Reuters India
India Reliance startup makes biggest fuel complex Thu Dec 25, 2008 7:59am EST\
MUMBAI, Dec 25 (Reuters) - Reliance Industries Ltd (RELI.BO) on Thursday began processing crude oil at a new refinery in western India, almost doubling company output and creating the world's biggest refining complex just as global oil demand retreats.
After reaching full capacity of 580,000-barrels-per-day (bpd), the $6 billion project will make the oil complex in Jamnagar in western Gujarat the world's single biggest supplier of fuels to the global market, pumping out 1.24 million bpd of ultra-clean fuels to Europe, Africa and the United States.
"The secondary processing units are now under synchronization and commissioning. The entire refinery complex is expected to attain full capacity shortly," the company said in a statement.
The project is the creation of Chief Executive Mukesh Ambani, who helped break India's heavy reliance on imported fuel a decade ago with Reliance's first 660,000 bpd plant, a cash cow for the firm during a profit boom over the past four years.
Trade and industry sources earlier told Reuters that for tax reasons the new plant was not expected to begin significant exports until April, when the new fiscal year begins in India.
While the new refinery's low cost, high sophistication and global reach mean it should turn a profit by crowding out less efficient export-oriented rivals in Europe or Asia, it enters a market utterly different from the one Ambani might have envisioned three and a half years ago when he unveiled the project.
"We will leverage our competitive advantages of scale, complexity and capability to process a wide range of crude oils and flexibility to produce high quality transportation fuels and create significant value for all its stakeholders," Ambani said in the statement.
Run by subsidiary Reliance Petroleum (RPET.BO), in which Chevron Corp (CVX.N) holds a 5 percent stake, the refinery will at a stroke more than satisfy the world's additional oil product demand next year, if indeed the International Energy Agency's current forecast is not further cut by a deep global recession.
It is not a circumstance Ambani will relish, but it is also not one that will be unfamiliar.
"When in 1999 we started our first refinery at Jamnagar, we saw a recession globally and when we are about to start our second refinery, history is repeating itself," he said last month.
GEARED FOR EXPORT
Unlike a decade ago, when Reliance built its refinery to tap into India's growing demand for refined fuels, the new plant is geared entirely to the export market, avoiding the domestic market where the government still controls prices.
But the global refining industry has also changed dramatically as a surge in oil prices to nearly $150 a barrel and the worst financial crisis in nearly a century reverses steadily rising oil demand in the United States, Europe and even China.
Analysts at Credit Suisse warn that the refining sector may be entering a difficult time as China builds new plants quickly enough to meet its own demand while India and the Middle East vie for shrinking export markets.
But Reliance is better-placed than most to ride out the downturn, with a strategic position near Middle East crude supplies and an unrivalled capacity and complexity.
It will play a swing supply role that will redraw traditional trade flows, and has already embarked on a robust marketing campaign in Europe, Mexico, East Africa and Asia, capitalising on delays and cost overruns faced by other big refinery projects.
Reliance has already leased clean oil products storage tanks in Singapore, the Mediterranean and Caribbean, industry sources have said, to boost its trading operations. [ID:nSP188776] (Reporting by Bharghavi Nagaraju and Nidhi Verma; Editing by Andrew Callus)
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