New Delhi, August 10: Billionaire Mukesh Ambani’s Reliance Industries Ltd has a 15-year vision of building itself up as a new energy company aimed at recycling CO2, generating value from plastic waste and providing an optimum combination of clean and affordable energy, analysts said.
Although the oil-to-chemical conglomerate has concentrated on consumer business in recent years, RIL ‘s core oil-to-chemical (O2C) sector is well placed to generate a sustained free cash flow, BofA Securities said in a report.
“Until demand normalises, RIL is looking to maximise throughput, focus on cost by leveraging deep petrochemical integration and continue to focus on domestic fuel marketing,” it said.
“RIL has a 15-year vision to build itself as one of the world’s leading new energy and new material companies. It also intends to be a net carbon zero company by 2035. To achieve this, the company is open to work with global financial investors, reputed technology partners and start-ups working on futuristic solutions,” it said.
This new energy business based on the carbon recycling and circular economy principle represents a multi-trillion opportunity for India and the world.
The brokerage said renewable energy is a key priority for RIL, and it plans to create an optimal mix of clean and affordable energy with hydrogen, wind, solar, fuel cells and batteries.
“It intends to use proprietary technology, recycle CO2, create value from plastic waste; RIL is also looking to make its operations cleaner and more customer-centric,” it said.
Reliance has the largest single site refinery at Jamnagar in Gujarat with 1.24 million barrels of crude refining capacity per day.
The brokerage said RIL is trying to render CO2 as a recyclable resource, rather than treating it as an emitted waste.
While the company will continue to use crude oil and natural gas, it aims to adopt new technologies to convert CO2 into useful products and chemicals.
“One viable application RIL has found for such ‘end of life-cycle’ plastic waste is in road construction. Road constructed with post-consumer, non-recyclable plastic waste ensures enhanced durability, higher resistance to deformation, increased resistance to water induced damages and improved stability and strength,” it said.
“RIL’s strategy is to transform the Jamnagar refinery from a producer of transportation fuels to chemicals. The company ultimately wants to achieve a rate of more than 70% in the conversion of crude to olefins and aromatics,” it said.
Last November, RIL announced plans to invest Rs 70,000 crore in the company’s Jamnagar facility to build a crude oil-to-chemicals (COTC) complex.
In order to construct the COTC complex, the company proposes to grow a total area of 2,000 acres adjacent to its world-scale facilities at Jamnagar. The plan is also to convert the existing fluid catalytic cracking (FCC) unit of the Jamnagar site to an FCC (HSFCC) or Petro FCC unit of high severity to maximize the yields of ethylene and propylene.
RIL claimed in its recent annual general meeting that future collaborations would help it stay competitive and serve the Indian / International markets better.
The company plans to approach the National Corporate Law Tribunal with a plan to spin off its oil-to-chemical (O2C) business into a separate subsidiary to promote this opportunity for partnership.
BofA said Saudi Aramco is a win-win for both companies picking up 20% stake in the O2C business.
“RIL will be able to better utilise its refinery capabilities with availability of several grades of crude oil from super light to heavy being supplied by Aramco,” it said adding the partnership going ahead will leverage the O2C value chain to maximize margins and meet the evolving needs of consumers by supplying energy, base chemicals and new materials.
Aramco’s strategic alliance would help to increase its ratio of crude oil to chemical production, which currently stands at 20%. “With the deal RIL will gain technical expertise from SABIC (Saudi Basic Industries Corporation), in which Aramco recently acquired a controlling stake,” it said.
With Aramco, it provides a long-term crude supply contract with RIL’s Jamnagar refinery of 0.5 million barrels per day (about 5% of current production), with reduced demand risks.
At present, Aramco only covers around 40% of its crude production by refining and aims to further increase it.
“It would give Aramco the opportunity to participate in Indian market growth story where demand will likely be strong over the next two decades,” it added.
