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Vedanta – Oil & Gas Segment Analysis

Author: Published on: Published in: Vedanta (NSE:VEDL)

September 3, 2025 – Vedanta’s Oil & Gas division is in terminal decline not just because its fields are exhausted, but because the business has been systematically starved of investment. Despite growing license commitments and rising decline rates, VEDL has diverted available cash to fund unsustainable dividends upstream to its parent, Vedanta Resources Limited.

  • Mature, late-life assets dominate: Rajasthan (first oil 2009), Ravva (1994), and Cambay (2002) account for the majority of VEDL’s O&G production and reserves. All are >20 years onstream and in terminal decline.
  • Production concentrated in Rajasthan: Despite holding OALP and DSF acreage since 2018, >90% of 2P and 2C reserves and nearly all commercial output still comes from Rajasthan, Ravva, and Cambay. OALP contributed just 7% of FY25 gross production.
  • Exploration underinvestment: VEDL has spent ₹4,230 crore (~$495m) on exploration since FY21, averaging $100-125m per year. This is far below the $200-300m/yr needed to replace Rajasthan’s decline alone.
  • Failed drilling program: In its FY22 annual report, Vedanta announced plans to drill 30 PSC and OALP exploration wells. Only one of 8 wells drilled since FY23 delivered a minor contingent discovery (Rudra, 6 mmboe 2C).
  • Uneconomic exploration costs: Rudra’s discovery implies a contingent discovery cost of ~$50/boe, depending on allocation assumptions.
  • Capex misdirection: “Capex in progress” disclosures are presented only at segment level, preventing investors from distinguishing between mature asset infill and new exploration. Actual spend has been far below the multi-billion guidance routinely announced.
  • Reserves deterioration: 2P reserves fell from 569 mmboe in FY22 to 399 mmboe in FY25 (-30%). 2C swelled from 582 mmboe to 1,031 mmboe, but these remain unappraised and undeveloped.
  • Disclosure obfuscation: VEDL combines 2P and 2C in investor communications, presenting “1.4 bnboe reserves” in its FY25 annual report. This is more than 3× the commercial 2P base of 399 mmboe.

This extraction has left the O&G portfolio underfunded and unable to arrest its own decline. Shareholders may view this segment as a slow-fading cash generator but without immediate, large-scale investment, the collapse will be faster and more severe than anticipated.

The silver lining is that Vedanta’s O&G business appears to be accelerating its ESG timeline on account of the fact it is underperforming.

 

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