Vol 3, PW 9 (26 May 99) Midstream & Downstream

Indian industry has long marvelled at the sheer audacity of Reliance Industries and its much-publicised boasts of an increase in capacity at its greenfield refinery at Jamnagar.

In April last year Reliance announced capacity would be increased from 15m tonnes a year (t/y) to 18m t/y. In quick succession the figure was revised upwards again: first to 21m t/y, then 25m t/y and finally to 27m t/y where it stands today.

Was Reliance acting too soon It would appear so. A source close to the company tells this report Reliances expansion plans are likely to prove a costly mistake.

Petrowatch learns that when the Jamnagar refinery goes on stream in July this year it will produce at a capacity of just 19m t/y and that the vast bulk of its product has yet to find a home. This report learns, for example, that in its first year of production the refinery will produce 3m tonnes of naphtha.

Of this, Reliance will use 1m tonnes, but has not yet found a home for the remainder 2m tonnes, hardly surprising as both government and industry are now strongly discouraging the use of naphtha as a fuel for the power sector in favour of gas. The refinery will also produce 12m tonnes of High Speed Diesel; 3m tonnes of kerosene; as well as propane, butane and other gases totalling 800,000 tonnes.

Reliance, it seems, is also having problems with the 1.5m tonnes of petroleum coke which will be produced. Again, it has no takers.

Six months ago Reliance offered to sell the coke at $70 a tonne to Gujarat State Electricity Board (GSEB) but GSEB replied with a counter offer of $10 a tonne. The issue is deadlocked.

Clearly Reliance is having problems finding buyers for its petroleum products.