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Mukul Kanchan

Reliance Petroleum Limited (RPL) - an Indian oil refining company and a listed subsidiary of India's biggest private business house - Reliance Industries Limited (RIL), is setting up a 580,000 barrels per day (bpd) or 29 mtpa oil refinery at an investment of INR 270 billion (US$6bn) in Jamnagar, India, just beside the its parent Company's refinary which has a capacity of 660,000 bpd. The refinery being an Export Oriented Unit (EOU) and is located at the Special Economic Zone (SEZ), government has granted 100% tax-break on its export earnings for the first five years of commissioning. The refinery is likely to be commissioned by September ’08.

The most interesting story about RPL is that its refineries are among the most complex in the world, capable of processing the most sour & heavy crude sourced from Arab countries - not just the light, sweet crude which most refineries require. These crude are much cheaper than the sweet crude like NYMEX or Brent and thus company will have much heigher refining margin called Gross Refining Margin (GRM). The complexity is measured in Neilson Complexity; the current world average is 8.5 wheres RPL has complexity of 14. These complex refinary are easily able to shift between the output like naphtha & gasoline; aviation fuels & diesel according to demand. RPL has the ability to produce fuels with sulphur content less that 10ppm, compliant with strict US and European emission norms, would enable the company to post higher realisations.

The Company is yet to generate its first revenues, but is already listed in India 2 years back. It raised a huge chunk of money in its Initial Public Offering (IPO) and already trades at premiun to its peers. The Company is already running ahead of its schedule and no cost over-runs. Reliance group is world renownd for their project execution skills.