RPL refinery to start in July?

MUMBAI: The countdown has begun for an early commencement of trial runs at 580,000 barrels per day Reliance Petroleum refinery in Jamnagar.

Giving credence to an early start is a recent big-ticket deal that Reliance group is said to have signed with a Venezuelan state oil company.

According to reports, Rafael Ramirez, the Venezuelan oil minister, said, “The deal will help Reliance meet its refining needs as it expands to reach a capacity of almost
600,000 bpd.”
Analysts have been quick to connect the dots.

Vishwas Katela, HSBC analyst, said the Venezuelan deal signifies an early start of the RPL refinery.

“We believe the reference to expansion could have been for the new … refinery … and could indicate the beginning of trial runs by July 2008, taking into account the transportation time,” Katela said in a report on Wednesday.

A Reliance official denied talk of a July start. It is too premature to comment, the official said.

What lends credence to the early-start theory is that in December 2007, Reliance Petroleum refinery was about 82% complete as per an official statement.

HSBC analyst alluded that an early start-up, with 50% capacity utilisation in FY09, though the commercial commissioning might happen only in April 2009.”

This has been corroborated by other analysts tracking the company. According to Enam Securities’s Ballabh Modani and Parikshit Shah, the third of the calendar year could well see the operations commence.

While they shied away from putting a month, they preferred to put a period beginning July to September.

The official target set by the company was a start by December 2008.
What it means is that RPL could take advantage of the healthy gross refining margins before other capacities come up across the Asian region.

Many of the other petroleum refineries across Asia are plagued by delays as availability of critical equipment and skill sets to implement projects.

RIL, the largest private-sector company in India, which owns 70% of Reliance Petroleum (US oil giant Chevron holds 5%) is said to have entered into a long-term agreement to lock-in a 150,000 barrel per day crude purchase contract with Petroleos de Venezuela S.A.

Interestingly, ONGC Videsh, a subsidiary of ONGC, is acquiring 45% stake in an oilfield called San Christobelle owned by Petroleos by paying $450 million.

Meanwhile, the stockmarkets seem to have a whiff of the new development. In line with the emerging scenario, the Reliance Petroleum share price has gained ground.

A month ago, the share was quoted at Rs 153.45, while a week ago it was pegged at Rs 165.20.

On Wednesday the share price was pegged at Rs 170.10, gaining marginally by Rs 1.35 per share, a little less than a percentage point.

The proposed refinery boasts of Nelson complexity of 14, a scale that measures the ability of the refinery to process various crude including the cheap, bad ones.

The RPL refinery also boasts of keeping to its limits in project costs of $6.75 billion, without any cost over-runs.

j_satish@dnaindia.net