Emergic: Rajesh Jain's Blog

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Reliance’s Oil Refinery

September 5th, 2006 · No Comments

WSJ writes:

On India’s northwest coast near Pakistan, Mr. Ambani is building the world’s largest refinery complex. When it’s finished, he plans to load 40% of the fuel it turns out onto huge tankers for a 9,000-mile trip to America.

Behind this is a shift in the economics of the refinery business.

The pay scale and certain economies, such as using the original engineering plans from the first refinery, are intended to keep the construction cost low. The project is supposed to cost just $10,300 per barrel of refining capacity, about a third lower than the estimated cost of building the two big refineries planned for Saudi Arabia.

About 80% of the gasoline and other products the refinery turns out will go to the U.S. and Europe. At today’s rates, shipping to the U.S. will cost roughly $6 a barrel, a sum easily absorbed by the current high profit margins for refining.

Tags: Emerging Markets

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