Business Daily from THE HINDU group of publications
Monday, Apr 30, 2007
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Business Daily from THE HINDU group of publications Monday, Apr 30, 2007 ePaper |
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Corporate
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Outlook Industry & Economy - Petroleum
Pratim Ranjan Bose
Currency issue Strengthening of the Indian currency by Re 1 makes crude cheaper by roughly Rs 65 a barrel. Earnings on crude oil alone are impacted by approximately Rs 100 crore a month.
Kolkata April 29 Strengthening of rupee may make a `small' impact on ONGC. The rupee has strengthened by over 380 paise or 8.5 per cent against the dollar since March 5. It rose by Rs 2.60 in April alone. At the current rate of $65 a barrel, strengthening of the Indian currency by Re 1 makes the crude cheaper by roughly Rs 65 a barrel. Since ONGC's revenue is directly related to the global crude price (duly converted in Re) the rise — sharpest in recent history — will impact its earnings. Part of the impact, however, will be offset by smaller gains in hiring charges of rigs and project costs. "There will be some impact. But I do not think it would be very significant," the company Chairman, Mr R.S. Sharma, told Business Line. The company is yet to estimate the net impact. ONGC produced 26.05 million tonnes of crude and 22.22 billion cubic metre of natural gas during 2006-07.
Gross turnover
This is excluding the share available from the joint ventures in India. The gross turnover for 2005-06 was over Rs 50,000 crore. Considering a monthly crude production rate of 2.17 million tonnes, a back-of-the-envelop calculation suggests that the earnings on crude oil alone are impacted by approximately Rs 100 crore a month, for strengthening of the Indian currency by every rupee. The estimation is based on current India basket crude price. Industry sources, however, believe that since ONGC does not get the full benefit of the global prices due to discounts extended to the marketing companies (like IOC, BPCL, HPCL), the impact on oil revenues may be restricted at Rs 80 crore a month for every rupee tilt in favour of the Indian currency. Impact on gas revenues could not be ascertained. However, since ONGC gets very low rates for the lion's share of the gas production, the impact will be comparatively lower.
Savings on rigs
The rising rupee, however, will help ONGC to make some savings on its capital expenditure. The company has set a capex budget of Rs 18,000 crore for 2007-08, including Rs 4,300 crore on hiring of rigs (mostly offshore) alone. According to the company sources, the company currently charters 20 offshore rigs at approximately $1.5 million a day. (Of the same, $1 million goes to Transocean alone for hiring 9 rigs.) Accordingly, every rupee rise in forex should bring home a savings of Rs 15 lakh a day or Rs 4.5 crore a month. Similar gains are expected on hiring global contractors or technology providers.
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