Reliance Petroleum Limited (RPL), a subsidiary of Reliance Industries Limited (RIL), is expected to recover its costs in the first 2.5 years of its operations. The Jamnagar refinery of RPL, with a refining capacity of 580,000 barrels per day, is expected to be on stream in the third quarter of this fiscal.
According to sources close to the company, RIL estimates a net income of Rs 8,190 crore in the first full year of operations in FY10. The refinery has a capital cost of Rs 27,000 crore. The refinery, promoted as an export-oriented unit (EOU), is likely to be commissioned by September '08, after which RPL would benefit from the shortage in global refining capacity.
According to a Mumbai-based analyst, RPL's superior product mix, coupled with advanced secondary processing, would enhance its GRMs, above industry benchmarks. These factors, along with the 100% tax-break on export earnings for the first five years of commissioning, would support healthy financials.
The proposed refinery is expected to be superior to both regional refineries and RIL's existing refinery with regard to its superior complexity and improved yield of value added products, added RIL officials. They also said that the refinery would be able to supply ultra low sulphur gasoline and diesel to meet tighter fuel emission norms and flexibility to handle heavier crude, implying savings on crude cost by taking advantage of the wider differential in heavy light crude.
In the past two decades, the refining capacity remains under investment but demand for petroleum products has increased. Demand from countries like China, India, other emerging nations and the US has led to scarcity of refining capacities across the globe. This robustness in market expansion has resulted in average capacity utilization of 88.9% in the past year, as against 84.7% over the past five years.
SOURCE:
The Financial Express