Its Official, Declining Rupee Proved Favourable For ONGC

At a time when rupee slide is putting enormous pressure on Indian Inc. and economy and it also resulted in substantial increase in oil subsidy, it has surprisingly helped India’s biggest oil explorer ONGC to post better than expected number in Q2. In fact on one hand subsidy burden on the PSU major is at all time high at Rs. 26418 crore in first half as against Rs.24676 crore shelled out during last fiscal, company’s net profit in rupee terms spurted to 6064 crore in Q2 as against 5897 crore earned during Q2FY13, a growth of 2.8 per cent.

What was more interesting was that during first half of the year production of the almost all the products from crude oil, natural gas, sale of gas and value added product has declined but in spite of this company had registered a growth in the net profit. On this performance ONGC CMD Sudhir Vasudeva quipped; “The situation is still very grim as subsidy discount is all time high and our per barrel realization has also come down drastically to USD44.84, yet rupee depreciation has somehow saved the day for us.”

Actually PSU oil producing companies receive the payment from oil marketing companies in USD term and due to decline in rupee in Q2FY14 companies have gained in rupee terms in spite of lower realization. “During Q2 FY13 ONGC had a realization of 46.76 per barrel but at that time USD exchange rate was at Rs.54/USD and during this Q2 it has gone to Rs. 68 also. This has helped us in earning decent money. In the sale of natural gas alone company has earned more than Rs.550 crore during Q2, of course it also includes little bit other costs,” informs A K Banerjee, Director Finance, ONGC to DSIJ. Important to note current rate of gas is USD 4.2/mmbtu and this price again received in dollars to ONGC and Oil.

On the matter of gas production also declining Sudhir Vasudeva said actually this gas is not of ONGC but belongs to JVs and due to ageing field this decline is happening but during this fiscal some smaller fields will be operational and we will be able to add around 1 MMT of oil and equivalent to our kitty. During Q2 ONGC produced 10.199 MMT of oil and 11.591 BCM of gas.

In spite of an increase in profitability when asked about the subsidy scenario in coming quarter considering the estimate of ministry of petroleum of Rs.140000 for current fiscal, Vasudeva replied that we have paid Rs. 49421 crore last year and with the current rate this year figure will already go to more that Rs. 52000 crore but if government wants us to pay more, then we have been forced to pull Rs. 5000 crore from our cash reserves to meet our operational expenses. That situation would certainly be very troublesome for us.