Falling crude prices will bring down realizations of oil producers: Petroleum Ministry

Profits from petroleum to go down as pre-NELP, NELP JVs linked to intl prices

The Union Ministry of Petroleum and Natural Gas (MOPNG) on Tuesday said the reduction in crude oil prices will see the import bill fall by a similar percentage.

A ministry official told Business Standard, "Crude oil prices have reduced by around 10% over last month and the crude oil import bill is expected to reduce by a similar percentage. In a deregulated scenario, where increase/decrease in international prices are passed on to the consumers, profitability is not expected to increase much unless there is a rise in the cracks and resultant refining margins, which is not evident in the present scenario so far."

The official was speaking on the heels of Brent crude falling to 5-year low at $71/bbl on Monday. 

India's annual import bill is to the tune of $165 billion. It is the world's fourth-largest oil consumer and imports 3.8 million barrels of crude per day.

The official said that during the current quarter (till November 14), the average price of the Indian basket  has reduced to $82.62/bbl as against $104.34/bbl during H1 of FY15, a significant reduction of more than $ 20/bbl. 

''Further, the current Indian basket price is hovering around $75/bbl. Due to this sharp reduction in crude prices coupled with deregulation of high speed diesel (HSD), total under-recoveries of oil marketing companies (OMCs) during H2 FY15 are expected to be lower than that of H1 FY15,'' the official informed. 

Moreover, the official said price realisation of Indian oil producers from pre-New Exploration Licensing Policy (NELP) and NELP Joint Venture blocks (other than production from nominated fields of ONGC and OIL) are directly linked with the international prices. 

''Therefore, continuation of the declining trend in global prices would result in reduced realization in case of oil producers. This would also reduce the total profit from petroleum for joint Ventures (JVs), which would in turn reduce the share of both producers as well as of Union Government,'' he noted.