Chevron deal offers access to Africa, Latin America

Reliance Petroleum Ltd's (RPL) deal with US energy major Chevron will give the company access to markets in West Africa and Latin America, Nikhil R. Meswani, executive director, Reliance Industries told reporters here on Thursday.

The deal will also help the company procure extra heavy crude from main producers at competitive prices, he said.

Reliance Industries Wednesday announced that U.S. energy major Chevron will pick up 5 per cent stake in Reliance Petroleum for $300 million. The announcement reflected the first major infusion of foreign direct investment in the country's refining sector.

"Chevron has expertise in procuring extra heavy crude and this will also help make Reliance Petroleum one of the lowest cost refiner in the world," he said.

Meswani said the prospect of refinery business worldwide is quite positive in view of growing demand and lack of capacity addition in the US and Europe.

"Not a single new refinery has come up in the US and European countries in the last 25 years. Refining margins are going to remain healthy during the next 10 years," he said.

Reliance Petroleum is setting up a 100 per cent export oriented greenfield refinery at the special economic zone in Jamnagar, which will have technology to process the most sour variety of crude into finished products.

Meswani said most refineries in the world do not have the technology to process extra heavy and heavy varieties of crude.

The refinery, which will be on stream by December 2008, will have a capacity to process 580,000 barrels per stream days making it the sixth largest refinery in the world. The company is also setting up a 900,000 tonnes per annum polypropylene plant, he said.

Another senior official said Reliance Petroleum might attract more Chevron type deals in the future."World is gradually realising the potential of refinery sector in India and almost all global companies are looking for opportunities to invest in this sector," President (cracker & polymers sector) Kamal P Nanavaty said.

The officials were in Kolkata in connection with Reliance Petroleum's coming public issue of 1.35 billion shares in the price band of Rs 57-62 a share to raise Rs 83.70 billion to part finance the proposed refinery.

The issue, which opened today, was oversubscribed 5 times within two hours of opening.