A special report published by Fitch Ratings, one of the leading international rating agencies, highlights the squeeze in margins faced by some Asian downstream oil and gas companies. Although crude oil prices have recently fallen from their July 2008 peaks, they still
remain at levels which are very high compared to only 18 months ago and continue to be a significant issue for some Asian downstream companies.
"The financial performance of Indian Oil Corporation, Sinopec and CPC Corporation, has suffered significantly over the last two years because governments, wanting to control inflation and maintain economic growth momentum, have not allowed the companies to fully
pass through the higher costs of crude oil," said Steve Durose, Regional Co-Head of Fitch's Asia-Pacific energy and utilities team.
The oil and gas price environment over the last 18-24 months has generally benefited the oil and gas companies, as unprecedented high real wholesale prices mostly led to a significant increase in cash flows and margins. However, some firms without significant upstream exploration and production assets have, conversely, faced a significant margin squeeze.
Fitch expects oil prices to continue to decline, particularly as the global economy slows. However, the agency does not anticipate that the price levels seen in 2004 and prior are likely to recur, and companies whose margins are under threat from high crude oil and gas prices need to be prepared for crude oil prices to remain in the range of USD50-100/barrel.
By People's Daily Online
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