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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 295.02 billion during the fiscal, nearly a fifth lower than originally planned, according to the oil ministry data. Its overseas arm ONGC Videsh invested just Rs 67.83 billion 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 109.48 billion 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 143.68 billion, Indian Oil Corporation, the nation’s largest refiner and fuel retailer, almost met its capex target while Hindustan Petroleum Corporation spent Rs 54.59 billion to marginally exceed its target.
Bharat Petroleum Corporation spent Rs 109.26 billion, 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 490 billion from Rs 862.63 billion two years ago. Similarly, the debt at BPCL and HPCL fell 18% and 38% respectively in two years. Hisashi Iwakuma Jersey
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