RIL project seen bumping up petrochemicals core profit by $300 mn

A man walks past an advertisement of Reliance Industries Limited at a construction site in Mumbai (File photo: Reuters)

Reliance Industries Ltd's (RIL’s) first-of-its-kind ethane import project is expected to add $300 million to the operating profit of the petrochemicals business, Vipul Shah, chief operating officer of petrochemicals, told reporters in a media briefing on Wednesday.

To secure feedstock for its three cracker facilities at Dahej, Nagothane and Hazira, RIL invested about $1.6 billion to import ethane from the US to use as feedstock and produce ethylene at these facilities.

For the financial year 2016-2017, the company reported earnings before interest and tax (Ebit) of Rs 12,990 crore in the petrochemicals business.

"The total investment in this project will be recovered in four years’ time," said Vipul Shah, chief operating officer for petrochemicals for RIL. The $1.6-billion investment included building six very large ethane carriers (VLEC), pipelines connecting facilities, modification of facilities to receive ethane and other storage and related infrastructure to source ethane from the US to India.

Company officials expect feedstock cost on an overall basis to reduce by 30 per cent with the usage of ethane.

"The three cracker sites have been revamped to crack ethane and increase ethylene capacity," the firm said. Company officials added, with the use of ethane and modification of its facilities, its ethylene capacity will increase by 0.2 million tonnes from the current 1.9 MT to 2.1 MT.

This is the first time ethane is being sourced from US to India. Upto May 2017, the company said, it imported 416 Kilo Tonnes of ethane, amounting to total of 9 VLEC cargoes making it the largest importer of ethane from US.

The company will import close to 1.6 million tonne of ethane every year for these facilities. Company officials added there are 20-year long term contracts in place for sourcing ethane from US. Imported ethane is expected to reduce the use of naptha at the Hazira cracker facility, and will help increase utilization at the other two crackers which was struggling due to non-availability of natural gas. RIL uses about 2.5 million tonnes of naptha at its crackers, ethane imports are likely to replace this by 20% to 25%, company officials added. This change will also make more naptha available for exports.  

"The supply of Ethane to RIL crackers at Dahej, Hazira and Nagothane will provide feedstock security and flexibility, enabling RIL to select the most optimal feed mix based on market conditions," the company said in its statement.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel