Happy with Kirit Parikh Committee report: ONGC

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Happy with Kirit Parikh Committee report: ONGC

In an interview with CNBC-TV18, RS Sharma, Chairman of Oil and Natural Gas Corporation (ONGC), spoke about his views on Dr Kirit Parikh’s Committee report.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS Kirit Parikh report: Udayan says implementation key Kirit Parikh panel report to be submitted today: Oil Secy ALSO READ See latest News about ONGC See previous management interviews See what other Experts & Brokerages are saying about ONGC ONGC BSE | NSE 31/05/12 Are Mutual Funds betting on ONGC? Other Stocks in this news GAIL India |

Q: You would have analyzed as well the impact for refinery companies and on that there is some concern that refining margins may actually go down because the gate prices will move towards export parity rather than import parity, is that your estimate as well for standalone refineries there maybe a bit of a negative hit?

A: That is a concern in respect of our standalone refineries MRPL. We got the copy of the report late last evening. I am sure our teams shall be working for next couple of days on how it will impact the business and the bottomline. We will be able to give a more definitive response by tomorrow or sometime later.

Q: Given this calibrated formula, which has been put out or recommended, it appears that ONGC will be significant beneficiary if oil prices do move up. For now, if crude goes to USD 100 per barrel, your realizations probably after subsidies would be close to USD 60 per barrel. But under the new formula it appears it will be closer to USD 80 per barrel. Do you think that much upside the government will let you have?

A: Precisely that is what we have been asking. The cost of oil field services and chartered hired rigs etc, everything moves in tandem with the crude prices. After the prices crashed, we saw a substantial benefit coming to us when we have gone through the tender, hiring of the services and the rigs. And again when the prices have started moving up we are feeling heat.

So I feel it very appropriate because it is not simply the upside in terms of revenue goes to our bottomline. It also impacts the cost of services. In that perspective, it's a very balanced view. I know our realization would be higher but at the same time the costs also would be higher.

Q: I am not arguing the point about the fairness of it. We all understand it's fair. It's whether given your experience in the past you think the government will let you enjoy this upside in a rising crude scenario, which is pinching other companies including the government?

A: I think that is the call to be taken by the government but I can only share with you, even the meeting taken at the highest level, the Prime Minister had taken a meeting on the January 13, to review the health of these oil companies upstream and downstream. He expressed serious worries and concerns about the health of the oil companies.

It also must be appreciated that all these companies are listed companies. We have minority shareholders and we have institutional investors. Their interest also needs to be taken care of. I know that as of this current formulation our retention price will go up, to what extent that will gets accepted, I am not in a position to comment as of now. But we strongly welcome the mechanism this committee has come out with.

Q: At the same meeting the Finance Ministry said we cannot help you out too much so whatever additional burden has to be borne will be borne by the upstream companies. What is the plan from hereon as you understand it and will there be more engaging with oil companies in order to understand this committees report recommendations better or is it now solely up to the cabinet and we will all have to wait for a final decision?

A: We are not having a laid back approach. We are doing our calculations and we will see how ultimately it gets accepted. We keep working our analysis that at various decision levels how it will be impacting us and we shall come out with our response to that in due course of time.

Q: Are you okay that Gail is no longer part of the subsidy sharing panel in the upstream?

A: I have not looked into those aspects of the report since we got it late last evening. We are yet to work out the total analysis. Could be in a couple of days we will be ready to take a more intensive view about the whole recommendation.