Reliance changed the game amid the West Asian crisis, increasing its share from Europe to Africa by 50 percent

Reliance Fuel Export: While many countries around the world are facing oil shortages due to the crisis in West Asia, Mukesh Ambani’s company Reliance Industries (RIL) has turned these difficult times into a great opportunity. The ongoing tensions in West Asia have adversely affected the fuel supply chain globally. At such times, Reliance exported its fuel to East and South Africa, the Mediterranean region and other European markets. The company’s September quarter financial report shows that the move has increased Reliance’s share in these markets to nearly 50 percent.

Has made a strong hold in new markets

Reliance did not limit itself to just Europe or Africa. The company explored new opportunities to sell premium petrol (gasoline) in Australia, Kenya and Tanzania. Along with this, besides diesel, the supply of aviation fuel (ATF) in the Mediterranean market also increased significantly. According to Srinivasan Tuttagunta, Chief Operating Officer, Supply and Trading, Reliance, supply cuts in the Mediterranean market have created good opportunities for jet fuel along with diesel. During this time, the company also supplied low sulfur ATF to South Africa for the first time. This move has opened new doors of future exports for the company.

Record earnings from O2C business

In this oil game, Reliance’s oil-to-chemicals (O2C) business has emerged as the biggest hero of the second quarter earnings. O2C business revenue of the company grew by 44 percent to Rs. 2,31,601 crores. At the same time, its operating profit (EBITDA) rose by a whopping 68 percent to Rs. 25,203 crore has reached a record level. In fact, tensions in West Asia have increased crude oil prices by 41 percent year-on-year. At the same time, transport fuel prices have also increased by 50 to 78 percent. The impact of refinery capacity in West Asia along with Russia led to a big jump in global refining margins. In the September quarter, the gasoline crack (the difference between the price of crude oil and the refined product) rose to about $25 a barrel from $8.4 a year earlier. Similarly, diesel (gasoil) crack increased by $18.7 to $65.8, while jet fuel margin increased by $16 to $59.3 a barrel.

Plans changed from buying crude oil to ships

Taking advantage of this opportunity was not so easy. During the quarter, Brent crude prices fluctuated between $70 and $130 per barrel. Apart from this, due to increase in crude oil premium, freight and insurance cost, the purchase has become very expensive. Despite tensions around the Strait of Hormuz, Reliance remained flexible in its strategy. The company shifted its options for crude oil purchases between the US, Gulf countries and other regions, allowing crude processing to continue at record levels despite shipping problems. To reduce the impact of expensive cargo, Reliance deployed more than 20 of its ships. The total number of these vessels carrying finished products besides crude oil has reached close to 25.

The emphasis was on meeting local demand

Along with making profits in overseas markets, Reliance also kept India’s domestic needs in full focus. Petrol consumption within the country grew by 8.5 per cent year-on-year while diesel demand increased by 7.5 per cent. At the same time, to meet the domestic demand, the company almost doubled the production of normal LPG. For this the company had to reduce the production of some other components of petrol including alkylate. However, amid this excellent performance, the company’s margins were under pressure due to special additional excise duty. Besides, the inability to pass on the entire burden of high oil prices in the international market to domestic consumers also had some impact on profits. The company believes that global supply will remain tight going forward due to bottlenecks in refineries, Russian export bans and uncertainty over Chinese exports.