1. Reliance Industries profit set to get $400 mn boost; here is the reason why

Reliance Industries profit set to get $400 mn boost; here is the reason why

Reliance Industries expects that the $1.6-billion investment in setting up ethane import infrastructure to secure feedstock supplies for its Dahej, Nagothane and Hazira cracker plants would add up to $400 million in operating profits annually, a senior company official said.

By: | Published: August 24, 2017 6:39 AM
Reliance Industries, Dahej, Nagothane, Vipul Shah, Hazira cracker plants  Vipul Shah, chief operating officer (COO), petrochemicals business at Reliance Industries, said, “The three plants ran at 20% lower capacity due to shortage of gas in India.

Reliance Industries expects that the $1.6-billion investment in setting up ethane import infrastructure to secure feedstock supplies for its Dahej, Nagothane and Hazira cracker plants would add up to $400 million in operating profits annually, a senior company official said. Vipul Shah, chief operating officer (COO), petrochemicals business at Reliance Industries, said, “The three plants ran at 20% lower capacity due to shortage of gas in India. The usage of ethane as feed stock would lead to 100% utilisation of capacity and increase production of ethylene by 200 mtpa from the three plants.”

The three plants earlier produced 1.9 mtpa of ethylene which will go up to 2.1 mtpa at full capacity. “We expect to recover the $1.6 billion investments in around four years,” Shah said. In the last three years since 2014, the company has invested around $1.6 billion in setting up ethane import infrastructure from Houston in the US to the west coast terminal at Dahej in India. This includes customised six very large ethane carriers (VLECs) manufactured by Samsung in Korea.

The feed stock requirement for Dahej and Nagothane was met using propane and liquefied natural gas (900,000 tonne per annum). This was completely replaced with ethane.

While the Hazira plant used around 2.5 mtpa of naphtha as a feed stock, the entire feed stock will not be replaced with ethane, as the company expects only 33% of ethylene to be produced cost-effectively.

“We have revamped the three crackers to crack ethane and also increase ethylene capacity within the limits of main compressors and other critical equipment,” Shah said. “The displaced or unused naphtha, around 500,000 tonne per annum, will be exported,” Shah said.

The company is hopeful after the successful execution of the project, entry of new players to use ethane as feed stock globally for the production of ethylene, will not impact their long-term contracts with the US. “The availability of ethane is mostly there, and despite having cyclical nature, the prices are mostly stable compared to other natural gases where demand increases during winters,” Amit Mehta, head of gas business at Reliance Industries, said “The shale gas production has also increased despite crude falling to $40-per-barrel levels as companies improved efficiency through cost-cutting and digging deeper into the same fields for higher volumes. So, we are confident over long term supplies will not get affected with the entry of new players in the market,” Mehta said.

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