Oil and Natural Gas Corp (ONGC) on Monday said its net realisation on crude oil sales rose by over 11 per cent in the quarter ended December 31, an indicator that the state-owned firm will post higher net profits for the period.
"Our gross billing in October-December quarter was $89.13 per barrel, as compared to $76.66 a barrel in the corresponding quarter of the last fiscal," a company official said.
After accounting for payments to ameliorate the fuel subsidy burden of state-run oil marketing companies, ONGC's net realisation was over $64 per barrel of crude oil in Q3, compared to $57.69 per barrel in October-December, 2009, he said.
Besides the higher net realisation on crude oil sales, ONGC will also benefit from the price of natural gas it produces more than doubling to USD 4.20 per million British thermal units.
"Overall, the quarter has been good," the official said.
ONGC will declare its third quarter earnings on January 28.
It had posted a net profit of Rs 3,053.58 crore for Q3 of FY'10. Based on the higher realisation on crude oil and natural gas sales, it is expected that ONGC will report a robust jump in profit for the quarter ended December, 2010, compared to the corresponding year-ago period.
The higher profitability is despite ONGC's fuel subsidy bill going up to Rs 4,222 crore from Rs 3,497 crore last year.
Upstream firms like ONGC give discounts to state refiners Indian Oil Corp (IOC), Hindustan Petroleum Corp (HPCL) and Bharat Petroleum Corp (BPCL) to make up for one-third of the loss they incur on selling diesel, domestic LPG and kerosene at the government-dictated price, which is lower than the imported cost.
IOC, BPCL and HPCL together lost about Rs 15,750 crore in revenue on selling diesel, domestic LPG and kerosene below the cost of production in the October-December quarter. Of this, upstream companies like ONGC, Oil India and GAIL will bear one-third of the total under-recoveries.
The official said as per this subsidy-sharing formula, ONGC will contribute Rs 4,222 crore by way of a discount on the crude oil it sells to IOC, BPCL and HPCL. In addition, OIL will pay Rs 558 crore and GAIL Rs 418 crore.
While petrol prices were freed from government control in June, state oil firms continue to sell diesel, domestic LPG and kerosene at government-stipulated prices, which are substantially lower than the cost of production.