The Indian upstream oil and gas sector will continue to be negatively impacted by low crude oil and natural gas prices even as upstream oil firms benefit from a nil under-recovery burden sharing, ratings agency ICRA said today.
“The Indian upstream and oilfield sector is going through tough times, impacted by the challenging environment due to soft global crude prices. This situation will continue in the near to medium term, despite modest increase in crude prices post-Organization of Petroleum Exporting Countries (OPEC) deal,” ICRA said in a note.
According to the agency, the production cut announced by OPEC in November last year led to a spike in global crude oil prices by 15-20 percent. However, the rise in prices were short-lived due to increased production of shale oil by US and by OPEC members resulting in global crude prices hovering around $47-48 per barrel in July.
“A key sensitivity for the prospects of the upstream sector in the medium term will be sustained recovery in crude oil prices, which appears unlikely in the near term with the market in the midst of rebalancing with competing forces at work. Apart from this, the fall in the domestic gas price in H1 FY2018 would adversely impact profit levels of the upstream players,” ICRA Senior Vice President K Ravichandran said. Read More…