Fuel demand rebound to drive earnings of oil firms: Moody’s
Moody’s Investors Service on Wednesday said earnings for state-owned oil firms IOC, BPCL and HPCL will grow over the next 12-18 months as a gradual easing of pandemic restrictions drives a rebound in economic activity and fuel demand. While earnings stability of marketing operations will help to offset low refining margins, rising fuel demand will in turn increase refinery throughput. The combination of better demand and improving fuel cracks will also support an improvement in Asian refining margins from current levels, it said. Demand for petroleum products in India declined substantially in April and May 2020 following a nationwide lockdown to control the spread of coronavirus. This led to a drop in capacity utilisation for most refiners in the fiscal year that ended on March 31 (FY21). “However, the impact on demand for petroleum products following the second wave has been a lot more muted as the lockdowns were more regional in nature,” Moody’s said. Rebound in fuel demand and gradual recovery in refining margins will drive earnings improvement. “Earnings for the three rated refining and marketing companies in India – Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) will grow over the next 12-18 months as a gradual easing of pandemic restrictions drives a rebound in economic activity and fuel demand,” it said. Stating that earnings stability of marketing operations will help to offset low refining margins, the rating agency said this primarily because of the oligopolistic structure of the fuel retailing industry in India where IOC, BPCL and HPCL together control 90 per cent of the fuel retailing network. At the same time, all three companies are ultimately owned by the government, which ensures a stable industry environment without any severe competition. “Stable earnings from the marketing operations have helped to offset the refinery segment’s weak performance over the last 12-18 months, such that the impact on Indian refining companies’ overall earnings has been limited. “The marketing business will remain a substantial earnings contributor for the Indian companies because of their large-scale fuel retailing network and entrenched market positions,” it said. Moody’s said capital spending by the three refiners will remain high on strong demand for petroleum products and government efforts to boost investment spending to support economic growth. Meanwhile, dividends will remain similar to historical levels, in line with Department of Investment and Public Asset Management (DIPAM) guidelines. “Indian companies have higher profitability while their scale and credit metrics are comparable to most regional peers. “Large-scale marketing and midstream operations provide earnings diversification, which mitigates the cyclicality of the refining business and results in higher profitability for the Indian refining and marketing companies,” it said.
Assam CM meets PM Modi, requests transfer of ONGC acreages to OIL
Assam chief minister, Himanta Biswa Sarma met Prime minister Narendra Modi and requested transfer all the acreages of ONGC to Oil India Limited (OIL). The chief minister also discussed revitalisation of fertiliser unit in Namrup. Sarma who met Modi on Monday said, “ONGC ‘s yield is not up to the mark and we are losing on royalty. We have proposed to transfer entire acreage to OIL or a special purpose vehicle to look after ONGC in Assam.” He added, “Prime has asked me that more talks will held in this regard. As third unit of Namrup fertiliser is facing problem, consideration is made to set up nano urea unit there. Prime minister asked me meet Union minister Mansukh Mandaviya in this regard.” Sarma also met Union Home minister, Amit Shah. He said, “I have informed him National Liberation Front of Bodoland (NLFB) cadres has laid down arms and with this insurgency in Bodoland is almost over.” He said government is working on industrial plan on two closed paper mills. “We have come out with a Rs 630 Crore bailout package for employees. However, there is some issue between the employees and officers which they will resolve soon. We will see what new industry can be done at the site.” Sarma said after August 15 inter district movement will resume with odd and even formula. “If we achieve 1.5 Crore vaccination or positivity rate is below five percent we may consider starting of final year classes of post graduate, degree, higher secondary and class 10.”
Gajendra Singh joins oil regulator PNGRB
Former director for marketing in gas utility GAIL India Ltd Gajendra Singh has been appointed as a member of the Petroleum and Natural Gas Regulatory Board (PNGRB), which is downstream oil regulator. The Appointments Committee of the Cabinet (ACC) appointed Singh and GAIL Director (Finance) Anjani Kumar Tiwari as members in the PNGRB, according to an official order issued on August 7. Singh has accepted the appointment and joined PNGRB on Monday. Sources said Tiwari hasn’t joined as he is yet to be relieved from GAIL, where he is serving as Director (Finance). His term at GAIL is till November-end. According to the order, they have been appointed to the post for five years from the date of assumption of charge of the post, or till attaining the age of 65 years, or until further orders, whichever is the earlier. Singh, who has 35 years of exposure in the gas sector, retired from GAIL in June last year, and will have a tenure of almost four years. During his career, he served at different leadership positions, the last being Director (Marketing), GAIL. He was also chairman of Indraprastha Gas Ltd, MGNL, BGL and GAIL-Global Singapore and a member of the empowered gas pool committee of the government. PNGRB regulates downstream oil and gas transportation and distribution. It authorises entities for laying pipelines as well as gives out licenses to retail city gas. It comprises a chairman and four members, including one member legal. Prior to these appointments, the board had become practically defunct. Its last chairman Dinesh K Sarraf completed his 3-year term in December last year, while members retired at different times, the last being SP Garg, whose term ended last month. A government Search Committee in June selected former power secretary Sanjeev Nandan Sahai to head the Board. His appointment is under consideration of the ACC.
India should bid for long-term oil contract: Guyana
India should bid along with other companies if it wants to secure a long-term oil contract with Guyana, the country’s vice-president Bharrat Jagdeo said. Guyana concluded a successful bid by India for its last shipment of crude but “we don’t want to be doing this on the short term”, he said, adding Guyana does not want to go into a bilateral arrangement. “I am hoping that within a matter of weeks a decision would be made that will settle who sells our oil for the next, may be, a year at least, one-year contract,” Jagdeo said in a video interview transcript. Indian state-controlled refiner IOC had bought Liza crude from Guyana as part of a move to expand its purchase options. The company had chartered the Militos to take the crude cargo from Guyana to Paradip, on India’s east coast. The Suezmax is carrying 1mn bl of Liza and will reach Paradip this week, shipping data from Vortexa showed.