ONGC to trim costs

New Delhi, Feb. 15: ONGC Ltd has decided to prune its expenses because of the slump in global crude prices. The PSU has appointed global consultant McKinsey to advise it on cutting costs.

However, ONGC is unlikely to cut its capital expenditure as the state-owned firm wants to take advantage of the lower rates of services and rig rates to carry out exploration and production activity, officials said.

An ONGC order stated that in view of the prolonged soft prices, which will hurt its bottomline, it was "imperative that due prudence is exercised while sanctioning all kinds of expenditure/investments".

"Cost control and efforts for cost reduction as well as deferment of capital expenditure without adverse impact on operations is expected from all concerned," the order said.

Listing the areas of immediate cost control, it called for avoiding travel and where absolutely necessary the number of officers and the duration of visit be kept at an absolute minimum. Also, video conferencing facilities be used to cut down on travel by officers.

Proposals for participation in study tours, workshops, conferences and seminars abroad at company cost may not be entertained except those that are fully funded by sponsoring agencies.

"There will be no cut in capex activities. In fact, there will be an increase, but financially there will be a reduction because of the fall in services cost," ONGC chairman Dinesh K Sarraf has said.

In the current financial year, ONGC aims to spend Rs 30,000 crore on capital expenditure. It had cash and cash balances of Rs 15,000 crore as on December 31.

The PSU explorer's capex between 2010-11 and 2014-15 was Rs 1.5 lakh crore.

The explorer had estimated a capital expenditure of Rs 36,249 crore in 2015-16 and Rs 34,000-35,000 crore in 2016-17.

Oil and Natural Gas Corporation Limited (ONGC)