Lenders may soon be reluctant to fund oil and gas projects given it is now considered a ‘sin industry,' states ONGC chairman Arun Singh on April 25. ONGC will now have to generate enough cash internally to continue its business, he added, as reported by the business daily Economic Times.
Moneycontrol could not independently verify the news.
The constant concerns that have been coming up regarding climate change issues have alerted some capital funders across the globe, as well as banks and debt and equity funds to stay away from funding projects that raise high emissions.
Singh believes that although, in India, fossil fuel projects have not yet faced any constraints with respect to funding, there still is some fear regarding the same.
"You should be mindful that now if you don't generate your own money, there is no bank money available to you after three years. Your industry is a sin industry," the chairman warned the ONGC employees in a town hall the previous week. "You have to generate enough money from the existing business to fund your own business. You don't have a choice to get outside funds,” Singh added.
Singh added that to generate surplus cash that can be used to fund its business, ONGC needs to contain costs, especially those that can stick around very long since the oil business does not have that long a horizon.
“The future of the conventional area is not looking great. You cannot afford to expand in this space much. You have to grow, you have to generate enough profit, enough production to migrate into some other world," he said.
Singh is faced with the task of increasing the firm’s oil and gas output rapidly whilst ensuring that investments aren’t halted when future demands move away from fossil fuel.
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