1. Modi’s oil champions IOC, HPCL, ONGC on track to match $16 bn spending

Modi’s oil champions IOC, HPCL, ONGC on track to match $16 bn spending

India’s state-owned oil companies aim to sustain spending near a three-year high, encouraged by falling oil-services costs and expanding demand.

By: | Published: May 19, 2017 10:57 AM
Narendra Modi, IOC, HPCL, ONGC , oil companies, State owned,  Indian Oil Corp,  Oil and Natural Gas Corp Oil and Natural Gas Corp., the biggest explorer and top spender, plans to invest as much as last year. (Reuters)

India’s state-owned oil companies aim to sustain spending near a three-year high, encouraged by falling oil-services costs and expanding demand. The country’s largest oil refiner Indian Oil Corp. will boost domestic spending by a quarter in the year to March 31 and smaller processor Hindustan Petroleum Corp. plans to invest about 17 percent more this year. Oil and Natural Gas Corp., the biggest explorer and top spender, plans to invest as much as last year. The 11 state-owned companies spent more than one trillion rupees ($16 billion) in the year ended March 31, the highest since 2014.

“Spending by Indian oil companies has further upside over the coming years because of opportunities at home and abroad,” said Abhishek Kumar, senior energy analyst at Interfax Energy’s Global Gas Analytics in London. “Low services costs make spending more attractive now.”

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Investments in oil and gas fields globally are set to drop a third year after falling 24 percent to $450 billion in 2016, according to the International Energy Agency. Oil companies slashed spending, delayed projects and cut staff to cope with the crash in prices that started in 2014. The market is beginning to stabilize amid efforts by the Organization of Petroleum Exporting Countries to trim output.

Brent crude, which has averaged almost $54 a barrel this year, was trading 0.2 percent higher at $52.59 as of 8:52 a.m. in Singapore.

The Indian spending boom is being driven by the country’s growing energy appetite and the need to meet Prime Minister Narendra Modi’s goal of reducing dependence on oil imports by 10 percent by 2022. The IEA also expects India to be the fastest-growing oil consumer through 2040.

‘No Let Up’

“There’s no let up on our capital expenditure,” said B. Ashok, chairman of Indian Oil. The company, which is also the nation’s biggest distributor of fuels, plans to spend more than 200 billion rupees ($3.1 billion) this year from 160 billion rupees on growing its local refining and fuel-retailing operations, he said.

Hindustan Petroleum plans to invest as much as 70 billion rupees on expanding refineries and marketing infrastructure this year, compared with about 60 billion rupees last year, said J. Ramaswamy, director of finance at India’s third-largest fuel retailer.

One factor behind the higher capital expenditures at Indian refineries is the country’s move to upgrade fuel quality and lower emissions to the equivalent of Euro 6 standards by 2020, said Bhaskar Patel, managing director at Technip India, a unit of TechnipFMC Group.

Explorers aren’t slowing down either.

“Last year we drilled about 500 wells and this year also we plan to maintain that number,” ONGC Chairman Dinesh Kumar Sarraf said. “While the investment figure would be similar to that of last year, we will be able to do more jobs because cost of services is declining.”

To be sure, last financial year’s capital expenditure was buoyed by the acquisition of stakes in two Rosneft PJSC blocks in Russia by Indian Oil, ONGC, Oil India and a subsidiary of Bharat Petroleum Corp.

  1. S
    Sudipta Deb
    May 20, 2017 at 5:27 am
    Basically price of petroleum products in India is much higher than most of the other countries, resulting higher earnings for the oil companies. Hence, the inefficient and wasteful companies are able to invest more. With reduction of crude oil price to almost half ( from above 100 USD to less than 50 USD), petroleum products prices never reduced in India. It is, therefore, crystal clear that there is nothing to glorify these oil companies or the Indian government.
    Reply
    1. D
      Dr. C.Lakshmi
      May 19, 2017 at 3:48 pm
      This is definite positive step towards sustainable development. Decreasing dependence on oil imports will release valuable resources for development financing. Indian economy, in the past, has shown its vulnerability towards global oil price fluctuations.The fiscal management was gravely affected due too much of dependence on imported oil. One of the factrs leading to the economic crisis in 1991 has been the wide current account deficit emanating from oil price hike and gulf crisis. The Government has set its targets on the focused fields that can foster accelerated economic development.
      Reply
      1. D
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        May 19, 2017 at 11:16 am
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