RIL’s profit expected to grow with higher naphtha exports, ethane imports

Indian conglomerate holding company Reliance Industries Limited (RIL) is expecting its operating profit to increase with higher naphtha exports as it boosts ethane imports to use at its petrochemical projects.

Reliance will raise its annual naphtha exports by 500,000 tons this fiscal year, said Vipul Shah, chief operating officer for petrochemicals at Reliance.

Asia is structurally short of naphtha and relies on the West and Middle East to fill most of the gaps.

Reliance, owner of the world’s biggest refining complex and also a leading petrochemicals player, exports more than 200,000 tons of naphtha in a month on average.

The company aims to import 1.4 million tons of ethane from North America in 2017/18, rising to 1.6 million tons from the next fiscal year, said Shah at a conference.

The ethane imports will be used at its crackers at Dahej, Hazira and Nagothane in western India. Previously, the Dahej and Nagothane plants were running on gas, while Hazira was using naphtha as feedstock.

“Since we will be able to bring in 1.4 million tons of ethane our operating profit can go up by $300 million this fiscal year,” Shah said.

Billionaire Mukesh Ambani-backed Reliance has been posting robust petchem operating profit margins. They hit at an all-time high of 15.8% in the June quarter, it said last month.

Shah expects the company’s operating profit to rise by up to US$400 million in the 2018-19 fiscal year if market dynamics do not change significantly.

To cut its operating costs, Reliance has bought six very large ethane carriers.

Reliance has no plans to convert its naphtha-based cracker at Vadodra in western Gujarat state to ethane, Shah added.

Additional naphtha exports from Reliance are expected to have little impact on the market, trade sources said, although it depends on cargoes arriving in Asia from the Middle East and the West, including Europe.

One medium range (MR) cargo is about 30,000 tons. South Korea alone, which is Asia’s top naphtha importer by country, imports more than 1.2 million tons of naphtha a month.

Naphtha prices have been recovering due to strong demand, as the high cost of liquefied petroleum gas (LPG) prices prompted buyers to use more naphtha. LPG can replace at least 5% of naphtha in some Asian crackers.