RIL-EXPORT

Jul 01, 2008 (Asia Pulse Data Source via COMTEX) -- REPMF | Quote | Chart | News | PowerRating -- IEA questions rationale behind allowing RIL to export fuel By Ammar Zaidi Madrid, July 1 (PTI) -- US-backed International Energy Agency has questioned India's move to let Reliance Industries export fuel when the country was forced to import petroleum products to meet surging domestic demand.

Reliance Industries has converted its existing 660,000 barrels per day refinery at Jamnagar in Gujarat into an export oriented unit and its subsidiary Reliance Petroleum is likely to commission a 580,000 bpd export-oriented refinery by September.

"While Jamnagar will undoubtedly increase light product supplies to global markets vis-a-vis the same crude being run through less complex refineries, Indian products import requirements could increase possibly quite dramatically.

"But for how long will India allow products to leave its shores while struggling to meet strong domestic demand growth," the IEA said in its medium-term oil market report released coinciding with the 19th World Petroleum Congress here.

India imported 22.716 million tons of petroleum products like LPG for USD 15.255 billion (Rs 61,504 crore) in 2007-08. With the economy growing at over 8 per cent, fuel demand particularly that of diesel and petrol is growing in double digits.

"Indian markets may not initially see much benefit from the (RPL) refinery start-up, given the export status that the refinery has," the IEA said.

While the start of Reliance's new unit will make Jamnagar the single largest refinery hub globally, the agency said the addition of such a large increase in refining capacity requires additional supplies or the displacement of crude from existing destinations. "The impact on global crude allocations will be felt across Asia and as far afield as the US," it said. The agency as to where will the refinery source its crude from and what its target markets would be.

"OPEC spare capacity is forecast to increase from around 2 million barrels per day currently, to an average of 4 mb/d in 2009. The addition of such a large increment of crude distillation capacity requires additional supplies or the displacement of crude from existing destinations," it said.

On the impact of the refinery on global refinery margins, IEA said increased diesel supplies will undermine margins.

IEA said the proposed refining configuration suggests that the refinery could process crudes as heavy as 25 degree API.

Consequently, Reliance will have the potential to source crudes from every major exporting region, possibly with a bias towards heavy Middle Eastern and Latin American grades. "The impact on global crude allocations will be felt across Asia and as far a field as the US." Product exports from Reliance are likely to target different regional markets. Distillate production is likely to be targeted towards the European market.

The refinery was originally designed to make 50ppm sulphur material, but is now being modified to enable it to produce 10ppm sulphur diesel, a necessary change if Europe is to remain a viable market after January 2009. Gasoline exports will have to work harder to find markets.

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