ONGC Gains from Higher Crude Prices, Net Up 60%

Co logged higher profit despite a . 5,713-cr subsidy to state refiners

    State-run energy explorer Oil & Natural Gas Corp (ONGC) on Friday reported a 60.4% jump in second quarter net profit on higher crude prices. Net profit for the July-September quarter stood at . 8,642 crore, against . 5,389 crore in the year-ago period. "The net revenue gain due to variation in crude oil prices was . 4,227 crore in Q2," chairman Sudhir Vasudeva said. The company reported higher profits despite a . 5,713-crore subsidy discount to state refiners, he said. ONGC sells crude to government-owned refiners at a discount to compensate them for selling diesel, kerosene and cooking gas below international rates. The company was able to raise its selling price after the government 

raised fuel prices in June following a rise in global crude costs. 
"Better results this quarter is not an indication of what the annual results would be. It would depend on the total subsidy burden at the end of the year," Vasudeva said. 
The chairman said the company is expecting about . 2,500 crore on account of royalty recovery from Cairn Indiaoperated Rajasthan oil block. "After tax, the net gain on this account would be around . 1,900 crore. We hope to get the sum in the next quarter." The explorer has agreed to give a no-objection certificate to partner Cairn for transferring the management control of Cairn India to Londonbased Vedanta Resources. The government recently cleared the multi-billion-dollar Cairn-Vedanta deal on condition that Cairn will agree to treat royalty amount paid for crude produced from its Rajasthan field as an expenditure before sharing profit between partners. ONGC, a 30% partner of Cairn in the block, had been paying 100% royalty as per a 15-year old contract. 
The New Delhi-based company also gained from a decline in the rupee because oil and gas sales are priced in dollars. ONGC's shares closed 0.11% lower at . 277.65 on the Bombay Stock Exchange on Friday. Last month, the government deferred a 5% share sale in ONGC.