Mixed bag for India’s oil firms as explorers spend less, while refiners meet Capex targets

Mixed bag for India’s oil firms as explorers spend less, while refiners meet Capex targets

India’s oil firms had a mixed bag in capital expenditure in 2015-16, with exploration firms spending less,

in line with the global trends in the bearish oil market, while refiners met or exceeded their targets.

Higher profit, lower working capital requirement and reduction in borrowings due to lower oil prices

encouraged refiners to fast-track execution of projects to cater to a rapidly rising demand for fuel in the

country.

But oil producers slashed capex plans in part due to lower oil prices and in part due to poor execution

ability. State-run Oil and Natural Gas Corporation (ONGC) spent Rs 29,502 crore during the fiscal, nearly

a fifth lower than originally planned, according to the oil ministry data.

Its overseas arm ONGC Videsh invested just Rs 6,783 crore or 35% less than the targeted capex. Oil India

Ltd spent nearly a tenth less. ONGC’s and Oil India’s cuts in capex were driven mainly by delays in the

tendering process, company executives said.

ONGC Videsh, which is mostly a junior partner in several overseas fields, cut its capex to align with

partners responding to lower oil prices, they said. Cairn India, a private producer that controls about a

quarter of the country’s oil production, reported a capex of just $248 million in 2015-16, much lower

than the original plan of $1.2 billion.

Cairn slashed its capex target several times during the year due to tumbling oil prices that resulted in its

biggest quarterly loss of Rs 10,948 crore in January-March. GAIL, India’s largest natural gas pipeline

operator, invested barely half of its target spending, primarily due to slower progress in some of its key

pipeline projects stuck for years. With an investment of Rs 14,368 crore, Indian Oil Corporation, the

nation’s largest refiner and fuel retailer, almost met its capex target while Hindustan Petroleum

Corporation spent Rs 5,459 crore to marginally exceed its target.

Bharat Petroleum Corporation spent Rs 10,926 crore, 12% more than its target. Mangalore Refinery and

Petrochemicals Ltd, controlled by ONGC, missed its capex target by 10%. Overall, state-run oil

companies missed their capex target by 13.5% during the fiscal.

Lower oil prices and higher economic growth in the country pushed up fuel consumption 11% in 2015-

16, encouraging refiners to fast expand capacity to capture the new demand. Refiners were also aided

by the declining requirement of working capital and debt.

At the end of March, the borrowings at Indian Oil Corporation had fallen to Rs 49,000 crore from Rs

86,263 crore two years ago. Similarly, the debt at BPCL and HPCL fell 18% and 38% respectively in two

years.

https://economictimes.indiatimes.com/industry/energy/oil-gas/mixed-bag-for-indias-oil-firms-as-

explorers-spend-less-while-refiners-meet-capex-targets/articleshow/52334582.cms