Reliance Petroleum [Get Quote], a subsidiary of Reliance Industries [Get Quote], is likely to commission only half of its refinery's capacity at Jamnagar by December-end as demand for fuels such as naphtha and fuel oil has dropped across the world.

The company is likely to produce 31 kilo tonne per day of diesel, 25 ktpd of petrol, sulphur, pet coke and naphtha by December-end. It will, however, put off production of fuel oil and polypropylene till February-end, company officials said.

"The refinery will be commissioned according to the schedule mentioned by the company. However, it will only be a partial commissioning," said an analyst with an advisory firm which tracks RIL.

A global slowdown in demand has forced companies to delay the commissioning of new factories and partly close existing ones. Reliance Petroleum's 29 million tonne per annum refinery, being constructed in a special economic zone, will export almost all of the fuels it produces. These exports are primarily aimed at the US and Europe, where the demand for fuel has slowed to multi-year lows in the face of an economic crisis.

"Our refinery is very flexible. It is capable of producing different fuels to keep up with the demand," said a senior RIL official. "And we would rather operate the refinery partially and earn less than keep it shut and earn nothing at all."

Reliance Petroleum, in which US oil major Chevron holds 5 per cent stake, has spent close to Rs 27,000 crore (Rs 270 billion) on the project. The company has already commissioned one mooring point each for exporting diesel and petrol, according to sources in the Gujarat government.

Four out of eight crude oil storage tanks have also been commissioned, an official close to the development said. Besides, a 400-MW captive power plant is ready to be commissioned.

The refinery, which will add nearly 20 per cent to the nation's refining capacity and make Reliance the largest crude oil refining company in India, will produce fuel oil and polypropylene only when the entire plant is commissioned.

Reliance officials say that the entire refinery cannot be commissioned on the first day itself. "No refinery starts production at full throttle on Day One. The refining capacity will be gradually increased in a few months," said a Reliance Industries' spokesperson.

Analysts say that Essar Oil [Get Quote] had also followed a similar strategy for commissioning its refinery. "Essar only commissioned its entire refinery after almost six months of starting production," said a Delhi-based analyst.