Oil price will continue to remain volatile: Oil India CMD

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26 Aug, 2025 12:21

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Oil India plans to complete a capex of Rs 11,700 crore this fiscal and looks to invest a similar amount next year across its business value chain. With its recent acquisition Numaligarh Refinery Ltd (NRL), the company plans to transform itself into an integrated oil company, with investments also earmarked to build petrochemical facilities at the newly acquired refinery. Ranjith Rath, the Oil India chairman and managing director, India spoke to Moneycontrol discussing crude oil prices, investment plans and expectations from the India Energy Week.

Edited excerpts:

We saw a lot of volatility last year, whether it was crude oil prices, gas and the kind of disruptions we saw last year. Where do we stand now? Do you think that the worst is over in terms of the sheer volatility of it?

The reasons for volatility you cannot forecast. The causative factors, that could be any incident tomorrow, day after, you cannot forecast. But as oil and gas partners in the growth story or as oil and gas players in the value chain, we are very well aware of the volatility question per se. So we prepare ourselves for the volatilities as part of our strategy and ensure that how do we maintain the ‘trilemma’( of crude oil prices, exchange rate and above ground risks.)

We are towards the end of fiscal FY23. And this is the time most companies are preparing their budgets, their plans for the next fiscal. So when you are making those plans, what is the base that you're looking at? Is there a crude oil price range that you're looking at? What are the parameters that you are basing it on?

From an India perspective, we would always be very, very positive about our investments. You would notice that crude oil price at a rock bottom may hamper a predictive growth, but I would not say that there is no component of volatility left. The year-on-year volatility component will remain, but the investment component in the hydrocarbon sector from an Indian point of view will remain robust. That’s number one. And when I say investment component, it is not just in the downstream part of it. The kind of geological opportunity that is available in this country with the pathbreaking reforms that has been foreseen in terms of unlocking the sedimentary basins in the East Coast, West Coast and Andaman and Nicobar with the OALP (open acreage licensing programme) rounds on, we see serious investment coming in there. And as a public sector undertaking in the space of exploration and production, we would continue to enhance our exploration acreage. Seismic data acquisition, processing and interpretation are going on.

That's actually quite an upbeat plan. Of course, that's something that will be very crucial for India given the kind of needs we have and given the kind of demand that we are seeing right now.

Absolutely. The graph of demand in India is ever increasing. Therefore, I will not say that the price of oil is not a factor in consideration, but for us it is a priority to ensure investment. So on exploration space, these are the investments which are lined up. In a similar manner, we have producing assets and Oil India is the oldest oil company in the country with the oldest pipeline also. We are also focusing on enhancing our production… There is a nice term called "new oil in old well". We are actually adopting enhanced oil recovery methods. Using those interventions, we are actually not only arresting the depletion curve of mature fields, we are actually enhancing the production. So our enhancement effort is actually first negating the depletion curve and then increasing the production.

The global crude market was very volatile last year. And in some ways, we took advantage of the situation and we were able to source very cheap crude oil from Russia. But if you put aside the Russian oil, it could have turned out to be a very stressful situation because domestic production has not scaled up the way we would have expected. So I want to understand, you have a lot of plans, but in terms of really stepping up production and in terms of really adding output, what are you doing differently now? Because things have changed and energy security is not just an Indian question right now, it's a global question. So what are you doing differently?

I must first clarify that oil prices will continue to remain volatile. The degree of volatility would actually change over a period of time depending on the various causative factors. That is one aspect. Second, today, the country continues to import 85 percent of its crude oil requirement, which is primarily to meet its internal domestic consumption and also we take advantage of India's location in exporting the product. We make a business out of it also. Now, having done this, we must work out how to enhance our exploration and production. Because production cannot be identified on a singular basis. If you don't do exploration, you don't create a reserve replacement ratio, which is more than one. This business of oil and gas, it is actually risk-laden. The subsurface risk is huge. Therefore, the exploration coverage would lead to discovery, which would then become a commercial discovery and then become production. Now, there is a timeline involved in this.

One is the timeline required to enhance production through additional discovery, but then the other part is from your main producing area—how do you enhance your production on a year-on-year basis? That is where we come and we get into the principle of improved oil recovery or enhanced oil recovery. There are various technological adoptions possible and we are successfully doing it also.

Could you also put some numbers to these initiatives? What does it mean in terms of expansion of your current capacities across segments, each segment? And if possible, if you could put a number on the investments and by when we see this happening?

In terms of capex, it's in the order of Rs 4,000 crore-plus.  The investment target for this year for Oil India is Rs 11,700 crore, out of which we are looking at about Rs 4,000 crore-plus in the upstream part of it and Rs 7,000 crore or Rs 6,800 crore-plus in the downstream part, actually the NRL investment. And the Rs 4,500 crore split is primarily on the seismic data acquisition in the exploratory and development wells that we are going to drill. And as of numbers, we are looking at about 40-plus exploratory and development wells. And next year our target is to touch 70. Rs 11,700 crore is for the current financial year, we are already on track and we will be able to meet that investment number. And we have a similar, better investment commitment for the year after.

And in terms of the output, sir, how will that increase?

In terms of output, Oil India has got the best practices to maintain the main producing area which is the Assam area, and we do about 3 million tonnes. Now, how do we maintain 3 million tonnes? If you are in a producing field, which has been producing since the early 1960s, there is a decline curve. So we actually first negate the percentage of decline and then enhance the production. That can happen by intervening in the existing wells, by adding additional development wells and by finding deeper wells. So these are the three places. In all our fields, we are actually adopting this three-pronged strategy.

Your natural gas output actually increased during the first two quarters of the year. How significant would be the increase by the time you close this fiscal? And what kind of production targets are there for that?

See, natural gas is actually buoyed by the necessity of infrastructure or a pipeline connectivity for the customers. That's one. Second, we have a mix of allocation of customers. So if you look at numbers point of view, we would definitely outperform whatever we had done last year. And as part of our short-term strategy, without getting into any new discovery, we have given ourselves a mission of 4+. That means we would actually look at a target of 4 million-plus crude oil and 5 BCM (billion cubic metres) of natural gas by 2024-25.

And that seems achievable?

That's possible. Within the main producing area, we are very, very hopeful with the interventions that we are undertaking currently, we will be able to achieve it.

The other very interesting thing that happened last year, of course, was the acquisition of Numaligarh Refinery (NRL). How has the integration process been? And you have an expansion plan there as well?

NRL is actually getting into an expansion from 3 million tonnes to 9 million tonnes. We are looking at the crude oil feedstock for this 9 million tonnes. Till now, Oil India was doing 3 million tonnes and most of it, the majority of it was given to NRL. So if we do 4 million tonnes tomorrow, we will feed NRL and another 5 million tonnes will be sourced from overseas assets, for which a pipeline is being built from Paradip to Numaligarh which is 1,600-plus km.

Earlier Oil India was an E&P company only (exploration and production and pipelines). By virtue of acquisition of a majority share of NRL, we have now become an integrated energy company. We now plan to go for a petchem derivative that's actually to enhance the petrochemical intensity of the refinery. That's about another Rs 7,000-crore plus investment. A decision is yet to be taken, but that's on the horizon.

So this would be specific to NRL? This petchem project that you're talking about?

Yes. We have also got the commitment of ethanol blending nees which is 20 percent. As part of that, we have got something called ABRPL (Assam Bio Refinery Pvt Ltd) where we are going to have ethanol from bamboo. So the feedstock for 2G ethanol is bamboo. That's another Rs 3,000-crore investment. All these investments are actually falling in place. ABRPL, that is the 2G ethanol project, we are looking at getting it commissioned by October 2023. The other two projects of refinery expansion and pipeline, we are looking at something like the later part of 2024.

With this petrochemical project, your portfolio has diversified and you're a more wholesome energy company than before, thanks to the new acquisition. What is the plan? How big is this initiative? And what kind of plans do you have in terms of the capacity there?

Till now, NRL has been a products-only refinery with the product mix depending on the market. We are expanding it, and we are looking at Bangladesh. There is a pipeline which is already mechanically completed for supplying diesel to Bangladesh, which is the Indo-Bangladesh friendship pipeline. It's about to be commissioned and inaugurated. Petrochemical derivative is an imperative of any refinery today. Since it's in the approval process, we will leave it at that.

Since NRL is being expanded to 9 million tonnes, we have to evacuate the product. So we are enhancing the capacity of the existing pipeline by adding more pumping stations, so that we will be able to evacuate the product not only to Bangladesh but also to the mainland. So actually, if you look at it, the efforts of exploration and production will cater to the refinery, the refined products will flow through the pipelines to reach to the mainland, and there is a cross-country pipeline, which will bring crude oil to the refinery. So it's a fantastic synergy game.

We were looking at the Reliance Industries results that came out last week, and they shared to what extent the bottom line was impacted by the windfall tax levied by the government last year. But crude oil seems to be cooling off. The government had said initially that this is not a permanent thing and they would consider removing it. What is the sense you are getting? Because you are interacting with the government on this issue as well. And when we close the year, how would be the impact of this for the whole year?

Levying a tax is a prerogative of the government. And as long as you are doing well… I'm hopeful that we will also do well when the third quarter results will be out in the first week of February. So from a commercial point of view, we're okay with it.

Of course, India Energy Week is something that everybody is looking forward to. I'm talking to CEOs who are telling me they have fixed up meetings with potential technology partners or potential partners who can help them scale. What are you looking for? What is your agenda as Oil India?

One is through IEW, we are looking at engagement with our overseas partners where anyway by virtue of the path-breaking reforms of the government of India, the landscape has opened now for exploration coverage. So we are actually looking forward to partnering with organisations. So they might find it easier to partner with a national oil company or an entity that is already in operation. That's one aspect. Second, we would also look at technological collaborations during such discussions. And the third is, we wish to showcase India as a destination for oil and gas. Earlier, it was only for E&P. Now, having NRL, it's for the entire value chain. During India Energy Week, we intend to launch a hydrogen bus also.

But when you talk about the E&P space, even with the OALP rounds that have happened, we have seen that overseas players are still a little jittery. Do you think that has changed?

It's looking encouraging. The last reform that has happened has actually unlocked about 1 million square kilometres of area and the ongoing OALP round nine has about 2 lakh-plus square kilometres of area on offer. By unlocking those erstwhile no-go zones, this is now available for exploration. That's one part of it. Because the offshore part of the country is, besides Bombay High or KG Basin, still unexplored. So we are very hopeful that this is actually gaining traction, and whatever little interaction that we are having, I'm not supposed to take the names because nothing concrete has happened, but serious traction is going on.