Rising under-recoveries: ONGC eyes lower field service rates to cut costs

Grappling with under-recoveries stemming from low crude prices, ONGC is eyeing potential opportunities to reduce future operational expenses by hiring exploration service contractors at lower rates. The company, sources said, has not yet announced any tender for such services, but is keeping a close track on the movement of oil prices and waiting for the opportune moment.

Before the pandemic, lease rates of rigs and other oil field services had rebounded after continuously falling since FY16, as global oil service firms depleted their capacity for further margin cuts. In 2017, rates for deep-water rigs were 65% below 2014 levels. As noted recently by Care Ratings, ONGC had hired offshore rigs at around $30,000-$35,000 in FY16 when a sharp downward trend in crude oil was witnessed which were 65%-70% lower than a year ago.