Reliance Industries Ltd, India’s privately owned refiner,has finalized its term contracts for diesel and jet fuel cargoes loading over January-December 2015. The renewed term contract with its buyers is at lower premiums than those in the previous year. This information was confirmed by traders. The premiums have been lowered because there is more supply coming on the stream this year in the Middle East.
The new premium rates
The firm has agreed to sell 500 ppm sulfur gasoil contracts at a premium of about $1.30 a barrel above the Middle East quotes. This is 42% to 48% lower than the premiums of $2.25 to $2.50 a barrel that was negotiated for last year. It finalized the 2015 term to the Mean of Platts Arab Gulf (MOPAG) Gasoil assessment, Free On Board (FOB) basis.
Reliance Industries will also sell the 10 ppm sulfur diesel at a premium around $2 a barrel more thantheMiddle East quotes. This is below the levels it achieved for 2014 term contracts which were $2.50 to $3. This has been fixed to MOPAG Gasoil assessment, as well. Reliance wanted to achieve this rate, last year only.
For jet fuel, Reliance fixed its 2015 term at a premium of $1.85 t0 $1.90a barrel to Middle East quotes. This is said to be fixed to MOPAG jet/kerosene assessment, FOB basis. This is again lower than the $2 a barrel that it had negotiated last year.
The reasons behind the change
The lower premiums have resulted from the additional supplies of ultra-low sulfur diesel. This is expected to emerge soon from the Middle East, once commercial production of 400,000 barrels per dayfromYasref refinery in Saudi Arabia as well as Abu Dhabi National Oil Company’s (ADNOC) expanded Ruwais Refinery are initiated.
In addition to this, India has lost a key consumer outlet for 500 ppm gasoil as East Africa switched its import specifications from 500 ppm to 50 ppm sulfur gasoil from January 2015.
A Singapore based trader expressed, “I guess Reliance Industries want to capture the market first, because it seems to be a very trying year for Reliance with more refiners producing 10 ppm grade in the Middle East.”
Reliance Industries’ refinery has the potential to export 1 million-1.5 million mt/month of gasoil, depending on domestic consumption. It has a nameplate capacity of 1.24 million barrel per day at its Jamnagar complex in Gujarat. The Jamnagar Manufacturing Division, located near Jamnagar, comprises of a petroleum refinery and associated petrochemical plants. The refinery is equipped to refine various types of crude oil and manufactures various grades of fuel. It was created in a record time of less than three years and will always remain a special experience for Reliance.
Reliance’s new refinery in the Special Economic Zone (SEZ) at Jamnagar is the world’s sixth largest and has a Nelson Complexity Index of 14.0. This makes it the largest and most complex refinery, globally. The refinery has a capacity of processing 580,000 barrels of crude oil per stream day (BPSD).