The Indian government's decision to increase the Goods and Services Tax (GST) on exploration services has raised concerns about its potential impact on major oil and gas companies. The GST rate for exploration services, including seismic surveys, geological analysis, and drilling operations, has been hiked from 12% to 18%, effective September 22.

Impact on ONGC

Oil & Natural Gas Corporation (ONGC), India's largest oil and gas exploration and production company, is expected to feel the effects of this tax increase:

• ONGC's exploration costs amount to ₹19,500.00 crore, representing 13% of its standalone revenue.
• The 6% GST hike is anticipated to raise ONGC's overall expenses by approximately 1%.
• This increase is expected to reduce ONGC's Earnings Per Share (EPS) by less than ₹0.70 per share.

Implications for Oil India

Oil India Limited, another major player in the Indian oil and gas sector, will also be affected by the GST rate change:

• Oil India's exploration costs stand at ₹1,980.00 crore, accounting for 9% of its revenue.
• The tax hike is likely to increase Oil India's expenses by about 0.5%.
• The company's standalone EPS is expected to decrease by 1.5% as a result of this change.

Market Reaction

The news of the GST hike has already had an impact on the stock market:

This GST rate increase comes at a time when oil and gas companies are already facing challenges in the global energy market. The additional tax burden on exploration services may potentially affect the companies' exploration and production activities, which are crucial for maintaining and increasing domestic oil and gas output.

While the immediate impact on earnings appears to be moderate, the long-term implications of increased exploration costs on India's energy security and the companies' future investment decisions remain to be seen. Investors and industry analysts will be closely monitoring how these companies adjust their strategies to mitigate the impact of higher exploration costs in the coming quarters.

Oil & Natural Gas Corporation (ONGC), India's state-owned oil and gas giant, is pursuing a multi-faceted strategy to expand its operations and secure diverse energy sources.

US Ethane Purchases

ONGC executives have announced plans to purchase 0.6-0.8 million tons of ethane annually from the United States for a petrochemical project. This move signifies the company's efforts to diversify its feedstock sources and strengthen its petrochemical operations.

Russian Oil Procurement

The company has stated that its refineries will continue purchasing Russian oil as long as prices remain affordable. ONGC noted that there is currently no government advisory against Russian oil purchases, allowing them to maintain this procurement strategy.

Strategic Expansion Plans

ONGC is also setting its sights on expanding its global footprint through strategic acquisitions in foreign oil and gas projects. This move signals the company's ambition to strengthen its international presence and diversify its portfolio beyond domestic operations.

Focus on Fair Pricing

While ONGC is actively seeking opportunities abroad, the company is not willing to pursue acquisitions at any cost. An executive stressed the importance of fair pricing in these potential deals, indicating a prudent approach to international expansion.

Implications for ONGC's Global Strategy

These announcements underscore ONGC's commitment to strategic growth in the global oil and gas sector. By targeting foreign assets and diversifying its supply sources, the company aims to:

• Diversify its resource base
• Gain access to new technologies and markets
• Enhance its position in the international energy landscape
• Secure cost-effective feedstock for its operations

Cautious Approach

The emphasis on fair pricing and affordable procurement suggests that ONGC is taking a measured approach to its expansion and operational plans. This strategy could help the company optimize its costs and ensure that any acquisitions or purchases add value to its portfolio.

As ONGC moves forward with its plans, industry observers will be watching closely to see how these strategies unfold and impact the company's future growth trajectory and its role in the global energy market.