Reliance Industries' Second Refinery in Jamnagar Exceeds Nameplate Capacity by 15%

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Researched by Industrial Info Resources (Sugar Land, Texas)--Reliance Industries Limited (BSE: 500325) (RIL) (Mumbai) announced that during October to December of 2009, its second refinery, at Jamnagar in Gujarat, exceeded its nameplate production capacity by 15%. The unit, with a nameplate capacity of 580,000 barrels per day (BBL/d), produced 667,000 BBL/d during this period and overtook the older 660,000-BBL/d refinery at the same site.

Built for operation at predefined nameplate capacities, refineries also have inbuilt buffer capacity of 10% to 15%, in order to maintain sustained production volumes. According to RIL officials, if production parameters such as pressure, catalyst levels, heat and feed are optimally utilized, a refinery can produce more than its installed capacity using the debottlenecking process, which helps in augmenting the capacity of the various stages of a downstream or upstream process, by analyzing bottlenecks and identifying engineering solutions for execution and implementation.

In December 2008, RIL commissioned its second refinery at Jamnagar. With the second refinery attaining full-scale commercial production, the Jamnagar facility became the largest single-location refining facility in the world. RIL officials are confident that the production volume of the second refinery could exceed 20% in the future. The refinery has room to produce 700,000 BBL/d of oil, which is about 20% more than its nameplate capacity. The unit has achieved high performance and stability in record time, and has completed stress tests for production of up to 700,000 to 710,000 BBL/d. The stress tests assist in identifying, observing and analyzing results by operating the refinery at levels far beyond normal capacity.

RIL's refineries are recording an increase in production volumes at a time when analysts have forecast conservative growth in demand for refined and petrochemical products. Increase in production volumes at Jamnagar will help RIL in undertaking low-cost expansion of its facilities. Since there is no new capital expenditure involved, the expansion could directly translate into profits. During the October-to-December 2009 quarter, efficient and higher utilization of the refineries in Jamnagar helped RIL record refining margins of $5.9 per barrel, exceeding the Asian refining margin benchmark of $4 per barrel.

In a related development, RIL signed an agreement to lease 500,000 BBL/d of storage at the Borco oil terminal in the Caribbean. The storage is crucial, as the company has been aggressively seeking customers in Latin America, East Africa, the U.S., and Europe.

For the quarter ended December 31, 2009, RIL recorded net profit of $869.1 million, an increase of 15.8% year-over-year. However, during April to December of 2009, RIL's gross refining margin stood at $6.2 per barrel, in comparison to $12.9 per barrel achieved during the same period in 2008.

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