Our last post talked about Jamnagar Refinery, which due to changes in geo-politics is more valuable.
Reliance is benefiting from Indian government support for Russian crude (and feedstock) imports as India is not a party to the sanctions put in place by many governments.
Subsequent to the Ukraine-Russian conflict, Reliance has been in global media news as being a key beneficiary of sanctions put on Russia. A result of Russian sanctions is the continuing disruption of global energy feedstocks and value-added-products. Indian imports of Russian feedstocks have grown from negligible to over 1 MMB/D in a 120-day period. Iraqi, USA, and Saudi imports have been substantially reduced or ceased. In May 2022 RIL’s Russian imports average more than 1.4 MMB/D of feedstocks (~27% of facility inputs, estimated at 18% of all Russian May exports). (Estimates vary as the granularity of measurements is actually shiploads (75% Greek tankers) of varying grades and materials.)
Crude oil cracking profit margins, in June 2022, at the Jamnagar facility are likely on par, or better, than USD$39 bb (Moody’s) margins across the industry. Private producers like RIL are concentrating on high-value export markets and taking advantage of highly discounted Russian feedstocks (USD$30 per barrel discount or up to 25% off global benchmark pricing). When combined with high-efficiency Jamnagar margins of USD$30 or more (crack spread per barrel gross margin) RIL may get as much as USD$60 or more margin per barrel of imported Russian feedstock. 2021 margins were less than 5% of the current profits per barrel (bb per day). RIL can see a margin increase of USD$4.2M per day (USD$126M per month), if global prices can be sustained, at an average import rate of 1.4 MMB/d. Some estimates are for RIL’s margins across the complex up 260% in 2022. RIL is likely reaping historically high profits from the Jamnagar facilities.
RIL is delaying a normal planned maintenance shutdown in the fuels processing section of the facility to take advantage of global market conditions. Continued operations are pushing global processing facilities past nominal operating utilization values in the high 90s% as global facilities pursue high profits. Counterintuitively this has led to spot shortages in Indian gasoline supplies as state-price-managed producers can’t keep up with surging demand (with Indian currency devaluing and crude prices increasing globally for the 85% of Indian crude demand imported).
The next post looks at the creation of the Jamnagar Refinery and explores what a fortuitous investment it has turned out to be.
Read this and other posts at www.ekalore.com/India-Business or www.ekalore.com/alien-invaders
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