Fitch: Margin squeeze for Asian oil and gas

Fitch Ratings said in a special report that some Asian downstream oil and gas companies are facing a squeeze in margins. Although crude oil prices have recently fallen from their July 2008 peaks, they still remain at levels that are very high compared to only 18 months ago and continue to be a significant issue for some Asian downstream companies, the agency said.

The financial performance of Indian Oil Corp., Sinopec and CPC Corp. 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, Fitch said.

The oil and gas price environment over the last 18 to 24 months has generally benefitted the oil and gas companies, Fitch said, as unprecedented high real wholesale prices mostly led to a significant increase in cash flows and margins.

But some firms without significant upstream exploration and production assets have faced a significant margin squeeze, the agency said.

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