Indian oil and gas companies likely to increase investments: S&P

SINGAPORE - Indian oil and gas companies are likely use their improved cash flows from market-linked fuel prices to expand their asset base and enhance operational quality, according to a new report by ratings agency Standard and Poor’s.

"The combination of reform-driven improvements in financial health, lower crude oil prices, and forecasts of mid-single-digit demand growth for petroleum products puts Indian oil companies in a sweet spot to invest in growth," said Vishal Kulkarni, S&P Global Ratings credit analyst.

"We expect the fuel-price reforms in India since late 2014 to continue, and to enhance business and financial prospects for the oil and gas companies. Making fuel prices market-linked has improved oil marketing companies' profitability, bolstered cash flows, and lowered their debt."

S&P Global Ratings expects Indian oil marketing companies (OMCs) to step up investments in upgrading their existing refineries to meet cleaner fuel standards, improve yields, and create flexible refinery configurations in product pipeline and gas infrastructure capacities.

They will also need additional investments to maintain their dominant market share amid rising competition from private sector companies.

The planned combined capital expenditure (capex) by Indian OMCs over the next five years is Indian rupee (INR) 3.2 trillion (US$48 billion)- a huge jump from the INR1.6 trillion they invested over the past five years.  www.standardandpoors.com (ATI).