Trade with Commodities: Flaring crude set to leave oilcos with Rs 20,600-cr hole in FY10

Friday, May 15, 2009

Flaring crude set to leave oilcos with Rs 20,600-cr hole in FY10

Oil Prices Have Risen From $41/Barrel In December 2008 To $56/Barrel Now

RISING crude oil prices have inflated the shopping bill of domestic refineries Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL), and may wipe out Rs 20,600 crore from their 2009-10 revenues, an oil ministry official has said.
    Crude oil has risen from $40.61 a barrel in December 2008 to $56/barrel currently. The three refineries sell refined products at government-determined rates that are often below breakeven cost. India imports over 75% of its crude oil requirements.
    "Under-recoveries (revenue losses) of the three PSUs are likely to increase from Rs 15,000 crore estimated for the current financial year at prevailing crude oil prices," the official said, requesting anonymity.
    The Rs 20,600-crore revenue loss is based on estimates for the fortnight starting from May 16, 2009. The government reviews the impact of global crude oil prices on state-owned refineries every fortnight. The revenue loss of these three oil companies was Rs 103,292 crore in 2008-09.
    IOC, India's largest refiner with about 50% marketshare in fuel retail, is expected to lose Rs 11,900 crore in 2009-10, according to the latest estimates based on current crude oil prices. This is a 27% jump from Rs 9,400 crore estimated a fortnight ago, an official in IOC, who didn't wish to be named, said.
    The three public sector oil marketing companies are currently losing money on pump sales of petrol, kerosene and cooking gas while they are earning a profit on diesel.
    "But the profit on diesel is also shrinking," said an HPCL official, on condition of anonymity. The profit on diesel was about Rs 1.09/litre in the first half of May 2009. This has reduced to 32 paise/litre for the second half of the month.
Oil companies are now losing about Rs 2/litre on petrol, compared with Rs 1.50/litre in the first fortnight of May. But loss on retail sales of kerosene and cooking gas remain static at Rs 12.27/litre and Rs 91.51 per cylinder, respectively.
rajeev .jayaswal @timesgroup .com