New Delhi/Singapore: India’s Reliance Industries Ltd will begin testing its new 580,000 barrels per day (bpd) oil refinery in July and commission it in September, a source familiar with operations said on Thursday.
News of the start-up is in line with previous reports suggesting Reliance would start the plant late in the second quarter or early in the third quarter, well ahead of its official December target, bringing earlier relief to oil markets that continue to rally on fears of tight supplies.
Together with Reliance’s existing 660,000-bpd refinery, the new unit will make the Jamnagar complex the world’s biggest with a capacity of 1.24 million bpd. Chevron Corp holds a 5% stake in the unit that is building the second plant, Reliance Petroleum
“Trial runs are planned to begin in July and should be over by end-August, so that the refinery can be commissioned on some auspicious day in September,” the source, who did not wish to be identified, told Reuters.
Reliance’s existing refinery, commissioned in 2000, almost instantly turned India from Asia’s biggest diesel buyer into a net exporter of the fuel.
The company’s spokesman reiterated Reliance’s position that the refinery would be commissioned before December 2008.
About 90% work at the $6 billion-refinery has been completed. “We are quite confident that most of the units, at least 70%, will be up and running by December. The project is on track for completion in second half 2008,” said Antony Francis, general manager, petroleum division, at Reliance Industries.
Reliance aims to process medium grade crude with an American Petroleum Institute (API) gravity of 24 degrees at the new plant. Its current refinery is processing crude of 26 API, Francis told an industry conference in Singapore.
For its new plant, Reliance has signed a long-term deal with Venezuelan state oil firm PDVSA to source 150,000 bpd from June.
The early commissioning gives Reliance a bigger head start to capitalize on robust refining profits before other export-focused refineries — the biggest of which are being built in the Middle East — weaken margins when they launch early next decade.
But with the US economy weakening, some analysts have warned that a cyclical downturn in refining margins could come sooner rather than later, and even Reliance’s ability to turn cheap low-grade crude into high-value products may not spare it.
Reliance has offered term diesel to selected trading houses for June 2008-May 2009 supplies, including first cargoes from the new plant, with an eye on Western and African markets. The tender is yet to be awarded. The export-oriented refiner is offering gas oil with 0.05% sulphur content and even cleaner grades in the tender, traders said.