Yet, almost Rs 445 crore of ONGC’s gross figure was due to its acquiring – on central government orders – equity from Hindustan Petroleum Corporation (HPC) and Gujarat State Petroleum Corporation (GSPC). It took a 51.11% stake in HPC, paying the government about Rs 369 bn. And, an 80% in GSPC’s Deendayal Upadhyay block (Krishna-Godavari or KG basin) for Rs 75.6 bn.
Of the 11 companies, ONGC and GAIL have met their capex target. If one was to exclude the investment in HPC and GSPC's block, oil PSUs spent close to Rs 674 bn up to end-February. About Rs 183 bn less than the year’s target. And, while it is believed this shortfall will be made good this month, the final one of FY18, it is clear that the gross capex figure includes a lot of spending which was not made to create newer assets.
The Rs 860 bn to be spent in 2017-18 is lower from the nearly Rs 1.1 bn of 2016-17. However, oil PSUs are expected to continue spending at a healthy rate for some more time. “ONGC’s KG basin and oil marketing companies spending on refinery and petrochemical expansion, with the upgradation to BS-VI emissions standards, is predominately driving this expansion and this will continue for some time,” said Debasish Mishra, partner at consultancy Deloitte Touche Tohmatsu India.
ONGC, for instance, plans to spend almost Rs 321 bn in the next financial year.
In a November 2017 report, ratings agency ICRA said: "The profitability of upstream (exploration and production) companies will improve following the rise in crude oil prices. By our estimates, till an Indian Basket crude price of $65/barrel, the PSU upstream companies might not have to bear material under-recoveries. Thus, their net realisation and cash accruals will improve, unless the extant under-recovery sharing formula is changed. Beside, a 16% hike in domestic gas prices for the second half of FY18 and likely increase in future with a rise in global gas indices would add to improvement in their profitability. PSU upstream companies continued with their capex plans even in a low crude oil price scenario. However, private E&P companies had scaled down their capex plans due to soft crude prices. Higher crude oil prices, if sustained, will lead to an increase in capex by the private players, too."