he results of India’s listed petroleum companies in the fourth quarter, or the quarter to March, are likely to be mixed as it marks the end of a fiscal with record subsidies. The external environment remains healthy for the industry and FY14 could be agood year with a number of positive policy decisions in the offing.
The benchmark Brent crude oil prices averaged $114 per barrel during the quarter, 2% higher sequentially, but lower from a year ago. The petroleum industry’s underrecovery for the quarter is estimated to be between Rs 36,000 crore and . 37,300 crore, lower than the Rs 39,268 crore in the October to December, 2012 quarter.
Despite a sequential fall in under-recovery — selling products below cost — the burden of upstream state-owned companies such as ONGC, Oil India and Gail could rise as the government attempts to fully compensate downstream oil marketing companies Indian Oil, BPCL and HPCL. In the first nine months of FY13, these upstream companies had shouldered over 36.2% of the under-recovery burden, which is expected to rise to 38% to 40% for the full fiscal, calling for a largerthan-proportionate rise in their burdens. The downstream oil market companies, however, won’t have much to cheer about as they close the year with profits in line with the last few years. The actual cash support from the government will take time, keeping their debt burdens high. Standalone refiners such as Reliance Industries and Essar Oil are expected to benefit from the sequential improvement in the gross refining margins, or GRMs. Reuters Singapore GRM rose 37% QoQ to an average $8.7 per barrel in the last quarter of FY13 against $6.5 in the third quarter, according to a report by Motilal Oswal.
Even petrochemical margins have maintained healthy levels on a sequential basis. Higher raw material (naphtha) costs and a mild pull from re-stocking demand post the Chinese lunar holiday helped improve petrochemical margins in Q4. Polymer prices and margins improved across the board and would be earnings accretive for RIL, GAIL and IOC during the quarter, a Religare Institutional Research report said. However, RIL could see some volume drop on partial closure of its refinery during the quarter. For natural gas transporters, the draught season is expected to continue even in the last quarter of FY13 as volumes fail to move up.
In its report, Kotak Securities said the natural gas supply in India was lower (during the March quarter) due to a delay in ramp-up of the natural gas production from KG-D6 by RIL. This will not only negatively impact the performance of RIL but also impact gas-utility companies such as GSPL, GAIL and Gujarat Gas, it said. However, part of the gas volume loss was compensated by higher import of LNG by PLNG, it said.
As FY14 unfolds, global crude oil prices are expected to remain under pressure due to a subdued economic growth outlook and healthy supply growth. This, apart from refinery closures, is expected to support refining margins. The declining diesel subsidy and a possible increase in the price of natural gas will be good for upstream public sector companies.
The benchmark Brent crude oil prices averaged $114 per barrel during the quarter, 2% higher sequentially, but lower from a year ago. The petroleum industry’s underrecovery for the quarter is estimated to be between Rs 36,000 crore and . 37,300 crore, lower than the Rs 39,268 crore in the October to December, 2012 quarter.
Despite a sequential fall in under-recovery — selling products below cost — the burden of upstream state-owned companies such as ONGC, Oil India and Gail could rise as the government attempts to fully compensate downstream oil marketing companies Indian Oil, BPCL and HPCL. In the first nine months of FY13, these upstream companies had shouldered over 36.2% of the under-recovery burden, which is expected to rise to 38% to 40% for the full fiscal, calling for a largerthan-proportionate rise in their burdens. The downstream oil market companies, however, won’t have much to cheer about as they close the year with profits in line with the last few years. The actual cash support from the government will take time, keeping their debt burdens high. Standalone refiners such as Reliance Industries and Essar Oil are expected to benefit from the sequential improvement in the gross refining margins, or GRMs. Reuters Singapore GRM rose 37% QoQ to an average $8.7 per barrel in the last quarter of FY13 against $6.5 in the third quarter, according to a report by Motilal Oswal.
Even petrochemical margins have maintained healthy levels on a sequential basis. Higher raw material (naphtha) costs and a mild pull from re-stocking demand post the Chinese lunar holiday helped improve petrochemical margins in Q4. Polymer prices and margins improved across the board and would be earnings accretive for RIL, GAIL and IOC during the quarter, a Religare Institutional Research report said. However, RIL could see some volume drop on partial closure of its refinery during the quarter. For natural gas transporters, the draught season is expected to continue even in the last quarter of FY13 as volumes fail to move up.
In its report, Kotak Securities said the natural gas supply in India was lower (during the March quarter) due to a delay in ramp-up of the natural gas production from KG-D6 by RIL. This will not only negatively impact the performance of RIL but also impact gas-utility companies such as GSPL, GAIL and Gujarat Gas, it said. However, part of the gas volume loss was compensated by higher import of LNG by PLNG, it said.
As FY14 unfolds, global crude oil prices are expected to remain under pressure due to a subdued economic growth outlook and healthy supply growth. This, apart from refinery closures, is expected to support refining margins. The declining diesel subsidy and a possible increase in the price of natural gas will be good for upstream public sector companies.
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