The Union government shows signs of addressing the problems of petroleum sector. Investors, though selective, are turning bullish as the government appears to be moving towards market pricing of petro products, though total decontrol may be years away.
In 2012, the BSE Oil & Gas index rose 10 per cent, underperforming the 25 per cent gain for the broader benchmark BSE Sensex. Much of this underperformance was due to policy inaction-induced bleak earnings outlook. It is changing now. The Union Petroleum Ministry is expected to make headway on the long-standing issues regarding E&P capex approvals for Reliance Industries and Cairn India.
The Rangarajan Committee on pricing of gas is supposedly recommending linking of price to international benchmark such as Henry Hub in the US, or imported liquefied natural gas prices. If done, it improves the earnings outlook for explorers such as RIL and Cairn.