Natural gas business of PSU upstream companies to turn profitable: ICRA

New Delhi, March 24 (SocialNews.XYZ) The natural gas business of PSU upstream companies would turn profitable as domestic prices are expected to increase substantially in the next revision, ratings agency ICRA said.

Accordingly, the armed conflict between Russia and Ukraine has led to a reduction in offtake of Russian crude and a consequent increase in crude oil and gas prices.

The ratings agency noted that increasing oil prices add to the fiscal burden for the country, but it is a positive for upstream oil companies.

"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.

"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."

However, in the near term, there could be some inventory gains, which might aid the refinery GRMs.

"The retail prices of auto fuels are being increased in small amount. Graded price increases would prolong losses for the oil marketing companies."

In addition, the agency said that India's commodity imports from Russia and Ukraine are less than 2 per cent.

"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."

Source: IANS