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Oil & gas sector update
Jan 09: Gross under recoveries (GURs) of oil marketing companies will go down to around Rs 18,000 crore in FY2017 (with average Indian basket crude oil price of US$55/bbl and INR/US$ of 68 for the rest of FY2017). Despite recent spike in crude oil prices, the GURs would fall due to lower prices in first 8M FY2017, gradual monthly increase in prices of kerosene and LPG, DBTL leading to cancellation of fake accounts, surrender of LPG subsidy under the GiveItUp campaign and secular decline in allocation of SKO to the states under PDS. Sustained increase in crude oil prices and INR/US$ rate would be key sensitivities for GURs.
8The point to note is that the existing under-recovery sharing formula, low crude prices and gradual increase in prices of kerosene has resulted in a nil under-recovery burden for PSU upstream companies when crude prices stay in the range of $55-60/bbl.
8Over the medium term, an upside to crude oil production is expected to be driven by Cairn ramping up production of its Rajasthan asset, ONGC commercialising its marginal fields in addition to enhanced oil recovery/improved oil recovery (EOR/IOR) initiatives of ONGC and OIL.
8However even after factoring in the increase in production, dependence on import of
crude oil is expected to remain high, given the large demand–supply gap and the growth in domestic consumption of petroleum products.
8The outlook for the Indian upstream segment is negative due to the challenging pricing environment
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