ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailMenu BurgerPositive ArrowIcon PrintIcon SearchSite TitleTitle ChevronIcon Twitter
Companies

Oil & Natural Gas profit jumps 36% on higher crude prices, gas output

Rising energy prices stoke concerns India may ask company to share fuel subsidy

The surge in oil prices raises the specter of Indian government asking ONGC to share the country's fuel subsidy burden.   © Reuters

MUMBAI (NewsRise) -- State-owned Oil & Natural Gas Corp. reported a 36% jump in fourth-quarter net profit, aided by surging oil prices and higher gas production.

ONGC's profit for the quarter ended in March stood at 59.15 billion rupees ($876 million), compared with 43.40 billion rupees a year earlier. The profit missed analysts' estimate of 63.70 billion rupees in a Reuters poll.

The profit increase was damped by a 3% decline in crude oil production as well as a one-off increase in operating expenses. Net sales rose more than 10% to 239.70 billion rupees.

State-run energy companies such as ONGC have been trying to step up investments in oil exploration to meet India's rising fuel needs. According to the International Energy Agency, India is set to be the fastest-growing crude-consumer in the world by 2040. The country currently imports more than three-fourth of its crude oil requirements.

ONGC has set a target of 320 billion rupees towards capital expenditure in this fiscal year.

Meanwhile, the average price of Brent crude, the global benchmark, surged 24% in the quarter at $67 a barrel, leading to a 22% jump in net realization for ONGC.

The surge in oil prices raises the specter of Indian government asking state-owned companies to share the country's fuel subsidy burden because of its widening fiscal deficit. The government has budgeted 250 billion rupees for fuel subsidies for this fiscal year, while analysts estimate the amount to surge up to 530 billion rupees. There is speculation that New Delhi may ask ONGC to share the fuel subsidy burden.

Earlier this month, Moody's Investors Service warned that state-owned companies such as ONGC may be forced to bear up to 280 billion rupees in subsidy shortfall this fiscal year if oil prices stay between $60 and $80 per barrel. The Brent crude price is hovering around $77 a barrel after touching a three-and-a-half year high of $80.50 a barrel earlier this month.

ONGC and Oil India have not contributed to fuel subsidies since 2015, before which they shared 40% of the burden annually.

"Rising crude oil price may result in subsidy-sharing, adversely impacting profitability," Motilal Oswal said in a note. The Mumbai-based brokerage cut its valuations for ONGC.

ONGC shares gained 2% in Mumbai trading, while the benchmark S&P BSE Sensex rose 1.2%.

--Dhanya Ann Thoppil

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Get Unlimited access

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends May 26th

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media