Fitch Ratings has said, in its "Asia-Pacific Oil & Gas: Credit Outlook 2009" report, that the overall credit outlook for the sector is broadly stable, although the outlook for some refiners is negative.

"Fitch expects that margins and credit metrics for exploration & production (E&P) companies will decline from 2008 levels as oil and gas prices are likely to remain weak in 2009," says Steve Durose, head of Fitch's Asia-Pacific Energy & Utilities team. "However, companies which operate in this segment are generally well-placed to weather the economic storm given the strong cash flows generated during the commodity price boom of the last few years," adds Mr. Durose.

Fitch rates through the economic cycle and therefore does not upgrade during periods of high oil prices and downgrade when prices fall, therefore ratings in the APAC E&P segment are not generally under pressure.

The creditworthiness of many downstream and integrated oil companies in the region (especially in China, India and Taiwan) continues to be constrained by the obligation to subsidise the consumer price for refined products. However, pressure on the profit margins of these companies is expected to ease due to the retreat of oil prices.

Refinery margins are characteristically low but have generally been strong over the last few years as growth in economic activity led to demand growing faster than supply in many countries. The agency believes that margins for refiners whose prices are not regulated may weaken in 2009 due to increased capacity and a reduction in demand caused by the economic slowdown. However, all refiners are likely to benefit from working capital as a result of lower oil prices.

The ratings of many of the region's oil and gas companies are supported by their close legal, operational and strategic ties with their government owners. Fitch does not expect that the implied or actual government support for any of these companies will weaken in 2009.