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India's oil and gas sector is expected to report a mixed performance in the July-September quarter, as higher gas prices and rupee depreciation put pressure on city gas distributors, while improved refining margins and stronger gas-trading earnings support performance in other segments, according to a report by Systematix Research.
We expect our Oil & Gas coverage universe to deliver a mixed but relatively resilient Q2FY27 performance, the report said, highlighting the impact of higher energy prices and currency movements on companies across the sector. Brent crude averaged USD 91.3 per barrel during the quarter, up 34.1 per cent year-on-year, while spot liquefied natural gas (LNG) prices rose 86.7 per cent to USD 22.1 per million British thermal units. The rupee depreciated 9.5 per cent year-on-year to Rs 95.6 against the US dollar, keeping gas procurement costs elevated. The pressure is expected to be more visible among city gas distributors, which supply compressed natural gas (CNG) for vehicles and piped natural gas (PNG) to households and businesses. Systematix expects margins per standard cubic metre at Indraprastha Gas and Mahanagar Gas to decline 41 per cent and 15 per cent year-on-year, respectively, despite estimated volume growth of around 7 per cent and 9 per cent. The report expects stronger performance in parts of the refining and gas infrastructure businesses. Improved gross refining margins and higher operating volumes are likely to support the oil-to-chemicals business of Reliance Industries, while higher profitability from gas marketing and trading, pipeline transmission earnings and tariff increases are expected to aid GAIL India. Petronet LNG is also expected to report higher earnings despite a roughly 7 per cent decline in throughput, supported by improved regasification margins, contributions from spot cargoes and a tariff increase. Among other segments, lubricant sales and energy services are expected to benefit from volume growth, pricing changes and contributions from new assets. However, the report expects performance to remain uneven across businesses because of differences in operating conditions and exposure to fuel and currency costs. Systematix further expects the sector to remain relatively resilient in the quarter, but elevated gas sourcing costs are likely to remain a key pressure point for city gas distributors even as refining and gas-related businesses receive support from stronger margins and operating performance. (ANI)
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