India’s state-run oil sector units may be heading for stormy waters this year, with domestic product flagging and gross refining margins expected to fare poorer than levels seen over the past few years. The government’s increasing appetite for more lucrative shareholder returns from its commercial units may also put a dampener on oil sector PSUs profitability this fiscal year.
Analysts at Moody’s Investor Services note that while India’s rising domestic consumption will support ongoing investments in upstream systems and refining capacity, several other headwinds exist. In a note this week, the agency said: “India’s oil and gas consumption will support its investments in refining capacity and upstream production, but crude imports will keep growing amid stagnant production, and government pressure for shareholder returns will temper national oil companies’ credit quality”.
