Under recovery won't fall despite low crude price: ONGC

However, it has nothing cheerful to offer for the oil and gas producer companies. Sudhir Vasudeva, Chairman, ONGC says that under recovery won't fall even though crude oil price have decreased.

In an interview to CNBC-TV18, he said, "Depreciation of rupee is 20% which wipes out all the gain of oil price decrease. As far as the subsidy is concerned we have been instructed only to pay that provisionally USD 56 a barrel."

Vasudeva is also not hopeful that net realization will change much in FY13.

Here is an edited transcript of his comments. Also watch the accompanying video.

Q: There has been quite a bit of relief in terms of crude prices and that is probably brought down the under recovery projections quite significantly. Has there been any communication to you in terms of the subsidy sharing that ONGC may have to bear for the first quarter whether it will be as high as the last time around of 38-39% or lower?

A: First of all although the crude oil prices have decreased but that does not mean that the under recovery can go down because the rupee has also depreciated significantly over these few months. If you see oil was USD 111.89 per barrel during the fiscal year 2012 and the first quarter it is USD 106.89. If you see in terms of rupee, rupee was about 48 and it has now gone to about 57 for dollar.

So depreciation of rupee is 20% which wipes out all the gain of oil price decrease. As far as the subsidy is concerned we have been instructed only to pay that provisionally USD 56 a barrel.

Q: What is the impact on net realisations because of the way crude has come down. Will your realisations per barrel change significantly?

A: Not really. In case we work out at USD 111.89 which was our FY2012 at 48 it comes to Rs 5,370 crore  in terms of rupee for a barrel. Now you have accorded USD 106.89 with 54 point something for the first quarter of this foreign exchange, then it comes to about Rs 5700 crore so it does not really change much.

For every dollar increase in crude oil price the subsidy burden increases about Rs 3,750 crore. Rupee depreciation also adds to under recoveries by Rs 9,200 crore so it is a very complex situation. Apparently it appears that oil prices have fallen down so the under recoveries will go down substantially which may not happen that way.