Indian Oil Companies Ramp Up Capital Expenditure in Q1 FY25

India’s state-owned oil companies are accelerating their capital expenditure (capex) plans for the 2024-25 fiscal year. Leading the charge are the Indian Oil Corporation (IOC) and Oil and Natural Gas Corporation (ONGC), which have already spent a significant portion of their annual budgets in the first quarter (Q1).

Strong Start to FY25

• Indian Oil Corporation (IOC) and ONGC have each invested approximately ₹8,500 crore and ₹8,000 crore respectively in Q1.
• This aggressive spending represents roughly a quarter (27% for IOC and 26% for ONGC) of their annual capex targets.

Combined Efforts

• Together, state-owned oil companies have a collective capex target of ₹1,18,500 crore for FY25.
• As of June 2024, the combined spending of these companies reached ₹26,500 crore, which is approximately 22% of their annual target.

Company-Wise Breakdown

• IOC and ONGC are exceeding the average spending rate for state-owned oil companies in Q1.
• Hindustan Petroleum Corporation (HPCL) invested ₹2,680 crore (21% of its annual target).
• GAIL (India) Limited (GAIL) spent ₹1,500 crore (19%).
• Oil India Limited (OIL) invested ₹1,200 crore (18%).
• Bharat Petroleum Corporation Limited (BPCL) spent ₹1,600 crore (12%), which is below the average.

Investment Focus

Refiners like IOC, HPCL, and BPCL are directing their capex towards various projects, including:

• Refinery expansions.
• Petrochemical and biofuel plants.
• Pipeline and depot infrastructure.
• Natural gas distribution networks.
• A significant portion of HPCL’s investment is allocated towards its greenfield refinery project in Barmer, Rajasthan, which has reportedly experienced substantial cost increases.

Focus on Exploration and Production

ONGC and OIL primarily utilise their capex towards exploration and production activities, aiming to increase domestic oil and gas reserves.

Looking Ahead

The strong Q1 performance by several state-owned oil companies indicates a commitment to their capex plans for FY25. Continued investment in infrastructure development, refinery expansions, and exploration activities will be crucial for enhancing India’s energy security and self-sufficiency in the long term.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.