Reliance Industries' returning of the export-oriented unit status of its 33 million metric tonnes per annum (mmtpa) refinery at Jamnagar in Gujarat to be able to re-enter the retail fuel market is part of a move to become a complete petroleum value chain company, say analysts.
A mail sent to RIL remained unanswered.
"The company, a prominent player in the upstream segment, is planning an equally aggressive move in the downstream segment. This move will allow RIL to leverage between domestic and foreign markets. It's a logical move on the company's part," said Kamlesh Kotak, head of Mumbai-based Asian Market Securities.
According to market players, RIL is set to take advantage of the supply situation when most existing refineries go for an annual maintenance shutdown and for upgrades to the Euro IV emission norms between March and July.
According to the National Auto Fuel Policy, Bharat Stage-IV norms, the Indian version of Euro-IV, are to be applicable by April 2010 in 11 major cities.
"With other refineries in the shutdown mode, there will be a shortfall in fuel supply and RIL will fill the gap," said an industry expert who did not wish to be quoted.
RIL will also be able to hedge risk.
"With RIL commissioning its second refinery last December, the total capacity of the (Jamnagar) complex will go up to 1.24 million barrels a day, exposing it to international vagaries. By surrendering the EOU status of one refinery and maintaining that of the other, the company will be able to hedge its risks," said an industry veteran.
EOU status for RIL's second refinery currently ends in March 2010.
Internationally, RIL is set to enter fuel retailing in the US and Europe.
The company is planning to float subsidiaries for its operations in the US and European countries such as France, Italy, Germany and Switzerland. The company, which has trading desks in Houston, London, Singapore and Dubai, will set up more desks in the US and Europe. It also plans to set up separate marketing divisions for each country.
Domestically, it has begun supply at a few outlets in Gujarat. The plan is to revive most of its 350-odd closed outlets in Gujarat and Maharashtra by the end of this month.
It had closed all its 1,400-odd retail outlets last year, after sales dropped drastically due to its inability to match the subsidised prices offered by government oil marketing companies.
RIL, in a media release last week, said, 'The (Jamnagar) refinery will now operate as a non-EOU unit to cater to the increasing demand for petroleum products in the country. It will sell petro products in domestic and overseas markets."
