Hedging Game

Sept 11, 2007 (LBO) – Lanka IOC, the Sri Lanka unit of the Indian Oil Corporation, has started to hedge oil imports with positive initial results, an official said. LIOC expects oil prices to ease towards the latter part of the year. "We have started to hedge imports in a cautious manner," Lanka IOC managing director K Ramakrishnan told LBO.

Between April and July 2007 it had earned 302,900 dollars from oil derivatives.

Ramakrishnan said Citibank, Deutsche Bank and Commercial Bank of Ceylon had structured hedges for the company.

Sri Lanka's state-owned Ceylon Petroleum Corporation (CPC) started oil hedging much earlier. However CPC had confined itself to dealing with foreign banks.

"It doesn't matter whether it is a Sri Lankan or international bank, whoever gives us the best deal we will take it," Ramakrishnan said.

"We have had no problems with any bank."

Lanka IOC has a third share of the petroleum distribution market, owns a third share of a common user distribution and storage facility and owns a tank farm in the northeastern Trincomalee port.

In the year ended March 2007 the firm had sold 490 mill