RIL focuses on new fuel sources for Jamnagar project expansion

RIL has started work on a $4 billion coke gasification project at its Jamnagar facility
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First Published: Mon, Jul 15 2013. 12 18 AM IST
A file photo of RIL’s petrochemical plant in Jamnagar.
A file photo of RIL’s petrochemical plant in Jamnagar.
Updated: Mon, Jul 15 2013. 12 48 AM IST
Ahmedabad: Reliance Industries Ltd (RIL) is tapping new energy sources for its refinery and petrochemicals project in Gujarat.
Two months ago, the company launched a pilot “algae-to-oil” project at a 100-acre facility near Jamnagar that houses the world’s largest single-location refining complex.
The company aims to produce 100 barrels of oil a day from the plant shortly, up from about 10 barrels a day during the trial phase, said a person familiar with the developments, speaking on condition of anonymity.
Algae oil can be used to make bio-diesel or other refinery feed stocks or even for blending with crude.
If the feasibility studies go well, RIL will also explore setting up a refinery for bio-fuel, said another official aware of the developments, but declining to be named.
Apart from the biofuel project, RIL has started work on a $4 billion coke gasification project at its Jamnagar facility.
In his annual general meeting speech last month, RIL chairman Mukesh Ambani spoke about syngas (short for synthesis gas) and its implications on the refining business.
As part of the coke-gasification project, pet coke at the Jamnagar refinery will be upgraded to syngas for further use as fuels and for hydrogen and chemicals production, Ambani said. The coke gasification project is to convert coal and coke, the lowest-cost fossil fuels, into gas.
RIL, the country’s largest buyer of spot regasified liquefied natural gas, is likely to completely switch to syngas once the coke gasification project is completed, in about three years.
“The company has been exploring the coke gasification project for about five years now but it was not very economically viable. RIL sold pet coke in the open market for some time as it gave good returns. Now, with LNG prices soaring and availability of natural gas a challenge, syngas is the best option available,” said the first RIL official cited earlier.
The company currently requires 11-12 million standard cubic metres per day (mscmd) of gas for the Jamnagar project and this is expected to increase to 16-17 mscmd once the upgradation and expansion is complete, said Sudeep Anand, an analyst with IDBI Capital Services Ltd.
Reliance was allotted 11.38 mscmd of gas in 2009 by an empowered group of ministers from RIL’s D-6 block in the Krishna-Godavari (KG) basin in Andhra Pradesh, but this has remained largely on paper because of a shortfall in production. Gas production from RIL’s KG D6 block declined to 18-19 mscmd as against the targeted 80 mscmd, according a 28 June report by Angel Broking.
An email sent to the company’s official spokesperson remained unanswered.
The government recently approved a formula to raise natural gas prices in India effective 1 April 2014. Oil minister M. Veerappa Moily last week clarified that the quantum of hike will vary.
The spot price of LNG in India is $14-15 per million metric British thermal unit (mmBtu), Anand said. While RIL’s dependency on imported gas will decrease with coke gasification, gross refining margin (GRM) will improve by $2-2.5 per barrel as it is cheaper than LNG, according to Sudeep Anand of IDBI Capital.
GRM is the difference between the cost of processing crude and the value of finished petroleum products sold. RIL’s GRM for 2012-13 was $9.2 a barrel, up from $8.6 a barrel in the year previous.
The Jamnagar complex has an aggregate refining capacity of 1.3 million barrels of oil per day.
RIL aims to install eight gassifiers at Jamnagar, each having a capacity to produce 2.35 mscmd of syngas, said an industry expert in the know of the development.
Besides the coke gasification project, RIL has earmarked $4 billion for a petrochemicals project in Jamnagar that will include a cracker unit. The cracker will produce ethylene, propylene, low-density polyethylene and monoethylene glycol that have a wide range of applications in industry.
This project is expected to be commissioned in the second half of financial year 2016 and would nearly double the ethylene capacity to 3.3 million tonnes a year, Ambani said at the AGM.
RIL, in joint venture with BP Plc., is in the race with three other companies to pick up a 25% stake in a proposed LNG project being set up by Gujarat State Petroleum Corp. at Mundra in Gujarat.
“The Mundra LNG project could be a strategic investment plan by RIL to gain a footprint in all the possible avenues in the oil and gas sector,” said Vinay Nair, an analyst at Karvy Stock Broking Ltd.
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First Published: Mon, Jul 15 2013. 12 18 AM IST
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