A Reliance Group CompanyRefining life, Redefining growth
The Reliance Group, founded by Dhirubhai H. Ambani (1932-2002), is Indias largestprivate sector enterprise, with businesses in the energy and materials value chain. Groupsannual revenues are in excess of $ 34 billion. The flagship company, Reliance IndustriesLimited, is a Fortune Global 500 company and is the largest private sector company inIndia.The Companys operations can be classified into four segments namely:Petroleum Refining and Marketing businessPetrochemicals businessOil and Gas Exploration & Production businessOthers
INTRODUCTION TO RELIANCE PETROLEUM LIMITEDReliance Petroleum Limited (BSE: 532743)was set up by Reliance IndustriesLimited (RIL), one of Indias largest privatesector companies based in Ahmedabad.Currently, RPL is subsidiary of RIL, and has interests inthe downstream oil business. RPL also benefits from astrategic alliance with Chevron India Holdings Pvt Limited,Singapore, a wholly owned subsidiary of ChevronCorporation, USA (Chevron), which currently holds a 5% equitystake in the Company.
COMPANY PROFILEType Public (BSE: 532743)Industry Petroleum and GasFounded 2008Headquarters Ahmedabad, IndiaKey people Mukesh Ambani (CEO & MD)Products PetroleumRevenue 3,678.00 crore (US$665.72 million)Parent Reliance Industries
Reliance Petroleum Limited (RPL), a Mukesh Ambani led Reliance Groupcompany was set up to harness an emerging value creation opportunity in theglobal refining sector by Reliance Industries, one of the Indias largest privatesector company with a significant presence across the entire energy chain and aglobal leadership across key product segments. Currently, RPL is subsidiary of RIL.RPL was formed to set up a Greenfield petroleum refinery and polypropyleneplant in the Special Economic Zone (SEZ) at Jamnagar in Gujarat.This global sized, highly complex refinery is being located adjacent to RILsexisting refinery and petrochemicals complex, which is amongst the largest andmost efficient in the world, thus offering significant synergies.
The commissioning of the RPL refinery catapults Reliance into the league of the largestrefiners globally, both in terms of complex refining capacity and earnings potential. Withthe completion of the RPL refinery, Jamnagar has emerged as the ‘Refining Hub of theWorld’ with the largest refining complex with an aggregate refining capacity of 1.24million barrels of oil per day in any single location in the world.
The state-of-the-art, globally competitive RPL refinery has beencompleted in 36 months from concept to commissioning, which is a newbenchmark for building a grass-root refinery of this scale and complexity.This refinery has been built with a significant capital cost competitiveadvantage.RPL achieved the milestone by leveraging the project management skillsof the Reliance group together with world-class implementation partnerslike Bechtel, UOP and Foster Wheeler amongst others.
This record has been achieved in spite of the significant shortfall in engineering andconstruction resources that has impacted most other refinery projects globally.
Reliance enjoys global leadership in its businesses, being the largest polyester yarn andfibre producer in the world and among the top five to ten producers in the world in majorpetrochemical products.The Group exports products in excess of US$ 20 billion to 108 countries in the world.Major Group Companies are Reliance Industries Limited (including main subsidiariesReliance Petroleum Limited and Reliance Retail Limited) and Reliance IndustrialInfrastructure Limited.
On March 2, 2009 the Boards of Directors of Reliance Industries Limited (RIL)and Reliance Petroleum Limited (RPL) unanimously approved RPL’s merger withRIL, subject to necessary approvals. The exchange ratio recommended by bothboards is 1 (one) share of RIL for every 16 (sixteen) shares of RPL. RIL will issue6.92 crore new shares, thereby increasing its equity capital to Rs 1,643 crore.On April 13, 2009, the shareholders and the creditors of Reliance PetroleumLimited (RPL) approved the Scheme of Amalgamation of RPL with RelianceIndustries Limited (RIL).
Crude Oil Value Chain Exploration Production Bringing oil to the surface Using technology to using natural and artificialfind new oil resources methods Refining Transportation Converting Moving oil to refineries andcrude oil into finished consumers with tankers, products trucks and pipelines MarketingDistributing and selling refined products
Natural Gas Value Chain Exploration Production Using technology to Bringing gas to the surfacefind new oil resources Transportation Processing Moving gas with Treating gas to be sent topipelines and tankers markets MarketingDistributing and selling natural gas
MERGER OF RPL WITH RILWHY THE MERGER?* Creates one-fourth of the world’s total complex refining capacity* Becomes the worlds single-largest refining hub* Becomes the worlds 17th largest refining company* Becomes the world’s fifth largest polypropylene producer* Derives synergies from combined operations — crude sourcing, product placement,supply chain optimisation* Acquires flexibility in operations planning, higher utilisation of combined cashflows
Strengths Weaknesses Leading market position Increasing long term debt Operational efficiency in refining Problem with the FCCU Strong financial performanceOpportunities Threats Joint venture with NOVA Chemicals Intense domestic competition Acquisition of polyester assets of Hualon Rising petrochemical supply in the Corporation Middle East Increasing demand for transportation fuels Fluctuating crude oil prices Growing demand for petroleum products Economic slowdown in India
SHUT DOWN OF RETAIL OUTLETSSurging crude prices: High crude prices led toweakening of product cracks and refining marginsacross regions.Absence of government subsidies: Governmentstops providing subsidies to the private crude oilplayers. This leads to rise in the prices of oil of privateplayers. Differential between private and public companieskept widening :It is because of oil bonds for state-owned oil marketing firms and discounts fromupstream oil companies.RIL sells petrol and diesel at between Rs 6 and Rs14more than PSUs :This drove away customers, forcingthe pumps to go dry.
CONCLUSIONLargest private sector company in India.Refining Life Redefining GrowthReliance petroleum opened its own retail outlets with a huge investmentsof Rs 5000 crore at various places across India. But suddenly it announcedto close down all of its retail outletsFortune 500 listed company.To harness an emerging value creation opportunity in the global refiningsector