Financial Daily from THE HINDU group of publications
Saturday, Nov 12, 2005
Financial Daily from THE HINDU group of publications Saturday, Nov 12, 2005 |
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Corporate
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Outlook Industry & Economy - Petroleum Dip in crude prices, oil bonds may help oil cos post profits Pratim Ranjan Bose
Kolkata , Nov. 11 GIVEN the combined effect of reduction in crude prices, over Rs 15,000 crore issue of oil bond (expected to be cleared by Parliament in Winter session) and continuation of the existing subsidy sharing arrangement by the upstream companies; IOC, BPCL and HPCL are almost certain to post profits in the current quarter. The situation in IBP is unclear, as the company does not enjoy the support of a refining margin. The movement of crude prices will play a crucial part in determining whether the companies will end 2005-06 in the black. Sources in IOC and BPCL do not expect crude prices to move up drastically from the current levels in the coming months as the winter, which has just set in, is not as severe as was expected and the stockpile is already in place. "Spot market trends do not bear any sign of strong demand position and an upward movement of crude prices is unlikely in the next one or two months," says an official dealing with crude oil futures in a leading commodity exchange in the country. IOC, which had already engineered a Rs 9500crore profit in the second quarter, riding primarily on Rs 480 crore plus dividend earning from investments in other oil companies and subsidiaries, is hoping to make the most of the current downward revision of crude prices and the forthcoming oil bonds. The company will receive 50 per cent of the total bond issue. BPCL and HPCL, which have registered Rs 450 crore and Rs 529 crore respectively in the first half, are hopeful that the oil bonds will help them to wipe out the losses. LPG and kerosene subsidies spoil the party: But for the huge under-recoveries on sale of LPG and kerosene, Indian Oil should have been making operating profits at the existing level of crude prices hovering in the range of $54-55 a barrel (for the India basket). The situation is not much different with BPCL and HPCL. According to a senior IOC official, the revision of petrol and diesel prices coupled with the refining margin back up has enabled the company to break even at between $57 and $60 a barrel for crude. IOC had registered Rs 554.87-crore loss on sale of petrol and Rs 3,046.69 crore on diesel between April and October 2005. The total under-realisation on petrol and diesel was Rs 3,601.56 crore. This was 45 per cent of the total under-realisation of Rs 7,833.18 crore by all four oil PSUs. As crude prices have already fallen below the desired level, the company is currently being spared from bearing under-realisations on the sale of these two fuels. But that does not end the company's (and other OMCs') woes. IOC had registered an under-recovery of Rs 3,402 crore on sale of kerosene and Rs 1,444 crore on LPG during the first seven months. The company, holding over 50 per cent of the kerosene market in the country, bears the maximum burnt. In LPG, however, it holds 50 per cent market share. While there is no respite in sight in regard to kerosene and LPG subsidies, Indian Oil and all other OMCs are eagerly looking forward to the magic figure of $50 a barrel (India basket) to post operational profits.
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