst

Yes.

Anurag Sharma — Director, Onshore & Director, Finance

For ONGC, the outstanding debt stands at INR6,779 crores.

Unidentified Participant — — Analyst

What would be the consol debt?

Anurag Sharma — Director, Onshore & Director, Finance

Okay. This information is not readily available with me, but.

Unidentified Participant — — Analyst

Got it. I mean would we have OVL debt numbers alone?

Anurag Sharma — Director, Onshore & Director, Finance

Okay, for OVL as on 30 November, this information — 30 September, the debt is INR37,685 crores.

Unidentified Participant — — Analyst

Got it, sir. With respect to the OVL capex, you did mention that the guidance of INR8,000 crores, what you’re looking at excludes any potential new acquisition. Now given that Vietnam, as you mentioned is kind of declining, is this something that you’re thinking about as to further augment your portfolio there? Is this something that is in the radar?

Anurag Sharma — Director, Onshore & Director, Finance

This is an ongoing exercise. The ONGC business development team keeps on working on it, and they are at this point also looking at several offers. So this is an ongoing work which is being carried out by ONGC.

Unidentified Participant — — Analyst

Okay. And also, one question with respect to KG 98. So what would be the breakeven gas price there?

Anurag Sharma — Director, Onshore & Director, Finance

This information again is not available with me right now, but for the company figures I can share, if you want.

Unidentified Participant — — Analyst

Yes.

Anurag Sharma — Director, Onshore & Director, Finance

For ONGC, it is $3 per MMBTU, cost of production for the company is $3 per MMBTU.

Unidentified Participant — — Analyst

So what would be the cost rate that are considered under this, sir? I mean this includes depreciation also?

Anurag Sharma — Director, Onshore & Director, Finance

Yes, it includes depreciation also.

Unidentified Participant — — Analyst

Okay. Thank you, sir.

Anurag Sharma — Director, Onshore & Director, Finance

Thank you.

Operator

Thank you so much. As there are no further questions at this point of time, turning the program back to you, sir, for your closing comments.

Anurag Sharma — Director, Onshore & Director, Finance

Just to supplement, $3 per MMBTU, the cost of production which I shared, it does not include the returns on capital employed. So this is excluding that figure, just to clarify. So if there are no more questions, then can we close?

Operator

[Operator Closing Remarks]