RELIANCE PLANS
SHIPPING ARM FOR CAPTIVE BUSSINESS
Reliance Industries , the country’s largest private sector
company, and ranking in top 5 companies in production capacities of Polymers, PTA, MEG, PFY and Petroleum Products and a stiff competitor in world markets, now wants to fill up one of the missing links in its backward integration chain.
The company is now planning to buy ships for its captive use of transporting
crude and petroleum products from its 33 million tonne
refinery at Jamnagar The decision, which is expected to save an annual cash flow of $220m(Rs 990 crore) based on the back of the envelope calculation.
We are currently examining the option and would take a final decision once the ground work for the refinery’s expansion programme advances said a senior RIL official. RIL plans to spend Rs 25,000 crore to double Jamnagar’s petroleum refining capacity to 60 miilion tpa ,over the next 2-3 years.
Besides looking at freight savings we will also have to look at the profit margins i8n shipping industry and return on capital. The RIL official said.
The fleet would also give the country6’s petrochemical player an advantage vis-à-vis public sector competitors to control its freight charges as well as in keeping its delivery schedule. The move assumes significance as the additional 30 million tonne refinery is designed exclusively for exports .The new acquisition would also meet its demand for crude to meet its refinery expansion, sources said. Currently, RIL. Relies on leased very large crude carriers to transport crude oil from the Arabian Gulf, which supplies the 70% of its requirement.
The rest of the demand is met from West Africa and the Gulf of Mexico .Analysts are not so optimistic over the Reliance new plan. Apart fro huge capital outlays, margins in shipping are much
lower .Reliance has to see if the economies of scale justifies the investment said the analyst
RIL’s crude imports from the Arabian Gulf involves a voyage of four days. The company’s refinery is designed to process crude ranging from 100% Arabian
light 9higher cost but containing a higher percentage of light and middle distillates) to 100% Arabian heavy (lower cost with lower percentage of light and middle distillates)
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