ONGC is grappling with escalating operating costs due to a significant increase in oilfield services rates, which have surged by approximately 25% in just one year. Additionally, the company is facing higher maintenance costs for its aging capital equipment, such as compressors and turbines.
To counter this situation, ONGC is strategising to maintain control over its operating expenses by implementing various efficiency measures. These include capitalising on economies of scale, reducing manpower costs, and trimming general administration expenses.
The sharp rise in oilfield services rates encompasses a wide range of services, such as rigs, barges, helicopters, and others. This surge can be attributed to factors like Gulf producers, particularly Saudi Arabia, attracting a record number of rigs, and Brazil also accumulating a significant number of deep-sea rigs. As a result, Indian explorers are facing significant challenges in securing adequate rigs, let alone at affordable rates.
Oilfield services rates typically mirror the trajectory of oil prices. As reported by ETEnergyworld.com, when oil prices are high, it stimulates exploration and development activities, increasing the demand for services and subsequently driving up their costs. For ONGC, the greater challenge lies in procuring offshore rigs, as onshore rigs are relatively well-supplied in comparison.
Pomila Jaspal, ONGC Finance Chief commented, “The cost of operation has gone up. Of course, we can’t reduce on repair and maintenance. At the same time, we can reduce on unwanted costs like idle time of the rigs, and vessels. We are trying to reduce that”.
