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Reliance's Jamnagar refinery expansion through SPV

Tuesday, 24 Jan 2006
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Reliance Industries, in its board meeting on 23 January 2006, stated that the Jamnagar petroleum refinery expansion project would be implemented through Reliance Petroleum Ltd, a newly formed wholly-owned subsidiary of RIL.

The Rs.25,000 crore ($6 billion) project envisaging a petroleum refinery of 27 million tpa and a 1 million tpa polypropylene plant will be housed at the Jamnagar Special Economic Zone.

Reliance would also raise equity capital either through private placement or an initial public offering, to part finance the project. Reliance Petroleum would continue to remain as a subsidiary (though not fully-owned) after the proposed equity raising exercise. The size of the initial public offering, scheduled for launch in mid-2006, would be Rs.5,000-6,000 crore.

ProjectsToday adds:

In November 2005, Reliance Industries had announced that it would "shift" its refinery expansion project from the existing site to the Jamnagar special economic zone. Meanwhile, Reliance invited global tenders for petrochemical majors to set up their units in the proposed SEZ. Leading names like Dow Chemicals, Shell, Mitsubishi, etc. reportedly evinced their interest in the proposal.

Reliance Industries' plan is to expand its refining capacity to 60 million tpa from the existing 33 million tpa. This would be achieved by adding a new unit of 27 million tpa located in an area now designated as a special economic zone. This SEZ would also house a 1 million tpa downstream polypropylene unit.

The fact that the refinery is located with an SEZ, the project would benefit from several tax concessions including zero customs duty on capital goods imports. It is estimated that the refinery cost ($6 billion) is around 40 per cent of what it could have been if set up in a "domestic tariff area".

Project Update: UOP (Universal Oil Products of USA), ExxonMobil and Foster Wheeler have been appointed as technology licensors, while Bechtel is the EPC and project management contractor. As of mid-January 2006, around 50 per cent of the front-end engineering had been completed. Construction work on the site is likely to start soon. The refinery is headed for completion by March 2008.

The developer of the special economic zone would be Reliance Projects & Engineering Associates Pvt Ltd, another group company.

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