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Moody’s signals tough times ahead for Indian oil companies

Gasoil News - Published on Tue, 14 May 2019

Image Source: IOL
Moody’s Investors Service said that India’s oil and gas consumption will support its investments in refining capacity and upstream production but crude imports will keep growing amid stagnant production, and government pressure for shareholder returns will temper the credit quality of national oil companies. The Indian government demands high shareholder returns from the state-owned companies in the form of dividends and share buybacks. In addition, because of the high rate of growth in consumption, the oil companies also need to continue to invest in expanding capacity.

Moody’s said that “Refining margins in the region in 2019 and 2020 are likely to be lower than 2017 and 2018, which will result in lower earnings, particularly for refiners and integrated oil companies,” adding the oil and gas companies in India are largely exposed to the same level of price volatility risks as most international oil companies.

All petroleum products in India are now sold at prices linked to international or regional market prices, which has opened up the petroleum product retail market, but the refining and marketing NOCs -- Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum Corp -- continue to enjoy over 90 per cent market share in petroleum product distribution.

Also, the two upstream NOCs Oil and Natural Gas Corporation and Oil India produce about 70 per cent of India’s oil and 80 per cent of its natural gas. The government continues to set the selling price of natural gas in the country. This is however linked to international benchmarks.

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Posted By : Rabi Wangkhem on Tue, 14 May 2019
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