• Write for Us
  • Advertise
  • About
  • Contact
Thursday, June 1, 2023
British Herald
Advertisement
  • Home
  • World
    • UK
    • Europe
    • Asia
    • Africa
    • Oceania
    • USA
    • Middle East
    • Latin America
  • Politics
  • Business
    • ECONOMY
    • Financial Markets
    • Companies
  • Sport
  • Fintech
  • Videos
  • Coffee Table Book
  • BH Magazine
  • More
    • Health
    • Entertainment
    • Science & Technology
    • Climate & Environment
    • Sustainability
    • Food and Travel
    • Fashion
    • Culture and Lifestyle
    • Articles
    • Opinion
No Result
View All Result
British Herald
  • Home
  • World
    • UK
    • Europe
    • Asia
    • Africa
    • Oceania
    • USA
    • Middle East
    • Latin America
  • Politics
  • Business
    • ECONOMY
    • Financial Markets
    • Companies
  • Sport
  • Fintech
  • Videos
  • Coffee Table Book
  • BH Magazine
  • More
    • Health
    • Entertainment
    • Science & Technology
    • Climate & Environment
    • Sustainability
    • Food and Travel
    • Fashion
    • Culture and Lifestyle
    • Articles
    • Opinion
No Result
View All Result
British Herald
Home Articles

India’s Reliance Industries faces oil shock at home

Editorial Bureau by Editorial Bureau
October 31, 2018
0
India’s Reliance Industries faces oil shock at home

FILE PHOTO: Mukesh Ambani, Chairman and Managing Director of Reliance Industries

74
SHARES
1.2k
VIEWS
Share on FacebookShare on Twitter

By Koustav Samanta and Promit Mukherjee

You might also like

Debt Ceiling Crisis and De-dollarisation…American Hegemony In Trouble

De-Dollarisation and True Freedom in the Multi-Polar World

Glimpses of AI-Created Parallel World?

SINGAPORE/NEW DELHI (Reuters) – Reliance Industries, currently India’s second most valuable listed company, got rich by trading fuel across Asia, Africa and Europe while effectively ignoring its home market.

Reliance’s refineries processed crude from the nearby Middle East and sold fuel to fast-growing markets in North Asia including China, Japan, South Korea and Taiwan.

That began to change when India’s oil demand surged, overtaking Japan as the world’s third-biggest consumer. Reliance took more interest in the country’s retail fuel sector and has opened more than 1,300 service stations.

This push into the domestic fuel market may stumble after India’s government imposed cost controls on Oct. 4 on gasoline and diesel prices to rein in recent record highs.

Reliance’s shares plunged 6.9 percent on the day of the announcement and are down about 20 percent since their record close on Aug. 28.

The decline has pushed Reliance’s market capitalisation down to 6.64 trillion rupees (70.53 billion pounds)and it is no longer India’s most valuable company, sitting behind Tata Consultancy Services Ltd at 6.77 trillion rupees.

The price shock, driven by soaring crude import costs, angered consumers and triggered riots by farmers, forcing the government to react at the cost of its refiners’ health.

For now, Reliance is staying with its retail plans despite the recent trouble.

“When prices are cut, you have to effectively match it,” said Venkatachari Srikanth, Reliance’s joint chief financial officer, during their earnings presentation on Oct. 17. “We are not going to let this alter broadly our strategy on retail petroleum.”

In line with that, Reliance is planning as many as 2,000 retail stations with oil major BP Plc over the next three years, local media reported on Tuesday.

Reliance’s domestic push made sense in an Asian fuel market that is increasingly crowded with new refinery capacity from the Middle East, Southeast Asia and China.

The new capacity, combined with soaring crude prices, has eroded profit margins for producing refined fuels.

With the domestic market now also under pressure from price controls, some analysts have been spooked.

Sukrit Vijayakar, director of Indian oil consultancy Trifecta said the government move could “be disastrous for Reliance.”

For graphic on Indian oil refiner shares, click https://tmsnrt.rs/2NoWjjX

The retail move puts Reliance into competition against government controlled refiners like Bharat Petroleum Corp, Hindustan Petroleum Corp and Indian Oil Corp, the country’s biggest refiner.

Reliance’s domestic strategy initially won the backing of investors and the retail fuels group was touted by company Chairman Mukesh Ambani in a speech at its annual general meeting in July.

Between January and August, Reliance’s shares soared 45 percent, far outpacing the state-owned refiners as well as India’s main stock index, the Nifty 50, which gained 12.5 percent.

But rising crude prices, which jumped from under $70 per barrel in early 2018 to around $85 in early October, and a tumbling rupee combined to push domestic fuel prices to records, undermining Reliance’s retail strategy despite some relief from a dip in crude prices in recent weeks.

Still, Rohit Ahuja, senior vice president of India’s BOB Capital Markets, which has a buy rating on Reliance, said signs of an “oil price shock” in India were “already visible.”

Reliance may gradually mothball its retail stations because of the cost controls, said Macquarie Capital Ltd Analyst Aditya Suresh in a note on Oct. 5, though the bank expects no meaningful impact on its earnings.

For graphic on Oil price change in U.S.-dollar vs Indian rupee png, click https://tmsnrt.rs/2PjbPjb

EXPORT MARKET & IMO 2020

Reliance may be better placed to thrive on exports despite the increasing competition in Asia and the Middle East.

The company operates the world’s biggest refinery complex at the port of Jamnagar in the western Indian state of Gujarat. The first Jamnagar plant can process 663,000 barrels per day (bpd) of crude while the second site can process another 709,000 bpd.

Reliance’s refining margins last quarter were at a premium of $3.40 per barrel over the average Singapore margin, the benchmark for Asia.

However, the Singapore margin has dropped by about 50 percent since mid-2017 because of rising crude prices. Reliance also said in its results that fewer refinery outages last quarter meant global run rates were high.

Still, Reliance’s refineries benefit from being among the most modern in the world.

Several units process residual fuel oil, the leftovers after crude oil is initially refined, into higher-value gasoline and distillate products as well as remove pollutants such as sulphur.

That ability to cut its high-sulphur fuel oil output to nearly nothing while maximising its diesel fuel output gives Reliance an advantage as the International Maritime Organization (IMO) will require new low-sulphur fuel oil used in ships starting in 2020.

“IMO regulations are positive because of our mid-distillate configuration,” said Reliance’s Srikanth.

With a move towards cleaner fuels as part of IMO, BOB Capital’s Ahuja said Reliance’s gross refining margins could rise by up to $5 per barrel.

Beyond IMO 2020 and the Indian fuel price turmoil, the oil industry is threatened by the rise of electric vehicles and alternative fuels that could reduce oil’s use as a transport fuel.

Refiners are looking at petrochemicals to replace potentially lost demand in the transport sector.

“If I have to look at it from a ‘oil demand hit from electric vehicles’ perspective, it’s going to be petrochemicals that’s going to survive for them (Reliance) beyond ten years,” said Ahuja.

Combined, Reliance’s refining and marketing group along with its petrochemicals division contribute more than 90 percent of the overall company revenues, its latest annual report showed.

Under Reliance’s “Oil to Chemicals Journey” strategy the company is seeking to “upgrade all of our fuels to high value petrochemicals” over the next decade.

“We are focussing to produce and sell at every level,” said Reliance’s Srikanth. “Between whether to sell domestically or on bulk, whether we will export, every day is an analysis of which is a better option.”

($1 = 73.393 Indian rupees)
(Reporting by Koustav Samanta in SINGAPORE and Promit Muhkerjee in NEW DELHI; Writing by Henning Gloystein; Editing by Christian Schmollinger)

Share30Tweet19
Editorial Bureau

Editorial Bureau

Recommended For You

Debt Ceiling Crisis and De-dollarisation…American Hegemony In Trouble

May 25, 2023
American hegemony in trouble

Recent happenings such as de-dollarisation and the US debt ceiling crisis manifest the ending of the American hegemony globally. The US dollar, which is highly utilised in international...

Read more

De-Dollarisation and True Freedom in the Multi-Polar World

May 20, 2023
De-dollarisation

There is no competition for the US dollar as the leading reserve currency. The US has maintained a tremendous grip over the world's economics, politics, and military for...

Read more

Glimpses of AI-Created Parallel World?

May 18, 2023
Ai generated images

We know Lincoln studied under the street light. And we never knew he had a selfie! Oh, it’s not possible. Selfies never existed at that time. But everything...

Read more

Cannes Film Festival: How it all began

May 17, 2023
Cannes Film Festival

While the 76th edition of the Cannes Film Festival is taking place as we write this, British Herald takes a look into the journey of one of the...

Read more

London Craft Week 2023: A celebration of creativity

May 15, 2023
London-Craft-Week-

London Craft Week celebrates creativity and fine craftsmanship by bringing together over 700 artists, designers, brands and galleries worldwide. The ninth edition of the London Craft Week ran...

Read more
No Result
View All Result
May's figures of inflation in Europe will support those policymakers advocating for the ECB to end its tightening cycle

Inflation in Europe drops to lowest level since Russia invaded Ukraine

June 1, 2023
UK government faces deadline to hand Boris Johnson’s messages to coronavirus inquiry

UK government faces deadline to hand Boris Johnson’s messages to coronavirus inquiry

June 1, 2023
Sweden NATO membership

NATO presses Turkey to drop objections to Sweden’s membership as summit looms

June 1, 2023

Tags

australia boris johnson brexit britain British Herald CHINA Coronavirus coronavirus cases coronavirus outbreak COVID-19 COVID-19 Vaccine daily roundup Donald Trump Dubai expo 2020 england European Union facebook France germany Hong Kong india iran israel italy japan joe biden lockdown London News new zealand north korea Rishi Sunak russia south korea spain T20 World Cup taiwan thailand trending Trump turkey UK Ukraine usa worldnews
British Herald

Top News in World: Read Latest News on Sports, Business, Entertainment, Blogs and Opinions from leading columnists.

CATEGORIES

  • Africa
  • Articles
  • Asia
  • Brand Feature
  • Business
  • Climate & Environment
  • Companies
  • Crypto
  • Culture and Lifestyle
  • Daily Roundup
  • Economics
  • ECONOMY
  • Entertainment
  • Europe
  • Fashion
  • Finance
  • Financial Markets
  • Fintech
  • Health
  • IN UK 01
  • IN UK 02
  • Investing
  • Latin America
  • Market
  • Middle East
  • Oceania
  • Opinion
  • Pharma/BioTech
  • Politics
  • Reviews
  • Science & Technology
  • Sport
  • Sustainability
  • Tech
  • Technology
  • Travel
  • UK
  • Uncategorized
  • USA
  • Videos
  • World

BROWSE BY TAGS

australia boris johnson brexit britain British Herald CHINA Coronavirus coronavirus cases coronavirus outbreak COVID-19 COVID-19 Vaccine daily roundup Donald Trump Dubai expo 2020 england European Union facebook France germany Hong Kong india iran israel italy japan joe biden lockdown London News new zealand north korea Rishi Sunak russia south korea spain T20 World Cup taiwan thailand trending Trump turkey UK Ukraine usa worldnews

Herald Media Network Limited (UK). 2023. ALL RIGHTS RESERVED.

No Result
View All Result
  • Home
  • World
    • UK
    • Europe
    • Asia
    • Africa
    • Oceania
    • USA
    • Middle East
    • Latin America
  • Politics
  • Business
    • ECONOMY
    • Financial Markets
    • Companies
  • Sport
  • Fintech
  • Videos
  • Coffee Table Book
  • BH Magazine
  • More
    • Health
    • Entertainment
    • Science & Technology
    • Climate & Environment
    • Sustainability
    • Food and Travel
    • Fashion
    • Culture and Lifestyle
    • Articles
    • Opinion

Herald Media Network Limited (UK). 2023. ALL RIGHTS RESERVED.

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In

Add New Playlist

Are you sure want to unlock this post?
Unlock left : 0
Are you sure want to cancel subscription?