OIL PRICES AND BONDS

PREPARED BY
N.VIKRAM
7NBVE021
Pricing Overview
year wise Avg.prices in $
1999 16.55
1987 17.5
1988 14.87 2000 27.4
1989 18.33 2001 23
1990 23.19 2002 22.81
1991 20.19
2003 27.69
1992 19.25
1993 16.74 2004 37.41
1994 15.66 2005 50.04
1995 16.75
2006 58.3
1996 20.46
1997 18.97 2007 64.2
1998 11.91 2008 93.13
Reasons
Production

Natural Cause

Inventory

Demand
Break – Even Prices OPEC
Oil Bonds
In India, Govt compensates oil,
fertilizers and food companies by
issuing bonds every quarter for the
past few years.

Govtissues first batch of oil bonds in

March ‘02

Estimated About Rs.67000 cr.

The Govt totally allocated oil bonds

worth of Rs.20,333 cr for OMC in 07 -
Revenue loss
Revenue loss for the companies
like
◦ Indian Oil Corporation (IOC)
◦ Bharath Petroleum Corporation Ltd
(BPCL)
◦ Hindustan Petroleum Corporation Ltd
(HPCL)

Is estimated to be Rs. 77,304.50

cr in the fiscal of 2007 - 08
Recoveries in Figures
 Theunder recoveries of oil companies in are
estimated at Rs.29,685.5 cr

It includes share of

◦ IOC’s - Rs.16563.87cr
◦ BPCL’s - Rs.7322.64 cr
◦ HPCL’s - Rs.5799 cr

For the period of January – march 2008

Current Scenario
 At a whole the shortfall between cost and
production and selling price, are set to exceed
Rs.1,60,000 cr during current fiscal.

 At present Govt compensates 42% of under

recoveries or revenue loss of OMC’s through oil
bonds.

 Hikein the share of oil bonds from 42 % to 57%

so that OMC’s has to bear 10% of the losses –
Petroleum ministry.

 Even OMC’s has to provide Rs.16,000 cr.

Oil Firms Fear Q4 Losses
 “We will be reviewing all our expansion
projects as under – recoveries have gone up
to Rs. 320 cr per day. This solution of sharing
losses and issuing bonds can’t continue for a
long time”
– says Mr. S.V. Narashiman, IOC’s Director –
finance.

 Total loss from 07 - 08 is Rs. 77,304.50 cr.

 This is expected to double to Rs 1.5 trillion

this year.
Private Companies
 Private sector OMC’s such as
◦ Reliance Industries Limited (RIL)
◦ Essar Oil Limited
◦ Shell India
Seeks bonds on par with public sector companies.

 They operate almost 95% of the retail

outlets across the country.

 Essar
Oil and RIL – recently shut down
several retail outlet across country.
Global Reserves
In Future….?
Oil Reserves are
◦ Conventional &
◦ Non – Conventional.
Heavy oil’s which can be pumped and refined expect they are
thicker and more have more sulphur and heavy metal
containment, needs more refining.

5.4 trillion barrels

References
 Treasury Management - ICFAI university press – July
08.
 Port folio Organizer – ICFAI university press – July 08.

 Sites:
◦ www.wikipedia.org/oil prices
◦ www.oil-prices.net
Fin………..