Reliance Industries Offshoots its Oil-to-Chemical Unit

Reliance Industries Limited (RIL) has completed the spin-off of its oil0t0-chemical business into a new unit that will help it pursue growth opportunities with strategic partnerships, RIL said.

The oil-to-chemical business unit holds RIL’s oil refinery and petrochemical assets and retail fuel business. However, it does not include up-stream oil and gas production fields such as KG-D6 and textiles business, as per PTI report.

For the first time, RIL reported integrated earnings of the oil-to-petrol in their third quarter financial results, which was earlier reported separately. However, fuel retailing revenue was part of the firm’s overall retail business.

In the October-December 2020 earnings statement, refining and petrochemical and fuel retailing businesses earnings were reported as one. This resulted in eliminating refining margins.

“Reorganising refining and petrochemicals as oil-to-chemicals (O2C) reflects new strategy as well as management matrix,” the company said in a post earning investor presentation.

This, it said, will “facilitate holistic and agile decision making" as well as "pursue attractive opportunities for growth with strategic partnerships”.

Reliance started work on hiving off the O2C business into a separate unit last year for a possible stake sale to companies such as Saudi Aramco.

It values the oil-to-chemical business at $75 billion and has been in talks with Saudi Arabian Oil Co (Aramco) for sale of a 20 percent interest.

The company, however, did not mention discussions with Aramco, which are said to have hit a valuation roadblock.
The reorganisation would “drive the move towards further downstream and closer to customers” and “provide sustainable and affordable energy and materials solutions to meet India's growing needs,” the firm said in the presentation.

Reliance O2C Limited houses oil refining and petrochemical plants and manufacturing assets, bulk and wholesale fuel marketing, and Reliance's 51 per cent interest in retail fuel joint venture with BP of the UK.

The O2C unit also houses the firm's Singapore and the UK-based oil trading subsidiaries and marketing subsidiary, Reliance Industries Uruguay Petroquimica SA.

It also houses Reliance Ethane Pipeline Limited that operates a pipeline between Dahej in Gujarat and Nagothane in Maharashtra as well as 74.9 per cent stake that Reliance holds in the joint venture with Sibur.

Its very large ethane carriers, gas pipelines such as one that transports coal-bed methane from its CBM blocks, overseas oil and gas asset holding company Reliance Industries (Middle East) DMCC, and domestic exploration and production assets would not form part of the O2C unit.

Also, Reliance's textiles business as operated out of the Naroda site, Baroda township and land, including cricket stadium, Jamnagar power assets, and Sikka Ports and Terminals Limited would also not be part of the O2C unit.

Ambani had in July 2019 stated that the process of spinning of O2C into a separate subsidiary would be completed by early 2021.

Reliance owns and operates twin oil refineries at Jamnagar in Gujarat, with a combined capacity of 68.2 million tonnes per annum.

It is also the country's largest petrochemical manufacturer with units at Jamnagar, Dahej, Hazira, Nagothane, Vadodara, Patalganga, Silvassa, Barabanki, and Hoshiarpur.

The company holds a 66.6 per cent stake in the KG-D6 block where it is investing about USD 5 billion in developing a second set of gas discoveries along with BP.

It also has a similar stake in the NEC-25 block in the Bay of Bengal and operates two CBM blocks in Madhya Pradesh. These upstream assets are not part of the O2C unit.

“Reliance O2C (is) one of the most integrated manufacturers of value-added fuels, chemicals and materials," the presentation said. "O2C to maximize downstream, reduce transportation fuels and create clean and green energy platforms.”