The world’s largest refining plant is benefiting from the international energy deficit caused by Russia’s invasion of Ukraine.
According to persons with direct knowledge of the situation, Reliance Industries Ltd.’s Jamnagar refinery is halting crude processing and delayed planned maintenance to take advantage of rising diesel demand. It is currently shipping petroleum to Europe, and this will rise in the coming months, according to the persons who asked not to be identified because the information isn’t publicly available.
The Gujarat complex can handle 1.36 million barrels of oil per day from two refineries, with the majority of the fuel being exported. The 704,000 barrels per day export-focused factory, owned by billionaire Mukesh Ambani, has been idle since the pandemic struck, with only around three-quarters of its capacity used in January.
“Reliance has a lot of flexibility in terms of crude feedstock ratio and yield adjustments, and it exports 80% of its output,” said Senthil Kumaran, head of South Asia oil at industry consultant FGE. “It offers it the most profit in times of high margins.”
Some Asian refineries are considering exporting diesel as the price of the fuel rises in Europe as a result of Russia’s invasion of Ukraine. Prices have soared to as much as $139 per tonne over those in Asia, compared to less than $10 for the most of previous year. Some processors, such as Reliance, are well-positioned to profit from the so-called arbitrage trade, but others are struggling to keep up with rising oil prices and are considering reducing their output.
According to the people, Reliance had intended to shut down one of its crude processing operations in Jamnagar for around three weeks starting this month, but that has now been pushed back to September. According to figures from India’s oil ministry, the export-oriented facility barely utilized 74.7 percent of its capacity in January.
Nayara Energy Ltd., which is 49 percent controlled by Russia’s Rosneft Oil Co. PJSC, also runs a refinery at Jamnagar and exports petroleum, albeit in much smaller quantities than Reliance. Indian Oil Corp. and other large state-owned processors are more focused on the domestic market.
India has remained silent on the invasion of Ukraine and has voted against denouncing Vladimir Putin’s aggression at the United Nations. It has refused to participate in any sanctions against Russia and has urged Russia and Ukraine to hold talks to resolve the crisis.
Even after its operator, Exxon Mobil Corp. began taking steps to wind down operations before eventually exiting its stake in the project, state-owned upstream explorer ONGC Videsh Ltd. said earlier this month that it didn’t see any challenges in selling crude produced in Russia’s Sakhalin-I project.
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