RIL results strong, but oil exploration still disappoints

, Reliance Industries Ltd (RIL), posted revenues of Rs 371,119 crore ($68.4 billion) for the year 2012/13. Had RIL been a country instead of a company, and had its revenue been regarded as gross domestic product, it would have ranked 86th in the world, just behind Tanzania.

Its net profit for the same year stood at Rs 21,003 crore. RIL exported goods worth Rs 239,226 crore through the year, which is 14 per cent of India's total exports.

The company had been under pressure from investors due to its slowing energy business and its recent moves into sectors such as telecom, retail and financial services, which have yet to turn a profit.

Following the announcement of results, RIL sought to assure its investors that its move into fourth generation telephony (4G) was a well considered step. RIL subsidiary Reliance Jio Infocom is expected to roll out 4G services in the second half of 2013. The company has licences to provide this service in all 22 telecom circles of the country.

But despite the overall encouraging results, the core petroleum business was a mixed story. The exploration vertical did not perform well, while the petrochemical business remained lackluster. But to offset these, there was the oil refining vertical, in which revenue surged by 11.6 per cent. In the last quarter of 2012/13, the gross refining margin was at a high of $10.1 a barrel, while across the entire financial year it averaged $9.2 a barrel. RIL's Jamnagar refinery had 110 per cent utilization - in comparison, average utilization rates in North America have been 83.7 per cent, and in Europe 80.5 per cent. However, the recent dip in the crude oil prices globally could impact the margins in the current financial year.

But oil exploration, both in the D6 block of the Krishna Godavari (KG) basin and the Panna Mukta Tapti (PMT) basin continued to disappoint. While the PMT basin is aging, KG D6 saw a 40 per cent dip in production. The proposals to commercially produce gas from two coal bed methane blocks at Sohagpur (east) and Sohagpur (west) blocks have yet to be cleared by the petroleum ministry.

Analysts, however, believe there is still some hope in the KG basin, where RIL is seeing some success in the MJ1 well drills, and has committed itself to producing roughly 4 trillion cubic feet of gas from this block in next three to five years, with an investment of more than $5 billion along with its partners BP and Niko Resources.

*In an earlier version of the story, due toan editing error, Reliance Industries was described as the India's largestprivate sector company by market capitalisation.