ONGC shares rise nearly 2% as it eyes $1 billion profit from new trading arm

The surge in the share price comes as the company is eyeing about USD 1 billion of profit from a new trading company it plans to set up for buying and selling of crude oil and refined fuels of its group companies, a top official said to Press Trust of India (PTI) on Monday, October 13.

While most of the crude oil and natural gas it pumps out of the ground and from below the seabed is sold on government nomination, ONGC's subsidiaries buy or sell about 70 million tonnes of crude oil annually. They also export some amount of fuel. ONGC Director (Production) Pankaj Kumar said the company is looking to amalgamate all trading businesses under one roof for economies of scale as well as get better prices.

The company plans to set up a new trading company, which will buy crude oil for subsidiaries Hindustan Petroleum Corporation Ltd (HPCL) and Mangalore Refinery and Petrochemicals Ltd (MRPL), as well as trade oil and gas produced by its overseas firm ONGC Videsh Ltd.

A global oil company will be given equity in the new company to get international trading expertise.

"We are in the process of engaging a partner, four international companies have shown interest," he said. Without disclosing the identities of the firms, he said they are not oil traders but companies that may have experience in trading in oil and gas. "They will bring expertise and a platform for trading," he said.

While the equity structure of the new company has not yet been decided, HPCL and MRPL will be offered a stake in the trading firm. While HPCL currently buys about 36 million tonnes of crude oil for refining into fuels like petrol and diesel at its three refineries, MRPL imports 15 million tonnes of crude oil annually. HPCL will buy more crude oil after its 9 million tonnes a year refinery at Barmer in Rajasthan is commissioned sometime next year. These volumes, as well as the fuel that MRPL exports, will be handled by the new trading company.

Besides, OVL produces about 10 million tonnes of oil and oil equivalent gas from its overseas assets, which too would be traded by the new company.

Presently, all the companies trade separately - HPCL and MRPL buy their own crude, and OVL makes its own sales. "We believe there is USD 1 billion of value unlocking or profit through the trading company," he said.

ONGC itself produces over 21 million tonnes of crude oil domestically and about 60 million standard cubic meters per day of gas. The trading arm is part of ONGC's plan to optimise operations as it prepares for a low oil price environment.

ONGC gets international oil prices for the crude oil it pumps out domestically, and with international oil prices falling to about USD 60 per barrel from USD 81 in December 2022, its earnings are likely to be impacted.

Oil prices are reducing at a CAGR of 5% over the last 5 years and rates are likely to remain range-bound in view of peaking demand and increasing supply of non-fossil energy, he said.

"Considering such a scenario, ONGC has been working for the last one and a half years on a low oil price scenario," he said.

This involves boosting output from current fields by getting expertise from international companies, as well as cost optimisation. ONGC has hired global super major BP as technical service provider (TSP) for reviving the old and sagging Mumbai High fields. BP has also been engaged as a domain expert for its eastern offshore showpiece, KG-DWN-98/2.

Kumar said the company has also worked on optimising cost, which will result in a saving of 15 per cent annually in opex and capex. "We have an opex and capex of about ₹60,000 crore and 15% translates into annual saving of ₹9,000 crore," he said adding the savings would start accruing from current year and full benefits will come in 18 months.

ONGC share price details

In the past five trading sessions, ONGC shares have inched up 0.95%, and further gained 6.64% over the past month. Over six months, the stock has zoomed 6.45%, and also advanced 4.54% on a year-to-date basis.

The company’s shares touched a 52-week high of ₹292.90 on October 14, 2024, and a 52-week low of ₹205 on April 7, 2025. As of October 14, ONGC's market capitalisation is ₹3,11,361.91 crore.