Reliance's oil product sales recover, on track to achieve net-zero by 2035

India's Reliance Industries posted robust growth in oil product sales and refinery utilization rates in the January-March quarter as the opening up of economies helped boost demand recovery, the company said May 6, adding that its energy transition plans were progressing well on the back of a series of joint ventures.

While the improvement in transportation fuel margins and volumes has bolstered the earnings of its oil-to-chemicals, or O2C, division, the company said it was on track to achieve its ambitious target to become a net-zero company by 2035.

"Our O2C business has proven its resilience and has demonstrated strong recovery despite volatility in the energy markets," chairman and managing director Mukesh Ambani said while announcing results for January-March, the fourth quarter of financial year 2021-22.

"Despite the ongoing challenges of the pandemic and heightened geopolitical uncertainties, Reliance has delivered a robust performance in the financial year 2021-22 (April-March)."

Throughput, gas output

Reliance posted a 3.2% year-on-year rise in total throughput to 19.3 million mt in the January-March quarter. For the financial year ended March, Reliance's total throughput stood at 76.7 million mt, up 6.7% from the previous year.

Revenue from the O2C division in Q4 increased 44.2% year on year to $19.2 billion, primarily on account of higher realization on the back of sharp increase in crude oil prices. Product sales volumes were also higher, by 4.2% in Q4, following a steady recovery in demand.

For the whole financial year, O2C revenue was up 56.5% year on year at $66.1 billion. Annual revenue growth was supported by 7.5% higher sales volumes, led primarily by transportation fuels.

Meanwhile, Reliance recorded production of 40.4 Bcf of natural gas in January-March, same as the year-ago quarter. The quarterly production comprised of domestic output alone as Reliance has no operations in US shale post disinvestment of assets.

It recorded 188.1 Bcf of natural gas output in 2021-22, mainly due to higher production from the KG-D6 oil and gas block on India's east coast.

Higher gas production from the KG-D6 block was primarily due to post-commencement of production from the R-Cluster and Sat-Cluster fields. In KG-D6, Reliance is the operator along with its partner energy major BP.

The MJ field, the third cluster of KG-D6, is expected to start production by the October-December quarter, Reliance said.

Oil demand

Global oil demand in Q4 rose 4.2 million b/d year on year to 98.5 million b/d due to strong manufacturing and industrial growth, as well as increased global mobility following relaxation of pandemic-related restrictions, Reliance said in a statement.

"Crude oil benchmarks soared year on year due to lower mandated supply increase from OPEC, lowering inventories, declining OPEC+ spare capacity and geopolitical tensions," the statement said.

"In Q4, transportation fuel cracks surged quarter on quarter, led by demand recovery in Asia, supply uncertainty in Europe due to the geopolitical conflict, limited Chinese exports and low inventory levels."

India's domestic oil product demand rose by 3.1% year on year for the quarter, led by an increase in jet fuel and gasoline by 6.5% and 1.4%, respectively, Reliance said.

According to Reliance, Singapore gasoil 10 ppm cracks averaged $21.60/b in the January-March quarter, against $12.60/b in the previous quarter and $5.80/b in January-March 2021.

"The increase was supported by recovering demand with improved industrial and manufacturing activity, high natural gas prices encouraging switch to gasoil, lower global inventories and limited exports from China. The cracks were further supported by refinery closures in several demand centers and potential loss of Russian exports to Europe," Reliance added.

According to Platts assessments by S&P Global Commodity Insights, Singapore gasoil 10 ppm cracks averaged $19.85/b in the January-March quarter, compared with $11.11/b in the previous quarter and $4.74/b in January-March 2021.

Polymer, polyester demand

Domestic polymer demand increased by 3% year on year in Q4 with an overall improvement in the economy and easing pandemic restrictions, Reliance said.

Polymer demand for the full year rose 8% year on year with domestic markets witnessing robust demand from essential sectors like farm, health and hygiene, e-commerce food packaging and infrastructure.

Domestic polyester demand rose by only 1% year on year in Q4, constrained by high volatility and uncertainty in feedstock prices, which led to a slowdown in global polyester markets. But overall annual polyester demand was strong, with a growth of 24% year on year with the reopening of economies and a rebound in consumption.

"High volatility and uncertainty in feedstock prices led to a slowdown in global polyester markets. A spike in energy prices due to the ongoing conflict resulted in high processing cost across the polyester chain," the company said.

"The Chinese market also showed weakness amid rising COVID cases. China downstream operating rates reduced, resulting in higher inventory with polyester producers," it added.

Ambani said Reliance was forging ahead with the development of the New Energy Giga Factories complex across 5,000 acres in Jamnagar.

"And with the strong global partnerships we have, I am confident that Reliance will create sustainable and affordable new energy solutions for India to help her meet growing energy needs, while ensuring that we achieve our ambitious target of net carbon zero by 2035," he added.

In one of the recent partnerships, Reliance New Energy Limited entered into an agreement to acquire Lithium Werks BV, which will bring more than 30 years of battery expertise and nearly 200 MWh annual production capacity, including coating, cell and custom module manufacturing capability.