New Jamnagar refinery could process 15-API crude

Vol 9, PW 25 (06 Apr 06) Midstream & Downstream

Just six years after successfully setting up and running a 33m t/y petroleum refinery at Jamnagar, Reliance says it is ready to set up another similar sized refinery in the same town.

Work has already started. Some 4000 acres of land (the new refinery will need 1700 acres) has already been bought and about 5000 engineers have begun work in London, Houston, Toronto, Mumbai and Jamnagar preparing drawings and other documents.

Engineering and construction contracts have been awarded to Bechtel, Foster Wheeler, UOP, ExxonMobil the main contractors for the previous refinery, we are told. Reliance says the experience gained and lessons learnt in setting up the existing refinery would be useful for the new refinery as well.

Most importantly, we are told, the new refinery will be able to process between 15 and 50-API crude, unlike the present one, which has handled crude with an API number as low as 18. This is in line with Reliances business strategy to profit from emerging global trends.

Over the next 10 years mainly heavy and sour crude will be produced the world over, says Reliance director Hital Meswani. In the past producers skimmed the lighter crude.

Meswani said not many refiners could refine heavier crude. In 2000, heavier crude was available at a discount of $1.5/barrel compared to lighter crude.

This differential has widened to $5.4/barrel in 2006 and is expected to settle at $3.7/barrel by 2012. Meswani added that the global refining system is today operating at unheard of (high) capacity utilisation.

Over the years, we hear, investments have not been made in refining. Most of the dollars have gone into bottom of the barrel infrastructure.

Many refineries are old leading to frequent breakdowns. However, governments in Europe and America are tightening fuel quality standards.

Reliance sees an opportunity here and the new refinery will have a Nelson Complexity Index of 14 (the existing one has 11.3) and will turn out gasoline and diesel with just 10-ppm (parts per million) sulphur. These products will command a premium in the market, says Reliance.

We will buy cheap heavy crude and sell costlier, premium products.