Reliance Industries announces plans for crude production

Reliance Industries, whose main source of profit is refining, announces plans to temporarily shut one crude unit at Jamnagar while increasing investments for greater hydrocarbon production.

Mumbai, Maharashtra, April 18, 2016 /India PRwire/ -- On Monday, Reliance declared that for purposes of maintenance, it will keep one of its Jamnagar crude units shut for 3 weeks starting May 1.

Delivery on commitments unaffected

The other CDUs and secondary processing units at Jamnagar continue to maintain normal throughput, which is why the company is confident that this temporary shutdown will not impact its ability to meet commercial demands. This is reassuring, considering that the CDU is part of its export-focused plant.

Capacity for production

Reliance's crude distillation unit (CDU)is capable of producing 580,000 barrels of crude oil per day. The installed capacities of the two plants at Jamnagar in the Gujarat state, which are part of its refinery complex, allow Reliance to produce 1.2 million bpd of oil. The two plants have four CDUs, and each refinery has two CDUs of an equal size.

Refining drives near-record earnings

Reliance Industries is the operator of the biggest refining complex of the world. The business from it contributes to 70% of its revenue and 60% of the overall profit that the company makes. Analysts surveyed by Bloomberg expect Reliance to post a standalone profit of Rs.7,010.8 crore on sales of Rs.57,279.2 crore.

Competitive GRM

A JP Morgan report says that Reliance's earnings this quarter can be attributed to refining, with above $11 per barrel GRMs being reported. Typically, the company reports a GRM that is $2-3 per barrel above the GRM of the Singapore complex.

Gas prices to drop

High crude price differentials combined with discounts from producers in the middle-east mean that Reliance Industries' premiums will remain high. The profit from exploration and production is likely to cause an 18% reduction in domestic gas prices, as Nomura analysts predict.

Reviving investments to produce more

In response to the government's decision to offer more than double the prevalent gas price for difficult fields, Reliance Industries along with its UK-based partner BP are likely to resuscitate investments of about 10 billion. The aim of this investment would be to facilitate a greater production of hydrocarbons from their KG-D6 and NEC-25 blocks.

Investing at a crucial time

The investment by Reliance in unexplored areas comes at a time when output from the existing blocks is steadily dipping, as is evident in the drop from 60 million metric standard cubic meters per day (mmscmd) in 2010 to 9 mmscmd currently. This is a roughly 85% decrease.

Unexploited reserves discovered

Reliance has found that KG-D6 and NEC-25, which were hitherto unexploited, potentially possess 2-3 trillion cubic feet of natural gas reserves. In order to gain access to these reserves, a source has said that "RIL is planning cluster development of R-series, satellite and other fields in KG-D6". Not only will this move reduce costsbut also make the plan more economically viable.

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