Reliance Cuts Exports to Cash In on Demand in India

Reliance Industries Ltd., India’s largest company by market value, cut fuel exports by 50 percent in the first half of this month, selling domestically to profit from shortages during plant maintenance by rivals.

The refiner, controlled by billionaire Mukesh Ambani, reduced overseas shipments of diesel and gasoline from its facility in western India to about 385,000 metric tons from 730,000 tons in the same period a month earlier, according to data compiled from Clarkson Research Services Ltd., a unit of the world’s biggest shipbroker.

The company is increasing sales to India’s government- controlled refiners such as Indian Oil Corp. and Bharat Petroleum Corp., which in turn market the products to consumers. State refiners have to sell most fuels at capped prices because of rules aimed at curbing inflation.

“There are no freight costs involved if Reliance sells within the country,” said Alok Deshpande, an oil and gas analyst at Mumbai-based Elara Securities. “That’s a price advantage for the refiner.”

Increased demand in India as vehicle sales gain is pushing Reliance to focus on the domestic market, he said. Gasoline consumption in Asia’s second-fastest growing major economy may grow 7 percent to 350,000 barrels a day in February and March 2011, industry consultant JBC Energy said in a note on Jan. 24.

Manoj Warrier, a spokesman for Reliance in Mumbai, didn’t respond to an e-mail seeking comment.

Reliance shares dropped 1.9 percent to 935.55 rupees in Mumbai today. The benchmark Sensitive Index fell 1.6 percent.

Market Window

Reliance, owner of the world’s largest refining facility, reduced overseas gasoline shipments by 25 percent to at least 185,000 tons from its refineries in Jamnagar in western India, the data show. Diesel shipments fell 75 percent to 70,000 tons during the first half of this month.

State refiners have historically scheduled shutdowns at their facilities during the first and second quarter of the year. None of them has disclosed scheduled maintenance for 2011 though some may be preparing by stocking up.

Indian Oil, the country’s biggest refiner by capacity, is seeking two cargoes of gasoil, or diesel, for loading in March to western India, three people who received the tender document said on Feb. 17.

“There’s a window in the market for Reliance when domestic refiners go into some maintenance come April,” Praveen Kumar, the Singapore-based head of South Asia oil and gas at consultancy FACTS Global Energy, said by telephone on Feb. 16.

All figures from Clarkson are for single-voyage bookings and exclude long-term charters. Shipbrokers aren’t compelled to report charters so data capture can vary from month to month.

FCC Shutdown

Reliance operates two refineries that can process a combined 1.24 million barrels a day of oil, or about 1.6 percent of global refining capacity, according to the company’s website. It exports mainly to the Middle East, Africa and Singapore, according to the data from Clarkson.

Exports from its plants have also declined because of its maintenance. Reliance planned to shut a fluid catalytic cracker at one of its refineries for about five weeks, starting Feb. 7, the company said on Feb. 3. The unit is part of Reliance’s older, 660,000 barrel-a-day refinery in western Gujarat state. The Mumbai-based company also has a newer, 580,000 barrel-a-day plant adjacent to the older refinery.

The maintenance will reduce exports and may help drive up gasoline prices, Vienna-based JBC Energy said in a note Jan. 31.

“The FCC shutdown may also be having an effect on exports, but its impact will be felt more only in March,” FACTS Global’s Kumar said.

Diesel Demand

Reliance in January doubled shipments to the highest in five months, driven by diesel.

The refiner exported products from its refineries, capable of processing heavy grades of crude oil, to destinations including Europe, Africa and the United Arab Emirates during the first half of this month, the data show.

Royal Dutch Shell Plc chartered the Pioneer Express to transport 35,000 tons of gasoline from Sikka to South Africa in mid February, according to the data. The vessel was last seen off the coast of Gujarat near Jamnagar, according to ship transmissions captured by AISLive on Bloomberg.

BP Plc hired Gulf Cobalt to ship 65,000 tons of jet fuel from Sikka to Europe during the first half of this month, the data show. The ship was last seen heading to the port of Sikka, according to the vessel-tracking data on Bloomberg.

West-Coast Shipments

At least 1.6 million tons of fuel products left India’s west coast for overseas in the first 15 days of February, compared with 1.2 million tons in the same period last month. Indian refiners exported at least 390,000 tons of naphtha in the period, up from 215,000 tons last month, the data show.

State-run refiners export mainly naphtha, used to make chemicals and gasoline, because they sell most of their other products in the domestic market.

The International Energy Agency raised its 2011 forecast for global crude oil demand for a fifth month on Feb. 10, driven by developing nations in Asia and signs of recovery in North America.

To contact the reporter on this story: Pratish Narayanan in Mumbai at pnarayanan9@bloomberg.net

To contact the editor responsible for this story: Clyde Russell at crussell7@bloomberg.net

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