Natural gas business of PSU upstream companies to turn profitable: ICRA
According to the rating agency ICRA, the natural gas business of PSU upstream companies would turn profitable as domestic prices are expected to increase substantially in the next revision.
ICRA rates debt instruments issued by corporate entities, commercial banks, non-banking finance companies, financial institutions, and public sectors.
The rating agency noted that increasing oil prices add to the fiscal burden for the country, but it is a positive for upstream oil companies. Amid the Russia-Ukraine crisis, Russian crude has seen an offtake and a consequent increase in crude oil and gas prices.
The company said, “Additionally, domestic gas prices notified at $2.9 per mmBtu (GCV basis) for H2 FY2022 remain low and accordingly gas production remains a loss-making proposition for most of the Indian upstream producers.”
Besides, the agency said that demand for petroleum products in the current fiscal has witnessed some recovery compared to the preceding fiscal but remains lower than the pre-Covid levels.
It said, “Elevated crude prices may adversely impact the demand recovery witnessed in the recent months. The benchmark Singapore gross refining margin (GRM) has witnessed improvement in the recent months, however, high crude prices and subdued global demand may adversely impact the GRM.”
In addition, the agency said that India’s commodity imports from Russia and Ukraine are less than 2 percent. The retail prices of auto fuels are being increased in a small amounts. Graded price increases would prolong losses for the oil marketing companies, it said.
The company added, “Major commodities imported from other countries include oil, gold, metals, and chemicals. With many countries imposing sanctions on Russia, prices of the said commodities are surging. Consequently, concerns over India’s growth and inflation projections are increasing. If this commodity price surge sustains for long, it might impact the Indian economy.”
[With Inputs from IANS]
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