oil prices and bonds

OIL PRICES AND BONDSOIL PRICES AND BONDSOIL PRICES AND BONDSOIL PRICES AND BONDS

PREPARED BY N.VIKRAM7NBVE021

PREPARED BY N.VIKRAM7NBVE021

Pricing OverviewPricing Overviewyear wise Avg.prices in $

1987 17.51988 14.871989 18.331990 23.191991 20.191992 19.251993 16.741994 15.661995 16.751996 20.461997 18.971998 11.91

1999 16.55

2000 27.4

2001 23

2002 22.81

2003 27.69

2004 37.41

2005 50.04

2006 58.3

2007 64.2

2008 93.13

ReasonsReasonsProduction

Natural Cause

Inventory

Demand

Break – Even Prices Break – Even Prices OPECOPEC

Oil BondsOil BondsIn India, Govt compensates oil, fertilizers

and food companies by issuing bonds every quarter for the past few years.

Govt issues 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 - 08

Revenue loss 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 FiguresRecoveries in FiguresThe under 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 ScenarioCurrent 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.

Hike in 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 LossesOil 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 CompaniesPrivate CompaniesPrivate sector OMC’s such as◦Reliance Industries Limited (RIL)◦Essar Oil Limited◦Shell IndiaSeeks 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 ReservesGlobal Reserves

In Future….?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

ReferencesReferences 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……….. Fin………..