Wednesday, July 23, 2008

RPL - Refinery Expansion on Completion

Commissioning of Reliance Petroleum (RPL)'s refinery in Jamnagar special economic zone (SEZ) is being tracked not just by its 2 million shareholders and stock market experts, but by global energy analysts as well. Jamnagar Refinery project is on watchlist as the light sweet crude is getting costly day by day and India does not have much refining capacity to extract sulpher from crude oil. Jamnagar refinery has sound capacity to address this issue and hence can grown even if the global petro-refining demand diminishes.

Mukesh Ambani recently assured shareholders at the company's annual general meeting (AGM) last month, he says that the refinery is expected to be completed ahead of schedule.

The new expansion project also marks the success debut of Mukesh Ambani owened RIL's own dream refinery, this project will serve as an example for fast low capital cost, project execution and developing high complexity solutions in India.

However, there is tough competition in world as global refining capacity is increasing day by day.

Low Capital Cost: RPL's expanded refinery has total cost of around Rs 27,000 crore, i.e. around $6.5 billion, such similar-sized refinery elsewhere would cost around 13-14 bn USD.

Fast Project Execution: Commercial production in expansion will start in Sep-08. RPL has completed 94% commissioning and the main process units are about to be complete.

Hidden gem: RPL's hidden gem is its capacity to handle oil with high sulphur crude, Mukesh Ambani foresaw the crude crisis and had designed the plant so that it can handle oil with high sulphur crude, this bring cheaper oil to RPL and hence can increase operation margins. Not to mention the Tax benefits of the SEZ location of the refinery, all profits from RPL's first five year production are tax free and for next five years, I-T exemption will be 50%.

Jamnagar News

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