Fire at Reliance may halve refining output

26-Oct-06

A fire broke out in one of the vacuum gas oil hydrotreater units at Reliance Industries' 660,000 bpd Jamnagar refinery. The vacuum gas oil hydrotreater unit, is believed to have been completely gutted in the fire, removes sulphur from crude oil and passes it on to a fluid catalytic cracker unit, which then produces gasoline and olefins, which feed the petrochemical units at the Jamnagar refinery. Repairs could take an estimated 10-15 days, during which production is expected to halve, resulting in a loss to the company of almost Rs 1,200 crore. As diesel and gasoline comprise almost 40-45% of the company's total refined product exports, gasoline markets may firm while high-sulphur crude prices could slide, if the vacuum gas oil hydrotreater requires lengthy repairs. Reliance Industries' export commitments of gasoline, diesel, jet fuel and of some polymer products will be affected. RIL exports diesel and gasoline mainly to SAARC countries and to countries in the north African region. The company's total refined product exports amounted to US$5.5 billion during the first 6 months of the current financial year ending September 30. The complex may not be able to run its downstream petrochem plants of paraxylene, PTA and polypropylene. Option of importing low sulphur sweet crude oil is being considered, but that may not help Reliance Industries reach full capacity immediately. The government has asked state-owned Indian Oil Corp to tie up import of about 100,000 tons of liquefied petroleum gas. The fire is unlikely to result in the shortage of other fuels as they can be supplemented by imports.