Fitch affirms ‘BBB-‘ rating on Indian Oil
Fitch has affirmed on Indian Oil Corporation Ltd (IOC) ‘BBB-‘ rating, indicating that expectations of default risk are currently low. “Fitch equalises IOC’s rating with that of its largest shareholder, the state of India (BBB-/Stable) due to their strong operational and strategic linkages,” the credit rating agency said in a statement. Government of India holds 58.6 per cent stake in IOC. The rating signifies that the capacity for payment of financial commitments is considered adequate but adverse business or economic conditions are more likely to impair this capacity. Fitch believes the linkages remain strong despite the deregulation of diesel prices in 2014. IOC however continues to retail kerosene at government-prescribed prices that are lower than market prices. “Fitch may reassess the linkage of IOC with the state, as per Fitch’s Parent and Subsidiary Linkage methodology, if the state oil marketing companies’ policy role weakens due to further deregulation of petroleum products,” it said. While assessing the linkages, Fitch will also consider the government’s commitment to maintaining market-based prices for already deregulated products when oil prices increase. The lower oil prices and deregulation of diesel have significantly improved IOC’s finances. Fitch assessed the company’s standalone credit profile at ‘BB+’ which indicates an elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions over time.
Cairn India crude oil & gas production falls 8% in Q4
Cairn India reported an 8 per cent fall in oil and gas production for the fourth quarter of fiscal 2015-16 at 17.93 million barrels of oil equivalent as compared to 19.4 barrels of oil equivalent in the same quarter last year. The company’s production for the full 2015-16 fiscal also fell 4 per cent to 74.56 million barrels of oil equivalent as compared to 77.26 million barrels of oil equivalent in the previous fiscal. “Gross production from Rajasthan declined by 4 per cent compared to the fourth quarter of fiscal 2014-15, mainly due to the natural decline and under-performance of the Bhagyam reservoir,” the company said in an official statement. Bhagyam is one of Cairn’s largest discoveries in Rajasthan. The Mangala reservoir is its largest discovery in the State. The company’s average gross production on a daily basis was 9 per cent during the fourth quarter at 197,039 barrels of oil equivalent per day. Average daily gross production from Rajasthan was 4 per cent lower at 167,650 barrels of oil equivalent per day. The company said in a statement that lower volumes from Bhagyam were partly offset by ‘infill wells’ in Aishwariya, better reservoir management initiatives across the field and a ramp up of production. “Gross production from the Development Area DA1 and DA2 averaged at 150,918 barrels of oil equivalent per day and 16,732 barrels of oil equivalent per day respectively,” Cairn said. DA1 comprises Mangala, Bhagyam and Aishwariya oilfields in Rajasthan while other discoveries are in DA2. For the full 2015-16 fiscal, average daily gross production was 203,703 barrels of oil equivalent per day, 4 per cent lower than the previous fiscal due to lower production from Rajasthan and offshore assets. “Rajasthan production declined 3 per cent due to reservoir underperformance at Bhagyam. However, an excellent performance by Mangala EOR and contribution from Aishwariya infill program partly made-up for the decline,” Cairn said. <
RIL-BP may withdraw arbitration proceedings against Centre: Report
The arbitration case involving Reliance Industries (RIL)-BP Plc against the government may see an end, as the companies are said to be considering dropping the case. Both the companies are in talks with the government to drop the arbitration, the report added, citing an official from the oil ministry. In fact, they had met oil minister Dharmendra Pradhan in the first week of April, the newspaper reported. The move will help the companies sell the gas produced from their allotted fields on the free pricing model that was announced in the new gas-pricing policy announced by the Centre on March 11. “The fact that the consortium is keen to discuss the issue with us indicates its willingness to drop the arbitration relating to government’s power to fix gas price,” a government official told the newspaper. Meanwhile, the companies have also signalled their intention to invest $10 billion to recover 2.5 trillion cubic feet of gas from deep sea fields. They wish to sell this at the free market pricing mechanism. The official quoted above told the newspaper that it may take about a year for companies to finalise the field development plan, sign equipment and services contracts and commence work. “The recent reforms announced by the Government of India will provide the much-needed impetus to the Indian oil and gas industry. Together with our partners, we are working with the government to progress activities in our blocks,” BP said in a statement. According to the announcement, to avail the new liberal pricing, companies who have filed the arbitration or litigation must conclude or withdraw the same. The gas-pricing dispute – A case file. In 2014, RIL initiated an arbitration to implement the pricing determined by the United Progressive Alliance (UPA) government, which had set a price double than $4.2 mmBtu. However, the policy could not be implemented on the back of the model code of conduct being in place ahead of the Lok Sabha elections. The Bharatiya Janata Party-led government modified the formula and set the price at $3.06 mmBtu for April-September 2016.