Indian oil, gas firms to face softer margins in 2012 - Fitch Ratings

20 January 2012 07:03  [Source: ICIS news]

SINGAPORE (ICIS)--Indian oil and gas firms are likely to face softening refining margins this year from the levels seen in 2011 as global demand growth slows and further refining capacity is added, Fitch Ratings said on Friday.

“Despite the overcapacity situation in domestic refining, oil marketing companies benefit from subsidy support, whereas sustained exports by private sector refiners support their cash flows,” said Abhinav Goel, senior director in Fitch Rating's Asia Pacific energy and utilities unit.

The outlook for both public and private sector Indian oil and gas firms is assessed as stable despite various challenges, including the growing fuel subsidy burden on public sector companies and an uncertain global macroeconomic environment, the ratings agency said in a note.

“Slow policy reform remains the key reason for burgeoning under-recoveries, though high crude oil prices and a depreciating Indian rupee have further driven up the under-recoveries in the current financial year,” Goel added.

Fitch-rated oil and gas companies include Reliance Industries Limited (RIL), Indian Oil, GAIL (India) and Hindustan Petroleum Corporation Limited (HPCL).

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By: Nurluqman Suratman

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