Indian Oil’s Crude, Funding Costs Rise; Add to Losses

(Bloomberg) — Indian Oil Corp., the nation’s biggest refiner, said its oil import costs may climb as much as 70 percent to $45 billion this year, adding to increased borrowings and revenue losses from selling fuel below cost.

The New Delhi-based refiner is paying $110 to $115 for every barrel of oil it buys from overseas, compared with an average of $79 a barrel in the year that ended in March, Serangulam V. Narasimhan, director of finance, said in a telephone interview.


“Internal resources are not adequate because of pricing controls,” Narasimhan said in a telephone interview today. “Borrowing is by default. We have $3 billion of foreign-currency borrowings in short-term loans of about six months to a year.”

Indian Oil controls about 40 percent of refining capacity in Asia’s third-biggest energy consumer and expects average crude oil prices at $90 to $100 a barrel by March 2009. That’s lower than Bloomberg’s consensus for Brent crude oil of $110 a barrel for the quarter ending March.

“This will obviously put pressure on working capital needs of the company, considering it has to sell fuels below cost,” said Ballabh Modani, Mumbai-based analyst at Enam Securities Pvt. “Rising costs and lack of liquidity will delay projects and force refiners to cut future investments.”

Bloomberg