Indian Oil quarterly profit was lowest in 3 years; Subdued margins and inventory losses continue to weigh
Suppressed product cracks especially on petrol coupled with inventory and forex losses pulled down the second quarter net profit of Indian Oil Corporation (IOC), the country’s largest fuel retailer, to lowest in three years since the second quarter of 2015-16 when it had reported profit of Rs 329 crore. The company’s net profit in the September of the current financial year (2019-2020) declined to Rs 563 crore, as compared to Rs 3,247 crore posted in the corresponding quarter a year ago. The company’s Gross Refinery Margin (GRMs) excluding inventory gain or loss dropped to $3.99 per barrel for the second quarter ended September 2019, as compared to $5.88 per barrel during the corresponding quarter a year ago. IOC Chairman Sanjiv Singh attributed the dismal performance to subdued product cracks. “GRMs also depend upon product cracks, which is the difference between crude and product price. Compared to previous years, gasoline cracks have been very suppressed. Lower product cracks led to lower GRMs,” he said at a media interaction on Thursday. “If you look at the physical performance, our refineries exceeded 100 per cent capacity utilisation. We achieved 59.9 per cent of distillate yield which is in line with the numbers posted last year, we posted 8.8 per cent fuel and loss which is exactly in line with last year. Physical performance-wise, refineries operated perfectly,” he added. The company recorded an inventory loss of Rs 1,807 crore for the second quarter (July-September 2019) as against Rs 2,895 crore of inventory gain in the corresponding quarter a year ago. Also, IOC posted Rs 1,135 crore loss on foreign exchange, lower as compared to a loss of Rs 2,620 posted in the corresponding quarter a year ago. In addition, maintenance and refinery-upgrade activities in a run-up to change in fuel specifications to BS VI have impacted the company’s crude throughput. The refiner’s throughput in the second quarter of the current financial year declined 2 per cent to 17.53 Million Tonnes. Similarly, refinery throughput in the first six months (April-September) of the current financial year declined 2 per cent to 34.82 MT. The company’s Director-Refineries S M Vaidya said four of its nine refineries will witness either part or complete shutdown in the current financial year in a run-up to BS VI transition. “Most of the major refineries have undergone shutdown. The next major refinery which will undergo shut-down is Mathura, which will undergo shutdown between November-December (60 day shut-down). Haldia refinery is currently undergoing part-shutdown which will be completed by mid-January and Guwahati and Bongaigaon refineries will undergo part-shutdown from December to February,” he said. Singh also said that the company will take significant time to recoup the capital expenditure of Rs 16,000 crore made on supplying BS VI fuel. “The way the pricing is done today it is floating based on international prices. If you compare Euro IV and Euro VI prices there is no significant difference in the pricing in the international market. Although one or two parameters for Indian petroleum products are better, especially for gasoline, there are a few advantages, but the delta is very little. It will take significant time before we are able to recover these costs,” Singh said. He also added that the growth in the country’s petroleum product consumption in the current fiscal year is lower as compared to earlier years even as gasoline consumption grew 9 per cent in the first six months of the current fiscal and diesel use grew 1 per cent. “Second quarter typically witnesses low diesel demand because of monsoon months. Demand for diesel is also impacted by other factors as a lot of diesel is consumed in the transport sector,” Singh said. Singh also informed that the company will set-up a Joint Venture with Riyadh-based Al Jeri Group to set-up fuel retail outlets in Saudi Arabia and plans to set-up the first of these retail outlets in the next six months. According to Director of Marketing, Gurmeet Singh, the JV is yet to decide on the total number of fuel retail outlets to be set-up under the agreement.
Greece to split gas company DEPA, sell 65% stake – deputy energy minister
Greece plans to spin off the distribution grid and commercial operations of majority-state owned natural gas company DEPA and to sell its 65% stake in the two new firms, its deputy energy minister said on Thursday. The conservative government, which came to power in July, wants to speed up privatisations in the energy sector and attract foreign investment as the country emerges from a decade-long debt crisis. Deputy Energy Minister Gerasimos Thomas said the sale process is expected to begin “very soon”, at the end of the year or the beginning of next year. The remaining 35% of the new entities will be held by Hellenic Petroleum. He said there was strong interest from foreign investors in the utility, which imports gas from Russia, Turkey and Algeria. “We believe that the privatization will give the chance to make better use of and develop distribution networks in the country,” Thomas said. “Gas penetration is low.” A third company will remain state-owned after the split and will be in charge of the pipeline schemes, including a trans-border natural gas pipeline between Greece and Bulgaria known as IGB, Thomas said. DEPA’s privatisation was discussed at a cabinet meeting chaired by Prime Minister Kyriakos Mitsotakis on Thursday. The previous government had legislated a split in DEPA operations, aiming to sell a 50.1% stake in its retail business and a minority stake in its distribution grid. Mitsotakis’ government has prepared a bill amending that legislation, further liberalising the energy sector and reforming state electricity company PPC. Energy Minister Kostis Hatzidakis told reporters on Thursday the bill introduces flexible wage contracts that would boost hirings in PPC, scrap a 75% discount on electricity bills for employees and pensioners in place since 1990, and set conditions for voluntary exits. “PPC has managed to stick its head out of the water… but it still faces an uphill struggle,” Hatzidakis said.
Indian Oil second quarter net profit down 83% to Rs 563 crore
Indian Oil Corporation (IOC), the country’s largest fuel retailer, today posted an 83 per cent dip in net profit at Rs 563 crore for the second quarter ended September on the back of decreased revenue and fall in gross refinery margins. The company had posted a net profit of Rs 3,247 crore for the corresponding quarter ended September 2018. IOC’s revenue from operations declined 13 per cent to Rs 1,32,376 crore during the September quarter. The fuel retailer’s gross refining margin dropped to $2.96 per barrel for the first six months (April-September) of 2019, as compared to $8.45 per barrel posted in the corresponding period a year ago. Its refinery throughput declined marginally to 17.53 million tonnes (MT) in the second quarter of the current financial year from 17.81 MT posted in the corresponding quarter a year ago. Domestic sales in the second quarter increased marginally to 20.17 MT, as compared to 19.82 MT posted in the corresponding quarter last fiscal.
Private players stay away from India’s latest oilfield auction
The private players stayed away from the latest oilfield auction while the government received a total of eight bids, from ONGC and Oil India, for seven blocks on offer. ONGC has submitted bids for seven blocks and Oil India for one in the fourth round of the Open Acreage Licensing Programme (OALP), where bidding closed on Thursday, according to a statement on the website of the Directorate General of Hydrocarbons (DGH), the Oil Ministry arm that oversees oilfield auctions. No other company participated in the auction. This means ONGC will automatically get six blocks for lack of competition. For one block, it will have to compete with Oil India. The fourth round offered the lowest number of blocks and also received the least bids, among all the auction rounds of OALP. In the second round, 14 blocks attracted 33 bids while in the third round, 23 blocks received 42 bids. In the first, 110 bids were received for 55 blocks on offer. In three rounds together, 87 blocks have been awarded. “Expression of Interest submission window for the OALP-V bid round is open till November 30, 2019 and companies have another opportunity to take part in the blossoming Indian exploration & production sector,” the DGH said in a statement. Under OALP, a company has the freedom to carve its own blocks and let the government know about its interest in the block, which would then put that up for auction. The company, which has initially shown interest in the block, gets some preferential points during bid evaluation. The government has recently reformed the policy regime for exploration licenses to attract private capital. “Under this policy regime, the emphasis is on work programme, with no requirement for revenue share quotations for less explored Category II and III basins. A cap of 50% for revenue share in Category I basins has been introduced,” said the DGH. The fourth round has five blocks in category-II basin and one each in category-I and Category-III basin.
IOC commences deliveries of IMO-compliant low sulphur furnance oil
State-owned Indian Oil Corp (IOC) on Thursday said it has commenced delivery of fuel for ships that is compliant with International Maritime Organisation’s (IMO) low sulphur mandate. In a statement, the company said it commenced deliveries of IMO-2020-compliant Low Sulphur Furnace Oil (LSFO) with 0.5 per cent sulphur as marine fuel at Indian ports. “The first such supply was made on October 26, 2019, to the LPG tanker Berlian Ekuator at Kandla port,” it said. IOC has made available LSFO 0.5 per cent S grade marine fuel for immediate deliveries at Kandla and Kochi ports. “Bunker fuel deliveries at other Indian ports Mumbai, Mangalore, Tuticorin, Chennai, Visakhapatnam, Paradip and Haldia shall start by mid-November,” it said. IOC had earlier unveiled two new IMO 2020-compliant marine fuel grades as well as a range of marine lubricants specifically formulated and complaint with IMO 2020 low sulphur marine fuel specifications in Mumbai. “The LSFO 0.5 per cent S grade is produced from sweet crude oil grades with kinematic viscosity in the range of 220-270 cSt and complies with ISO 8217:2017 RMG380 standard,” IOC said. “This fuel addresses all quality considerations detailed by the International Organization of Standardisation in its recently released ISO 23263:2019 document including the Spot test for Compatibility.” IOC is the largest oil refiner and marketer in India. With extensive refining, distribution and marketing infrastructure and advanced R&D facilities, IOC endeavours to ensure India’s energy security and self-sufficiency in refining and marketing of petroleum products for past six decades, providing energy access to millions of people across the length and breadth of the country including the 7,517 km long Indian coastline.