Oil and Natural Gas Corporation (ONGC) realised only $47 a barrel on the crude oil it sold during the quarter ended June, marginally lower than the $49 in the corresponding quarter last year, even as its costs rose due to a production cess imposed after the Budget 2011-13.
This may weigh on the company’s quarterly result scheduled to be announced this weekend, though the weak rupee may provide relief.
During the quarter, ONGC billed its crude at $110 a barrel, but got only $47 a barrel, after giving oil marketing companies (OMCs) a discount of $63 a barrel. Under the government’s oil subsidy sharing mechanism, ONGC and Oil India Limited (OIL) have to give discounts on crude oil sales to government OMCs – IndianOil, Bharat Petroleum and Hindustan Petroleum. The discount by ONGC during the quarter ended June stood at Rs 12,345 crore, against Rs 12,046 crore in the year-ago period ($72.5 a barrel).
Recently, Chairman Sudheer Vasudeva had said ONGC’s cost of producing a barrel of crude oil was $47. Given that cost, the company’s margin on crude oil during the first quarter is certainly under pressure. “Even though the realisation in the first quarter may be lower in the year-ago period, the 24 per cent depreciation in the rupee against dollar would help ONGC post decent profits,” said a sector analyst. In the quarter ended June 2011, ONGC had recorded a net profit of Rs 4,095 crore.
Net realisation for OIL, however, stood at $53.9 a barrel for the quarter, after a discount of $56 a barrel to OMCs. Though its net realisation fell from $59.6, in rupee terms it rose 9.4 per cent due to depreciation in the rupee.
An ONGC official said the higher subsidy burden of $63 a barrel on the company, against OIL’s $56, was due to the inclusion of condensates in the government’s subsidy calculation mechanism.
In the last financial year, ONGC is estimated to have taken an additional subsidy burden of Rs 4,500 crore on account of condensates. Financial year 2011-12 was the first when the government calculated ONGC’s share of subsidy based on its production. Earlier, the share of ONGC and OIL was calculated as a ratio of net profits.
OIL reports 9% rise in profit
Riding on a weak rupee, Oil India Ltd reported a 9.5 per cent rise in net profit at Rs 930 crore for the quarter ended June. Profit in the year-ago period stood at Rs 849.6 crore. Subsidy burden rose 13 per cent to Rs 2,015 crore, while turnover during the quarter rose eight per cent to Rs 2,439 crore. It produced 9,46,000 tonnes of crude oil during the quarter, down about two per cent compared to the corresponding quarter last year. Gas production stood at 0.63 billion cubic metres, a fall of 2.4 per cent.
