Reliance Industries expands fuel exports to Africa, Europe as West Asia conflict disrupts supplies

Mumbai: Reliance Industries (RIL) redirected fuel exports to East and South Africa, the Mediterranean and other European markets to capitalise on market opportunities caused by supply disruptions due to the West Asia conflict. This helped the private refiner boost its market share in these markets by about 50%, showed the company’s September quarter financial presentation. RIL also tapped opportunities in Australia, Kenya and Tanzania for premium gasoline grades, while enhancing diesel and aviation turbine fuel (ATF) supplies to the Mediterranean.135409790“In the case of diesel and jet fuel, we found opportunities in the Mediterranean market because of the loss of supply,” said Srinivasan Tuttagunta, chief operating officer, supply and trading at RIL, per the presentation.RIL’s oil-to-chemicals (O2C) business emerged as the biggest driver of its fiscal second quarter earnings, reporting a 68% surge in Ebitda to a record Rs 25,203 crore.

O2C revenue grew 44% to Rs 231,601 crore, led by high energy prices. The West Asia conflict has disrupted energy supply chains, resulting in a 41% year-on-year rise in crude oil prices and a 50- 78% jump in transportation fuel prices.RIL said it also supplied lowsulphur ATF to South Africa for the first time, opening up potential new export opportunities. The company’s export strategy comes amid a sharp rise in global refining margins as geopolitical disruptions, refinery outages and declining fuel inventories tighten product supplies.

Change in sources tooRefining capacity in Russia and West Asia has been affected due to ongoing conflicts, lifting prices of gasoline, diesel and aviation fuel. Gasoline cracks, which measure the difference between refined product and crude oil prices, spiralled to nearly $25 a barrel in the September quarter from $8.4 a barrel a year earlier. Gasoil cracks increased to $65.8 a barrel from $18.7, while aviation fuel cracks climbed to $59.3 from $16.

“RIL’s ability to redirect shipments towards markets offering better returns has helped it navigate disruptions to traditional trade flows, including those caused by tensions around the Strait of Hormuz,” said a sectoral analyst, requesting anonymity. On crude sourcing, RIL revised its import basket between the Americas, Gulf and other regions last quarter to take advantage of available supplies and pricing opportunities. This flexibility helped it maintain record crude processing levels despite shipping disruptions.

Crude procurement has however turned pricier due to elevated physical crude premiums, freight and insurance costs. Brent crude fluctuated between $70 and $130 a barrel during the quarter, reflecting volatility in global oil markets.RIL said it had deployed more than 20 vessels, with the total number of crude and product vessels approaching 25, to mitigate the impact of sharply higher freight rates. The company also increased normal LPG production nearly twofold to meet domestic demand, curtailing output of other products, including alkylate and some petrol components.

Domestic fuel demand remained strong, with India’s gasoline consumption growing 8.5% year-onyear during the quarter and diesel demand rising 7.5%. However, RIL’s margins faced pressure from a special additional excise duty levy and the inability to fully pass on higher international fuel prices to local consumers. Looking ahead, RIL said it expects global product supplies to remain tight in the near term as refinery outages, curbs on Russian fuel exports and uncertainty over Chinese exports constrain availability.

Lower-than-average gasoline and diesel inventories are also supporting refining margins. RIL said its priorities would remain high asset utilisation, margin maximisation and end-to-end optimisation of its refining and marketing operations to capture opportunities arising from volatile global markets.