Reliance earns record refinery margins in Q1

Reliance Industries Ltd, the nation's most valued company, made a record refinery margin of 15.4 dollars per barrel in the first quarter this fiscal as its Jamnagar refinery processed more complex crude oils.

The Mukesh Ambani-run company had recorded a gross refinery margin (revenue earned on processing of a barrel of crude) of 12.4 dollars per barrel in April-June last year, a company source said.

"This performance is a result of a highly complex refinery along with most efficient liquid port, location advantage and following sound economics of buying cheap and selling premium products," he said.

The complex refineries allows RIL to buy and process some of the heaviest and sour crude the world has seen and which only a handful of refineries have the capability to process. The refinery regularly tries out crude from new sources, which are both cheaper and challenging to process.

During the quarter, RIL tried out crude with an API of 21-24. API is an indicator of how heavy, sour and difficult the crude is to process. The differential in light and heavy margins has been growing in the past few quarters and today it stands at 5-5.5 dollars per barrel, the source said.

With the refinery converted into an export-oriented unit, the company has focused on exports with reducing sales in the local market where it is incurring losses as government refuses to give RIL subsidy at par with what it gives to the PSU oil companies.

The source said that for a long time now RIL has outperformed the Singapore complex benchmark GRM by a wide margin. "The factors that have contributed to high GRMs are cost of sourcing crude oil, manufacturing reliability and efficiency, ability to produce quality transportation fuels and flexibility of crude oil receipt and product evacuation infrastructure."

During the quarter, RIL processed four new crudes which it procured at a substantial discount, the source said.

The 33-million-ton Jamnagar refinery imports all of its crude oil requirement in VLCCs (very large crude carriers) capable of bringing up to two million barrels in each shipment.

"This reduces the freight costs considerably and optimises the overall landed cost of crude oil. The product evacuation infrastructure again provides the flexibility to evacuate the products in varying parcel sizes and optimises the supply chain costs of the buyers," the source said.