September refining margins expected at $5 per barrel: BPCL

BPCL's marketing and refining segments saw a healthy growth, said P Balasubramanian, Director Finance of the company. The company's net profit was up 11 percent at Rs 2,620.5 crore in the June quarter of FY17 versus Rs 2,360.6 in the year-ago period. BPCL's gross refining margins (GRM) for the first quarter this fiscal year was at USD 6.09 per barrel. Both inventory gains and spreads were included in the GRM, he said. Further, the company expects September GRM at around USD 5 per barrel, Balasubramanian added.Below is the transcript of P Balasubramanian’s interview to Latha Venkatesh and Anuj Singhal on CNBC-TV18.Latha: Can you tell us what has been the inventory gain?A: Let me tell first the performance. We had good performance in the refinery around 6.2 million metric tonnes and marketing we had a very good growth of almost 8 percent in the current quarter far higher than the other oil marketing companies (OMC). Over the quarter had been good in the marketing side as well as the refining side. On the inventory side, we had a trading gain of almost around Rs 1,200 crore. Latha: What about the volumes? Did it now contract a bit compared to previous quarter?A: Normally, Q4 is slightly better quarter, but as far as BPCL was concerned, Q4 was almost at the same levels.Anuj: If you could give me that inventory number again and if you could break up your gross refining margins (GRM) as well in terms of the pure play and the inventory gain?A: Roughly, we had a 6.2 GRMs. GRM is a part of both inventory gain as well as a part of the spreads. Definitely the spreads in this quarter have come down, there is no doubt about that because we are a very well-heard refinery and then we our stock levels are very low. So, the impact trading gains on the GRMs are less for us.Latha: You cannot give us even a ballpark figure?A: Maybe roughly around USD 1 plus.Latha: We are more than two-thirds into the current quarter as well. How are GRMs shaping up?A: GRM of July has been bad and GRM of August is slightly okay. September, based upon the projections we find that GRMs will be somewhere around USD 5 plus. Overall, if the September prices are maintaining, we will be more or less at the last year’s level, but now today in July and August diesel cracks are very low. It came below USD 10 per barrel, but now diesel cracks have at least moved to USD 10 per barrel. But gasoline is still less around USD 8 plus per barrel. So, that is an area with a bit of a concern, but otherwise, now it is moving up. September, estimated GRM based upon the current prices is roughly around USD 5 per barrel.Last year, first quarter has been one of the best quarters for the GRM, so we cannot actually really compare. Compared to last year, we are almost USD 2-2.5 per barrel down.Latha: I just wanted to know, would you still be able to eke out inventory gains? A: Depending upon how the crude moves.Latha: I mean for the two-thirds of the quarter that is over, are there decent amount of inventory gains?A: Between June and September, not much of a movement, almost at the same level.Latha: How will volumes pan out? Will they be as good as the previous quarter?A: Almost at the same level, but normally in the monsoon period, the volumes will be slightly low compared to the first quarter, but not very much low, now monsoon is almost over and we are seeing fairly good growth in petrol and as well there is a decent growth in diesel.Latha: There was talk from the Reserve Bank that they will allow you to hedge commodity risk in international markets. Has anything been discussed with you?A: We are already hedging.Latha: But are norms going to change to the better?A: No, commodity hedging is allowed for a lot of years, almost last 10 years commodity hedging is allowed.Latha: There was a commitment last week that they would do something more for hedging commodity risk.A: We did not hear, today we can allot hedge on crude side as well as on the crack spreads. Being a refinery, we take a crack spread hedge, we do not take a price hedge.