Is ONGC making heavy losses in its gas biz?

At its Annual General Meeting yesterday, ONGC said it is making heavy losses in its gas business.

ONGC lost Rs 700 crore in gas business in FY08. This is primarily because ONGC sells 95% gas under APM at USD2.02 mmbtu (Million British Thermal Units). It is waiting for an upward revision.

Crude prices have been fluctuating and are on a downward turn. Even though the international crude prices have been falling, ONGC's Q2 net realisation per barrel is likely to stay around the same as Q1 which USD 69 per barrel.

ONGC's wholly owned subsidary OVL is planning to raise USD 1 billion bridge finance for OVL's acquisition of Imperial Energy. OVL (ONGC Videsh Limited) instead of raising money from the financial institutions, might borrow money from ONGC at a 6% interest. However, the government is keen that OVL should raise money from financial institutions so that it can hedge the risk. But ONGC's point is that it is flushed with money; has Rs 25,000 crore in cash and it will not hedge risks because interest rates are on their way up.