The decline in oil prices did not significantly affect Oil and Natural Gas Corporation (ONGC), which saw its consolidated EBITDA for 2015-16 decline by only 16 per cent compared to the same period three years earlier. Moody’s said this because ONGC’s share of India’s fuel subsidy burden offset that decline. “ONGC was more exposed to the decline in natural gas prices, which nearly halved in India during that period as gas prices fell internationally,” it said. Despite the oil price decline, ONGC did not reduce its capital spending on exploration and development, Moody’s said. “However, the company halted the pace of its international expansion from early 2014 to mid-2016, when it resumed overseas acquisitions, including its completion of a 26 per cent stake in CSJC Vankorneft, the owner of (Russia’s) Vankor Field and North Vankor license, for USD 1.9 billion (after adjusting for cash profits),” it said. All of ONGC’s overseas acquisition activity has been in line with the Government of India’s strategic objective of ensuring energy security for the country, which relies on imports for nearly 80 per cent of its oil consumption.

Moody’s estimated a capex of USD 7-7.5 billion for ONGC in the year to March 2019. This compares to USD 5.6 billion spending in 2014-15 and USD 12.3 billion in 2017-18. ONGC’s spending in 2017-18 was higher because of one-off acquisition of the government’s stake in Hindustan Petroleum Corp Ltd (HPCL). To help improve the vertical integration profile of its business, ONGC in January acquired 51.1 per cent of HPCL, India’s third-largest refining and marketing company, from the government for Rs 36,915 crore. The government sold the stake to help reduce its fiscal deficit. In the report that examined how changes in policy and structure since the oil price collapse will affect some of the largest NOCs worldwide, Moody’s said NOCs globally have adjusted to a more moderate band of oil prices since the transforming price collapse of late 2014 to early 2016. “Every NOC’s own circumstances depend on a host of factors, such as the strength of support from its government sponsor, and the company’s ability to control local markets,” it said.