Gail India's profit slumps 77% as petrochemicals drag, expenses jump

GAIL (India) Ltd, the country's largest gas distributor, reported a 77.5% slump in its quarterly profit on Thursday, dented by weakness in its petrochemicals segment, said Reuters.

The company's standalone profit after tax slumped to 6.04 billion rupees (USD73.86 million) in the quarter ended March 31, from 26.83 billion rupees a year earlier.

The state-owned gas company's revenue from operations rose about 22% to 328.58 billion rupees. Still, its petrochemicals segment saw a 46% drop in sales.

Gail's natural gas marketing segment, which contributes 96% of the total revenue, gained from higher volumes and lower costs, and delivered a 37% jump in quarterly revenue.

The company had agreed to a 20-year purchase deal with Russian energy giant Gazprom (GAZP.MM) in 2012 for annual purchases of about 2.5 million tonnes of liquefied natural gas (LNG).

Gazprom had given up ownership of Germany's Sefe after Western sanctions were imposed on Moscow over its invasion of Ukraine last year.

Last month, Gail reported it would get four cargoes of LNG from Sefe, equivalent to the volumes it was getting under a deal with a former unit of Russia's Gazprom.

The resumption of supplies from Sefe has been crucial for GAIL. The Indian company had seen its profit plunge after Sefe stopped supplying LNG in May last year to meet its own demand.

GAIL continues to battle with increasing expenses, which jumped ~40% to 332.85 billion rupees during the reported quarter.

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Indian Oil Corp., the country's top refiner, said on Friday it is looking to decarbonize its petrochemical feedstocks by introducing bio-naphtha at its crackers, said Hydrocarbonprocessing.

"To attain sustainability, bio-based feedstocks such as bio-naphtha and bio-ethanol are being envisaged as the natural transition for the petrochemical industry," the company's Chairman Shrikant Madhav Vaidya said at Asia Petrochemical Industry Conference, without providing a timeline.

Bio-naphtha is typically obtained from hydro-treatment of used vegetable and cooking oils.

"It is under research and development at our Faridabad facility in northern India... we have kept the used cooking oil pathway open but we're trying to get it via bio-ethanol," the company's executive director of petrochemicals, A. S. Sahney, told Reuters on the sidelines of the event.

We remind, Indian Oil Corporation (IOC) has inked a term agreement with Rosneft to considerably increase oil supplies as well as diversify the grades to India.

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Oil prices dipped as traders warily watched for signs of progress on talks to raise the U.S. debt ceiling, after surging in the previous session on optimism over U.S. fuel demand, said Hydrocarbonprocessing.

Brent crude futures slipped 76 cents, or 1%, to USD76.20 a barrel by 1333 GMT. U.S. West Texas Intermediate crude was down 66 cents, or 0.9%, at USD72.17 a barrel. A sharp plunge in U.S. gasoline inventories due to demand surging to the highest levels since 2021, and optimism surrounding negotiations over the U.S. debt ceiling, helped the main crude benchmarks settle more than USD2 higher.

European equities were up and the U.S. dollar hit a new seven-week peak on Thursday, making oil more expensive for holders of other currencies.

President Joe Biden and top U.S. congressional Republican Kevin McCarthy on Wednesday underscored their determination to reach a deal to raise the federal government's USD31.4-T debt ceiling and avoid an economically catastrophic default.

A debt agreement needs to be reached before the government runs out of money to pay its bills, which could be as soon as June 1.

Also weighing on prices was the increased possibility of another interest rate hike by the U.S. Federal Reserve, which closely watches the number of Americans filing new claims for jobs benefits. Data on Thursday showed they fell more than expected last week, suggesting the labor market remains tight.

Traders are pricing in around a 20% chance the Fed will raise rates at its June meeting, whereas a month ago, traders were pricing in around a 20% chance of a cut.

The strength of April U.S. economic data, in addition to optimism about the debt ceiling negotiations and the health of regional banking stocks overnight have strengthened market expectations of a further hike, ANZ Research said in a note on Thursday.

We remnd, India's oil imports from Russia rose to a fresh record high in April, further reducing the share of Middle Eastern and African grades to their lowest level in at least 22 years. Refiners in India, the world's third-biggest oil importer and consumer, are on a Russian oil-buying binge after some countries shunned purchases from Moscow over its invasion of Ukraine in February last year.

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Berkshire Hathaway Inc said it had acquired more shares of Occidental Petroleum Corp, boosting its stake in the oil company to 24.4%, said Reuters.

In a regulatory filing, the conglomerate controlled by billionaire Warren Buffett said it paid about USD201 MM for 3.46 million Occidental shares between May 16 and 18. Berkshire has bought Occidental shares on each of the last six trading days, paying about USD327 MM for 5.62 million shares.

It now owns about 217.3 million Occidental shares worth about USD12.7 B. Berkshire also owns approximately USD9.5 B of Occidental preferred stock carrying an 8% annual dividend, plus warrants to buy USD5 B of Occidental common shares at USD59.62 each.

Occidental's share price closed down 67 cents at USD58.25. Berkshire acquired the preferred stock and warrants in 2019 when it helped finance Houston-based Occidental's purchase of Anadarko Petroleum Corp.

It began buying common shares early last year, around when Russia invaded Ukraine and as oil prices rose. At Berkshire's annual shareholder meeting on May 6, Buffett pointed out Occidental's presence in the Permian Basin, which accounts for a significant amount of U.S. crude production and called Occidental CEO Vicki Hollub an "extraordinary manager."

He also tried to end speculation that Berkshire might buy Occidental and further diversify its own energy portfolio. "We're not going to buy control," he said. "We've got the right management running it... we wouldn't know what to do with it."

Berkshire had amassed a 22.6% stake in the BNSF railroad before paying USD26.5 B for the remainder in 2010. Buffett, 92, has run Berkshire since 1965.

The Omaha, Nebraska-based company owns dozens of businesses, including Geico car insurance and many retail and manufacturing companies, as well as stocks such as Apple Inc.

We remind, Occidental said its first large-scale direct-air-capture (DAC) plant will be postponed to mid-2025, after previously targeting a late 2024 commencement. The announcement was made during its 2022 Q4 earnings call on 27 February. In October 2022, Occidental and its subsidiary signed a lease agreement in south Texas that would allow it to build enough DAC plants to extract up to 3bn tonnes of carbon dioxide (CO2) from the atmosphere, the US-based energy producer said.

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Vietnam's Stavian Quang Yen Petrochemical JSC said it had awarded a contract to design a USD1.5-B polypropylene plant in the country to Italian engineering group Maire Tecnimont, said Hydrocarbonprocessing.

The 10-month Front End Engineering Design contract signed on the same day in Hanoi was for the development of the plant to be built in the northern province of Quang Ninh, Stavian said in a statement.

Stavian said earlier the plant would start commercial operations from the fourth quarter of 2026 and would produce 600,000 tons of polypropylene annually to supply manufacturers of home appliances, automobiles, electronics and medical equipment.

Vietnam's demand for plastic raw materials, estimated at eight million tons last year, is forecast to increase 6.6% a year from now through 2025, Stavian chairman Dinh Duc Thang said.

"Domestic supply is limited, leaving significant room for development," Thang said in the statement.

We remind, Maire Tecnimont S.p.A. (Milan, Italy) announced that its Sustainable Technology Solutions subsidiary NextChem has been awarded a new contract by Storengy to carry out a further advanced basic engineering study for the gasification of the waste wood and the purification system of the syngas to produce biomethane.

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