By Saket Sundria, Debjit Chakraborty and Dhwani Pandya

(Bloomberg) — Oil and Natural Gas Corp., India’s largest explorer, is making ready to spend on its largest ever crude binge as sub-$50 oil halves the price of rigs and providers.

State-run ONGC is contracting as many as 5 deepwater drill ships and dozens of jack-up rigs because it launches a $5-billion improvement program within the Krishna-Godavari Basin off the east coast of India, Chairman Dinesh Kumar Sarraf stated in an interview. The firm needs to utilize the drop in hiring charges for vessels and oilfield providers to decrease prices and enhance revenue, he stated.

“This is the largest ever campaign undertaken by us,” Sarraf stated. “Never in the past have we had five rigs in offshore deep-water at one time. We believe this is the right moment when we can increase our investment.”

The firm, which intends to spend 11 trillion rupees by 2030 to boost output, is essential to Prime Minister Narendra Modi’s goal of slicing import dependence by 10 p.c within the subsequent six years. That objective is essential for a rustic that imports most of its oil. India would be the fastest-growing crude client on this planet by way of 2040, in response to the International Energy Agency.

‘Exceptional Strength’

“It makes immense sense for an oil explorer to undertake capex in the current times when oil field services costs and charter rates have dropped so sharply, especially if they have strong financial profile,” stated Ok. Ravichandran, co-head, company scores at assessor ICRA Ltd. “Lower debt in relation to reserves gives ONGC exceptional strength in comparison to others.”

Offshore jack-up rigs which price as a lot as $90,000 a day when oil was surging, now price about half that, Sarraf stated.

ONGC shares rose 1.5 p.c to 213.85 rupees, probably the most since June 9, in Mumbai. The benchmark index S&P BSE Sensex closed up 0.9 p.c.

The flagship explorer in Asia’s third-largest economic system is betting its spending will repay as soon as oil costs revive. Production has declined in fields accounting for nearly three-quarters of ONGC’s output, including stress to carry on stream new property.

“While the big investments are going to help ONGC in the long term, it can strain the profits in coming years if crude prices were to remain around $50 a barrel levels,” stated Dhaval Joshi, a Mumbai-based analyst at Emkay Global Financial Services Ltd.

ONGC is engaged on as many as six giant initiatives on its western offshore fields and plans to spend about 300 billion rupees ($4.5 billion) throughout the fiscal 12 months that began April 1.

The firm has awarded 36 main contracts throughout the nation’s jap and western coasts, value a complete 340 billion rupees, previously year-and-a-half, together with 13 offshore rigs.

“We expect production would increase this year,” Sarraf stated. “That’s why we need to add more and more fields.”

The firm expects to begin gasoline output from the KG-basin block by mid-2019 with a peak manufacturing of 15 million customary cubic meters a day. Crude oil output will start a 12 months later and should go as much as 77,000 barrels a day.

© 2016 Bloomberg L.P