Introduction to Reliance Petroleum

Reliance Petroleum Limited

Type

public company (BSE: 532743)

Industry

Petroleum and Gas

Founded

2008

Headquarters Ahmedabad, India

Key people

Mukesh Ambani

Products

Petroleum

Revenue

36.78 billion(US$610 million)[1]

Parent

Reliance Industries

Website

www.reliancepetroleum.com

Reliance Petroleum Limited was set up by Reliance Industries Limited (RIL), one of India's largest private sector companies based in Ahmedabad. Currently, RPL is subsidiary of RIL, and has interests in the downstream oil business. RPL also benefits from a strategic alliance with Chevron India Holdings Pte Limited, Singapore, a wholly owned subsidiary of Chevron Corporation USA (Chevron), which currently holds a 5% equity stake in the Company.[2]

History of Reliance Petroleum

The Company was incorporated under the Companies Act, 1956 on October 24, 2005 as Reliance Petroleum Limited and obtained its certificate of commencement of business on November 7, 2005.

The Company formed to set up a greenfield petroleum refinery and polypropylene plant to be located in a Special Economic Zone in Jamnagar in the state of Gujarat in western India. The proposed refinery and polypropylene plant will be located adjacent to the existing refinery and petrochemical complex of the Promoter, Reliance Industries Limited (RIL), the largest private sector company in India with assets of over Rs.806 billion (approximately US$ 18 billion) as of March 31, 2005.

RIL is the only private sector company from India to feature in the Fortune Global 500.

2007 - Reliance Petroleum Ltd has informed that Mr. Michael Seymour Warwick has been appointed as an Additional Director of the Company.

2008 -Reliance Petroleum Ltd has appointed Mr. Joffery Reney Pryor, Vice President Business Development- Chevron Corporation, as a nominee director of Chevron in place of Mr. Jagjeet Singh Bindra.

- Reliance Petroleum Ltd has informed that Mr. Pawan Kumar Kapil has been appointed as an Additional Director of the Company with effect from December 15, 2008.

Jamnagar Refinery
Refining activities of Reliance Industries Limited are carried out at the Jamnagar refinery complex with refining capacity of 1,240,000barrels per day which is 65 million tonnes per anum. The refinery is able to process a wide variety of crudes- from very light to very heavy (from 18 to 45-degree API) and from sweet to very sour (with sulphur content from 0 to 4.5%). RPL commenced its crude processing on 25 December 2008. The secondary processing units are now under synchronisation and commissioning. The entire refinery complex is expected to attain full capacity shortly.[when?] With an annual crude processing capacity of 580,000 barrels (92,000 m3) per stream day (BPSD), RPL will be the sixth largest refinery in the world. It will have a complexity of 14.0, using the Nelson Complexity Index, ranking it one of the highest in the sector. The polypropylene plant will have a capacity to produce 0.9 million metric tonnes per annum.[citation needed] The refinery project is being implemented at a capital cost of Rs 270,000 million being funded through a mix of equity and debt. This represents a capital cost of less than US$10,000 per barrel per day and compares very favourably with the average capital cost of new refineries announced in recent years.[citation needed] The International Energy Agency (IEA) estimates the average capital cost of new refinery in the OECD nations to be in the region of US$15,000 to 20,000 per barrel per day.[citation needed] The low capital cost of RPL becomes even more attractive when adjusted for high complexity of the refinery.

Growth of Reliance Industry

Reliance Industries, Indias largest industrial company by revenue, has posted a modest increase in second-quarter net profit, thanks to higher margins in its petrochemicals businesses and a sharp depreciation in the rupee. Billionaire Mukesh Ambanis energy-focused conglomerate reported net profits of Rs54.9bn ($894m) in the period up 1.5 per cent year-on-year, but the Mumbai-based groups slowest rate of profit increase in 2013.

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In a statement, Mr Ambani highlighted the performance of the petrochemicals division, which is one of the worlds largest producers of polyester fibre and other materials and achieved unexpectedly high margins. Reliances first-half performance reflects the resilience of our business model in a period of volatility and uncertainty, Mr Ambani said. Our diversified and integrated petrochemicals business captured margins across segments, delivering near-record profit levels even as the domestic economy slowed. This broadly positive performance came despite the continued weak performance of the groups oil and gas exploration division, which has seen regulatory disagreements and delays relating to an eastern Indian gasfield it co-owns with BP. Reduced production meant quarterly revenues at the exploration division fell 35 per cent yearon-year to only Rs14.6bn, even as quarterly revenues for the wider group rose 14 per cent to pass Rs1tn for the first time.

BP owns a one-third stake in the companys KG-DG gasfield following a $7.2bn deal in 2011, but the partnership has been further undermined by indications that Indias government may roll back a planned increase in the price that the partners can charge for the gas. Negotiations over the proposed price rise which both companies say is a necessary precondition to any further investment in improving output have been marred by wrangling over the reasons behind recent production falls. Reliance and BP insist the fields difficulties are caused by geological complications a claim that Indias government has decided to investigate by appointing independent consultants to review the fields performance.

Reliance also reported a fall in margins at its oil refining and marketing operations, which provide around half of the groups revenue and include its main Jamnagar facility in western India, the worlds largest oil refinery.

Mr Ambani plans to invest about Rs1.5tn in the group by 2017, part of which will go into reviving the oil and gas business, as well as a major upgrade for its petrochemicals facilities and a closely watched new operation in the telecommunications sector. However, Reliances result statement made no mention of the long-awaited launch date for this mobile telecoms operation, which plans to provide ultra-fast 4G services but has been delayed since last year.

Reasons of decrease in Reliance Petroliun

Dhirubhai Ambani died in 2002, and the Ambani brothers took over as heads of the company. In that year, the company increased its dominance of the country's petrochemicals sector through its acquisition of main private-sector rival Indian Petrochemicals Corporation. Also in 2002, Reliance launched a diversification effort, targeting the telecommunications sector, especially the fast-growing cellular phone market. Reliance set up its own phone service, Reliance Infocomm, in that year. Yet the petroleum industry remained the company's major growth focus. In 1999, the Indian government auctioned off 25 blocks for exploration; bids were given in the form of royalty percentage offers. Reliance won 12 of the blocks and promptly set in place its own team of exploration experts, backed by oilfield services from Halliburton and Schlumberger. Reliance's investment quickly paid off with the discovery of natural gas reserves estimated at some 14 trillion cubic feet, the largest natural gas field discovered in India in decades, in the Krishna-Godavari Basin in the Bay of Bengal. In 2004, the company struck again, locating a new gas field in the Bay of Bengal, off the Orissa Coast. Buoyed by its successful exploration efforts, Reliance unveiled an ambitious expansion program for the second half of the 2000s. The company's plans included a $6 billion extension of the Jamnagar site, doubling it in size and making it the world's largest refinery by 2009. The company also announced that it intended to spend $10 billion on further oil exploration efforts, targeting the international market. In this way, the company hoped to increase its production tenfold by the end of the century. At the other end of the petroleum market, the company launched a $1.5 billion expansion of its Reliance gas station chain, with the goal of 6,000 stations. The company also expanded internationally, becoming the world's leading manufacturer of polyester yarn with the acquisition of Germany's Trevira. In addition, the company boosted its

telecommunications wing, acquiring U.K.-based FLAG Telecom, an operator of a 50,000-kilometer underwater fiber-optic cable network. In the meantime, rising tensions between Mukesh and Anil Ambani came to a head in late 2005, when a long-simmering disagreement over company strategy broke out into an open and highly publicized feud. In the end, a truce was brokered by the brothers' mother, who proposed a breakup of Reliance Industries into two roughly equal components. Mukesh Ambani remained as head of the company's petroleum, petrochemical, and textiles operations, and Anil Ambani regrouped the company's telecommunications, energy, capital finance, and other operations into a new company. The breakup of the company took place in 2006. As a result, Reliance Industries emerged as a focused and highly integrated petroleum and petrochemicals challenger to the global heavyweights.