RIL sees improvement in refining, petrochem margins

Reliance Industries (RIL), which registered its highest quarterly profit in nearly three years in the July-September period, sees an improvement in refining and petrochemical margins next year, Chief Financial Officer Alok Agarwal said today.

RIL yesterday reported a 27.8 per cent rise in net profit to Rs 4,923 crore in the July-September quarter as growing fuel demand boosted refining earnings.

"2009 was a terrible year for refining. 2010 has seen significant improvement... Refining margins should hold up at (current) levels. Personally optimistic they should improve from here on," Agarwal said in a media conference call.

The company, which operates the world's largest refining complex at Jamnagar, in Gujarat, earned $7.9 on every barrel of crude it turned into fuel in Q2, compared to a $6 a barrel gross refining margin in the year-ago period.

Margins in September quarter were 15-20 per cent below the mid-cycle margin of $9-10 per barrel, he said.

Agarwal said growth in petrol, diesel and ATF demand was robust and improving. "We are constructive on refining margins," he said.

Refining margins have seen sharp recovery this year because of the company's focus on producing middle distillates.

Reliance's only-for-exports 29 million tonnes a year refinery was originally targetting the US for gasoline (petrol) exports and Europe for diesel, but during the April-June quarter, more than 60 per cent of outward shipments were to Asia, he said.

With annual exports worth $30 billion, the company is the largest exporter in the country, accounting for 14-15 per cent of outward shipments.

Agarwal said the margin pressure on its petrochemical business is likely to ease next year.

Petrochemical and refining margin have scope for improvement, as they are not yet close to mid-cycle margins, he said.

Earnings would have been 5-7 per cent higher but for rupee appreciation, a maintenance shutdown of its cracker complex and a 70-day production loss at the Panna-Mukta oil and gas field due to a forced shutdown, he said.

Agarwal said RIL's three shale gas joint ventures in the US together hold gas reserves equivalent to its prolific eastern offshore KG-D6 fields.

"The three joint ventures for shale gas in US hold 11 trillion cubic feet of reserves, equivalent to KG-D6 block," he said, adding that an investment of $3.4 billion has already been committed on the three projects.

The company's recent foray into the telecom broadband business will contribute significant value over the medium term, he said.

However, Agarwal refused to say by when the company will ramp up output from KG-D6 to the envisaged peak level of 80 mmscmd. KG-D6 is currently producing below 57 mmscmd.

RIL is conducting reservoir studies, he said, refusing to give any timelines for a prospective ramp-up in output.

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