ONGC And Shell Energy India Form Partnership For Deepwater Exploration And LNG Sourcing

Market snapshot: State-owned Oil and Natural Gas Corporation (ONGC) and Shell Energy India have signed a non-binding memorandum of understanding (MoU) to jointly explore deepwater and ultra-deepwater oil and gas opportunities. The collaboration also encompasses the assessment of potential liquefied natural gas (LNG) sourcing options to evaluate future bids and projects.

Data Snapshot

• ONGC's standalone net profit for Q1 FY27 surged 112.3% year-on-year to ₹17,033.81 crore.
• Standalone revenue from operations for the first quarter grew 45.2% year-on-year to ₹46,460 crore.
• ONGC's net crude oil price realization rose 50.4% year-on-year to $99.45 per barrel.
• The Central Government approved the National Offshore Exploration Scheme, Samudra Manthan, with a Phase-I outlay of ₹84,084 crore up to FY 2030-31.

What's Changed

• ONGC is shifting focus toward capital-intensive deepwater assets in partnership with Shell, mitigating high-risk frontiers.
• The newly approved Samudra Manthan scheme provides crucial policy support, funding up to 50% of deepwater drilling costs up to ₹675 crore per well.
• ONGC's standalone net profit increased to ₹17,033.81 crore from ₹8,024.23 crore in the corresponding prior-period quarter.

Key Takeaways

• This partnership allows ONGC to leverage Shell's global deepwater capabilities for complex domestic reservoirs.
• The agreement evaluates LNG sourcing options, improving long-term supply integration and commercial synergies.
• Aligned with a newly launched seven-year exploration plan, ONGC aims to drill 150 deepwater wells.

SAHI Perspective

The alliance between ONGC and Shell Energy India represents a structured, risk-sharing approach to complex exploration. By utilizing Shell's technical expertise in deepwater drilling alongside the substantial fiscal backing of the Indian government's newly enacted Samudra Manthan scheme, ONGC is well-positioned to aggressively scale its exploration efforts without bearing the entirety of the financial risk.

Market Implications

The joint development strengthens ONGC's competitiveness in forthcoming Open Acreage Licensing Policy (OALP) bidding rounds. Securing reliable LNG sourcing options also provides essential operational continuity for ONGC's downstream petrochemical and refining arms, securing raw feedstock logistics.

Trading Signals

Market Bias: Bullish

ONGC's strategic partnership with Shell significantly strengthens its deepwater capabilities. This exploration push is underpinned by robust financial health, with standalone Q1 FY27 net profit surging 112.3% YoY to ₹17,033.81 crore, and a massive government-funded offshore scheme.

Overweight: Oil & Gas Exploration, LNG and Midstream Infrastructure

Trigger Factors:

• Allocation of deepwater blocks under future bidding rounds.
• Successful execution of exploratory drilling in the Krishna-Godavari and Mahanadi basins.
• Sustained crude oil price realization levels above $80 per barrel.

Time Horizon: Medium-term (3-12 months)

Industry Context

India imports nearly 90% of its crude oil and around half of its natural gas consumption. To combat declining domestic production, the Cabinet approved the ₹84,084 crore Samudra Manthan offshore exploration scheme on July 31, 2026, which earmarks ₹43,200 crore specifically for deepwater and ultra-deepwater well drilling to add over 600 MMTOE to national hydrocarbon reserves.

Key Risks to Watch

• High geological risk associated with deepwater wells, where historical global failure rates are high.
• Ongoing production declines in mature onshore assets, with overall oil and gas production down 3.9% YoY in Q1 FY27.
• Volatility in international crude oil prices impacting realized margins.

Recent Developments

In early August 2026, the Government of India formally launched the ₹84,084 crore 'Samudra Manthan' offshore exploration scheme. Following this, ONGC announced an ambitious seven-year program to drill 150 deepwater wells, utilizing a newly formed 'DeepX' mission-mode exploration unit.

Closing Insight

ONGC's partnership with Shell, coupled with policy tailwinds from the Samudra Manthan scheme, signals a pivot toward high-impact deepwater assets. This structured model of private technology transfer backed by public subsidies offers a realistic path to reversing India's domestic production declines.

High Performance Trading with SAHI.