New Delhi: “Reliance Petroleum may start exports from its new 580,000 bpd refinery in April although the plant is likely to begin trial runs near to its end-December target,” analysts and trade sources said.
The export-focused refinery is entitled to a 5 year tax holiday, but if commercial production were to start in December or January, the firms would only receive tax breaks for 3 months in the first year.
India’s fiscal years run from April to March.
“It makes sense to announce it in April and avail benefits for the whole year,” said Manish Joshi, a research analyst with Karvy Stock Broking.
Reliance aims to export products to developed markets in Europe and the United States.
“But US oil consumption has declined by 3-4%. It may so happen that Reliance may not find buyers in the US and Europe and may be forced to sell to other countries, which could impact margins,” said Joshi.
Analysts say the new refinery may be started and stabilised in phases over the first quarter of 2009.
Reliance Chairman Mukesh Ambani in June told shareholders revenue from the new refinery would begin from this year.
But since then, slowing demand has hit the outlook for refineries, prompting firms like Total and Petroplus to consider cutting back runs on unprofitable products like gasoline.
Refinery margins for complex Asian refiners in October were about $6.34 a barrel while those for simple refiners were about $2.29 a barrel.
Reliance commissioned its existing 660,000 barrels per day (bpd) refinery 6 months ahead of schedule but only announced commercial operations 6-8 months after trial runs.
Earlier this year, Reliance sold several cargoes of diesel under term contracts to various trading houses, including its first ever advance term sale of 0.005% sulphur diesel, which will be produced at the new refinery.
The sales were an attempt to lock in customers before the plant comes online. A trade source, who could not be named, said that Reliance had not yet signalled when supplies of ultra-low sulphur diesel would begin.