Mumbai: India’s largest company by market capitalization, Reliance Industries Ltd (RIL), plans to bolster the refining capacity of its new Jamnagar facility, already the world’s biggest refining hub, by nearly a quarter and raise it to 720,000 barrels a day (bpd).
A Reuters report, datelined Abu Dhabi, quoted Maurice Bannayan, senior vice-president in RIL, on the expansion in the billed capacity of the 580,000 bpd refinery, commissioned in December.
The new Jamnagar plant is currently operating at 650,000 bpd—about 12% above its officially stated capacity—said Bannayan, adding that the oil-to-yarn and retail conglomerate was “planning to do some consolidation that will (raise it) up to 700,000 or 720,000 (bpd) in six-eight months”.
RIL already has an older 660,000 bpd refinery adjacent to this newer facility and together they could generate 1,380,000 bpd, making a sector analyst with a domestic brokerage wonder how the Mukesh Ambani-controlled company plans to sell a larger quantity of its high-quality fuels in an already over-supplied market.
Another analyst with a Mumbai-based brokerage played it down, describing it as “a mere de-bottlenecking exercise”, but said it “may not be a good time” for expansion.
A questionnaire emailed to an RIL spokesman on Wednesday, seeking information on the investment needed for the step-up and rationale, elicited no response.
More global refining capacity is expected to come on stream in the next few years and the world economy is recovering from the meltdown of 2008, subduing demand and improving supply.
Domestic brokerage Edelweiss Securities Ltd’s sector analysts pointed this out in a 7 October note to their clients. Niraj Mansingka, Ruchi Vora and Abhishek Agarwal wrote: “The current mild bearishness in crude prices is expected to persist in the near future... With no closure of refineries, refining overcapacity has reached an extent where even a reasonable upswing in petro-product demand cannot protect margins and a sustainable improvement is not expected till the demand-supply mismatch for crude decisively swings the other way.”
RIL doesn’t disclose the price and countries in which it sells its products and gives overall segment revenues in its quarter results.
A 26 August 2008 report by Kotak Securities Ltd had listed the various refineries in India, Vietnam and China that will likely add 1,651,000 bpd capacity. It counted projects by China National Offshore Oil Corp., Sinopec Group, FuJian Petrochemical Co. Ltd, PetroChina Co. Ltd and the Vietnam National Oil and Gas Group.