Mumbai:India’s largest oil and gas explorer, Oil and Natural Gas Corp. Ltd (ONGC), said net profit fell 17.5% in the quarter ended 31 December on account of increased payment of cess and its share of the subsidy on the sale of fuel by state-owned oil marketing companies (OMCs).
Net profit fell to Rs.5,563 crore on a 15.9% increase in revenue to Rs.21,089 crore. The state-owned firm paid Rs.2,552 crore as cess on crude oil production in the third quarter compared with Rs.1,383 crore in the same period last fiscal, due to an 80% increase in charges.
The profit in the third quarter of the last fiscal was also higher as ONGC accounted for a one-time exceptional income of Rs.3,142 crore on account of royalty recovery from Cairn India Ltd’s main oil asset, block RJ-ON-90/1, in Rajasthan.
ONGC’s share of subsidies to OMCs such as Indian Oil Corp. Ltd (IOC), Hindustan Petroleum Corp. Ltd (HPCL) and Bharat Petroleum Corp. Ltd (BPCL), which lose money on account of selling diesel, domestic cooking gas and kerosene below cost, was Rs.12,433 crore in the third quarter, compared with Rs.12,536 crore in the same period last year. This had a Rs.7,260 crore impact on ONGC’s net profit.
The state-run explorer said net realization per barrel of crude increased by 7.3% to $47.97 per barrel.
In another development, the government will also pay Rs.25,000 crore additional cash subsidy to state-owned fuel retailers to make up for a part of the Rs.124,854 crore revenue the three OMCs together lost in the April-December period. This is in addition to the Rs.30,000 crore subsidy earlier released to OMCs. Of the fresh dispensation, IOC will get Rs.13,474.56 crore, BPCL Rs.5,987.25 crore and HPCL Rs.5,538.19 crore.
According to the petroleum ministry, the total under-recoveries—the difference between market price and fuel retail rates—to be borne by OMCs this fiscal are expected at Rs.1.67 trillion. The total loss from selling fuel below cost last fiscal was Rs.1.44 trillion.
ONGC’s crude oil and natural gas production also declined by 3.02% to 6.055 million tonnes (mt) and 0.90% to 6,344 million metric standard cu. m per day (mmscmd) in the third quarter.
Explaining the reason behind the drop in gas production, chairman and managing director Sudhir Vasudeva said that since many companies have their annual maintenance shutdowns, ONGC curtails production accordingly.
“Production is falling...very rapidly. While ONGC is producing from 126 fields, 75% of the production comes from 15 fields which are old. Every subsequent year, the decline is increasing,” Vasudeva said.
Such a drop may further dampen India’s energy security plans as it comes in the backdrop of projections of growing energy demand from countries such as India, the world’s fourth largest energy consuming nation.
ONGC is entrusted with ensuring India’s energy security and plans to spend about Rs.15,000 crore to drill 480 wells in 2012-13.
ONGC drilled 415 wells in 2011-12 at an investment of about Rs.13,000 crore. The explorer plans to spend Rs.2.65 trillion in the five years to March 2017. The firm is targeting production of more than 130 mt of oil equivalent in 2030, of which half will come from assets owned by overseas arm ONGC Videsh Ltd.
The results were declared after market hours.
PTI contributed to the story.