Public sector company Oil and Natural Gas Corporation Limited (ONGC) on Thursday reported a

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second quarter net profit of 5.9 per cent, driven by a lower subsidy burden and better realisation on crude sales. This was better than analysts' expectations.

Net profit in the July-September quarter for the Navratna company stood at Rs 5,090 crore, compared with Rs 4,808 crore in the same period a year ago, ONGC chairman and managing director R S Sharma told newsmen. An appreciating rupee also helped the company as its realisation on crude sales in rupee terms was Rs 2,731 per barrel in the latest quarter, up from Rs 2,041 a barrel a year ago.

Bloomberg estimates, compiled from 17 analysts, put the net profit at Rs 4,920.

On Thursday, the cabinet committee on economic affairs approved participation by ONGC Videsh (OVL) in the upstream and offshore midstream sections of blocks A-1 and A-3 of the Myanmar natural gas development project. It authorised OVL to make investments up to an aggregate of $173.85 million from its own resources and/or borrow from the domestic and international markets until the field development plan (FDP) is finalised and a comprehensive proposal for the investment is approved by the government.

Total sales of ONGC, excluding the sale of Mangalore Refinery & Petrochemicals (MRPL) products, in the second quarter stood at Rs 15,134 crore, compared with Rs 14,808 crore in the same period a year ago.

ONGC gave $14.08 per barrel discount to public sector oil refiners and marketing companies such as IndianOil to compensate them for the losses they incurred on selling domestic LPG and kerosene at prices lower than cost.

The subsidy payout at Rs 2,630 crore was 79 per cent lower than Rs 12,663 crore payout in Q2 of the last financial year year, Sharma said.

Speaking on crude oil prices, Sharma said, “I can see crude prices hardening in the future. Crude prices going excessively high don’t help ONGC. Our net realisation after paying for fuel subsidy was $56.42 per barrel, as compared to $46.72 a barrel last year."

The company’s crude oil production in the quarter saw a dip of 3.4 per cent at 6.63 mmt, compared with 6.86 mmt in the year-ago period. Natural gas production saw a marginal increase of 0.3 per cent at 6.45 bcm, compared with 6.43 bcm in the same period a year ago.

“By 2015-16, we expect production of gas to hit 100 mmscmd. The present production is nearly 62 mmscmd,” Sharma said. The incremental production would come from new fields particularly in the KG basin.

ONGC made five oil and gas discoveries during the quarter including one in Krishna Godavari basin. In October, ONGC discovered four additional oil and gas reserves, all of which were in western offshore. When asked about approximate reserves in these newly found blocks, Sharma said that it is too early to make an assessment of reserves.

The ONGC board also approved a planned investment of Rs 24,720 crore and Rs 26, 523 crore for revised estimate 2009-10 and budget estimate 2010-11 respectively.