Mukesh Ambani's Reliance Industries to expand Jamnagar complex; to brace against entry of Saudi, Russian players

Reliance Industries (RIL), which pipped Tata Consultancy Services (TCS) to become the most-valued company in terms of market capitalisation on Friday, is reportedly now planning to boost its oil-refining capacity by about 50%. This development comes against the backdrop of mushrooming energy demand.

The International Energy Agency (IEA) expects India's energy demand to more than double by 2040, making it the single-largest source of global growth. In fact, we are the world's fastest-growing major oil-consuming nation.

Citing people in the know, Bloomberg reported that the billionaire Mukesh Ambani-led oil-to-telecom conglomerate has begun discussions with global refinery process licencors and equipment vendors for a new refining train at the Jamnagar complex, the world's biggest refining complex. The proposed plant will be able to process as much as 30 million tons of crude a year, said the sources, adding that given the size envisaged by the company, the project may cost $10 billion.

Ambani's moves signal his intent to cement RIL's dominance in the country amid increasing competition. For instance, Saudi Aramco and Abu Dhabi National Oil Co. (ADNOC) signed agreements to invest in a proposed 60-million ton refinery complex on India's west coast while Russia's Rosneft PJSC and partners acquired the country's second-largest private oil processor.

Meanwhile, Total SA and Royal Dutch Shell are also expanding into fuel retailing in India. Shell has restarted retailing gasoline and diesel in the country, while Total partnered the Adani Group to set up liquefied natural gas import terminals and fuel retailing business.

The report added that RIL is looking to process the dirtiest and heaviest crude and may focus on producing feedstock for petrochemicals. According to the sources, the expansion plan is still under discussion and a feasibility report is likely to be prepared by the end of next year, once the recently-expanded petrochemicals capacities stabilise. RIL is expected to make the final investment decision with an aim to start work only in 2020.

This is actually the second time in this decade that RIL has considered expanding its refining capacity. In 2013-14 it had sought environment approval for the same, but the company shelved the plan, choosing to focus on increasing downstream chemicals capacities and building its telecom business instead.

Things seem more likely to go to plan this time round, given RIL's robust second quarter numbers for this fiscal, driven by its petrochemicals business, and the anticipated domestic demand for fuel. The IEA predicts that India and the Middle East will be bigger oil consumers than the European Union by 2030, driven mainly by diesel for trucks and petrochemicals feedstock.

Edited by Sushmita Agarwal