Singapore, 28 July (Argus) — Indian conglomerate Reliance Industries (RIL) saw its fiscal first-quarter profit surge more than 30pc against last year, in stark contrast with the country's state-owned refiners still hobbled by subsidised fuel pricing.
RIL yesterday posted a profit of 48.5bn rupees ($1.04bn) for the April-June quarter, spurred on by rising revenues from its domestic natural gas production and more profitable refining operations. RIL also has petrochemical, retail and telecommunications operations. State-owned refiners IOC and Hindustan Petroleum (HPCL) all swung to a loss for the period, still yet to see any benefit from the government's decision to partially free up pricing of the country's state-fixed oil products. India's other main state-owned refiner, Bharat Petroleum, will announce its first-quarter results on 30 July.
Revenues of Rs505.3bn from RIL's refining operations were slightly down on the Rs512.5bn the previous quarter but were more than double that of a year earlier. Its gross refining margin (GRM) also slipped to $7.30/bl from $7.50/bl during January-March but was up on the $6.80/bl recorded a year previously. RIL valued its product exports at $6.3bn during the quarter, compared with $2.8bn a year earlier, because of increased volumes from its 580,000 b/d export-oriented refinery at the Jamnagar complex. Jamnagar is also home to RIL's older 660,000 b/d refinery.
Refining margins in US and Europe region remained firm because of renewed optimism about an economic recovery, RIL said. But it said Singapore complex margins, a benchmark for Asian refining, were weaker against the previous quarter because of lower gasoline and fuel oil crack spreads that offset higher distillate crack spreads.
RIL's upstream revenues also more than doubled in the latest quarter, with the growth solely coming from its natural gas output in the D6 fields in the Krishna-Godavari basin, offshore east India. The fields' increase to 60mn m³/d helped lift upstream revenues to Rs46.7bn. The KG-D6 fields also produced around 24,000 b/d of crude during the quarter.
RIL has high hopes for increased output from its international upstream operations, making multibillion dollar investments in the US shale gas sector especially. It outlaid more than $1.3bn last month to partner Texas producer Pioneer Natural Resources on the Eagle Ford shale in south Texas, having in April created a joint venture valued around $1.7bn with US producer Atlas Resources for the ethane-rich Marcellus shale in Pennsylvania.
But the balance sheets of RIL's domestic state-owned rivals made for more sobering reading in the April-June quarter. IOC swung to a loss of Rs33.9bn, having made a profit of Rs36.8bn a year earlier. This was despite revenues actually increasing more than 20pc. Its GRM slumped to $3/bl from $7.30/bl a year earlier. HPCL posted a loss of Rs18.8bn for the same period, against profit of Rs6.5bn the year previously. Its revenues were also up 20pc, but its GRM was pegged back to $3.72/bl against $5.71/bl the preceding year.
IOC and HPCL's financial woes stem from its losses in selling subsidised fuel. IOC's estimated its “under-realisation”, or losses from selling subsidised gasoline, diesel, kerosine and LPG, during the quarter totalled Rs73.4bn. HPCL did not give a similar breakdown. The government and state-owned oil companies estimate such losses to total Rs530bn the current 2010-11 fiscal year.
Delhi has gone some way to addressing these losses by committing to deregulating the country's fuel pricing system. But so far this has only extended to freeing up gasoline prices, a tiny share of India's transport fuel market. Subsidies on kerosine and LPG are to remain, while the government's political will to remove subsidies on diesel already looks to be faltering in the face of political opposition and public unrest.
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