Flexibility helps RIL beat peers, achieve 90-100% capacity under lockdown

In comparison PSU refiners were able to achieve 60%; RIL's oil-to-chemical biz can shift quickly from fuel to chemicals, domestic to exports

Operational flexibility to shift from the domestic to export market and higher petrochemical production helped Reliance Industries (RIL) to operate at 90-100 per cent capacity even amid the lockdown in April and May.

In comparison, large public sector refiners operated at a combined average capacity of 59 per cent in April.

RIL produced more chemicals than fuel as it saw good export demand for petrochemicals, especially for polymers. The company’s oil to chemical business, which is being carved out as a separate company, has the operational flexibility to shift quickly from fuel to chemicals, domestic to exports and also using feedstock flexibility.

According to data from the Union Ministry of Petroleum and Natural Gas, RIL’s refinery utilisation in April was 94.82 per cent, compared to Indian Oil Corporation’s (IOC’s) 53.17 per cent, and Bharat Petroleum Corporation’s (BPCL’s) 70.08 per cent. 

IOC’s and BPCL’s refinery production was hit because of low demand from transportation fuels like ATF, petrol and diesel. Hindustan Petroleum (HPCL) was the only public sector outlier with 100 per cent utilisation. A net buyer of refined products, HPCL concentrated on improving refinery throughput and reducing third party purchases.

Sources said, “Taking full advantage of global reach and deep customer connect, RIL quickly shifted towards significant exports mode and inverted business model from 20 per cent exports earlier to 80 per cent now, and this shift took place within 10 days.”

It exported paraxylene to the US initially and China later. RIL plans to balance exports and ramp up domestic sales as downstream industry reopens. Last weekend a vessel-load of 68,000 tonnes of polymers was exported to China. “This was the first time sthat such a high quantity of polymers was exported from India to China,” explained the source.

Queries sent to Reliance Industries on polymer exports and refining capacity utilisation did not elicit a response.

However, sources said in April 2019, out of 80,000 tonnes of total polymers exports, RIL’s share was 34,500 tonnes or 43 per cent. In April 2020, when most businesses were shut or working at low capacity, RIL exported 236,000 tonnes of polymers, which was 95 per cent of total polymers exports. The trend continued in first three weeks of May, sources said.

In the domestic market, RIL’s has shifted focus to producing milk and food packaging material and PPE (personal protective equipment), where demand is high. With manpower housed near the plant, RIL did not face any shortage of workers, said sources.

Analysts agree that RIL’s petchem business would have supported the overall refinery utilisation. “Naphtha produced is effectively used in captive consumption for petrochemicals production. A combination of naphtha, exports of transportation fuels and sale of LPG to domestic public sector companies may have possibly ensured a higher utilisation for its refinery,” said a senior oil and gas analyst who did not wish to be identified.