Submitted by: Submitted by

Views: 127

Words: 572

Pages: 3

Category: Business and Industry

Date Submitted: 11/26/2012 06:29 AM

Report This Essay

Oil sale contracts are a large part of NIOC’s business. NIOC relies on annual contracts with several countries to export their oil reserves, with India and China leading the way. Besides being signatories to long-term contracts for crude purchase, customers also buy oil consignments on spot. In the fiscal year that ended on March 31, 2011 India's imports from Iran were less than 340,000 bpd, compared with the 362,000 bpd committed under annual term contracts. India is currently importing about 280,000 bpd. India's refiners such as Indian Oil are already cutting imports to comply with a set of U.S. sanctions requiring Iran's crude clients to significantly cut purchases. Refiners could have to further cut imports in 2012 which would put Indian Oil under pressure as an energy supplier being India’s largest oil refiner by volume.

Per Indian Oil’s annual report in 2011 the government of India, specifically the president of India, is Indian Oil’s largest shareholder at 78%. As such Indian Oil is a state-run company. By comparison almost all other investors are considered minority stakeholders who don’t have much of a say in how the company operates. The Ministry of Petroleum & Natural Gas is entrusted with the responsibility of exploration and production of oil and natural gas, their refining, distribution and marketing, import, export, and conservation of petroleum products and liquefied natural gas. It is also where oil prices are decided.

Indian refiners were given the freedom to fix their own fuel prices in June 2010, but Indian Oil could not raise fuel prices since December 2011 despite sharp increases in global oil prices. While they are forced to sell everything from petrol, diesel, kerosene and cooking gas below cost, they are not bring compensated as below-market prices set by the Oil Ministry are assisting the country’s poor and controlling inflation. Besides profitability, there is also the issue of poor corporate governance that is causing...