Reliance Industries plans to complete its ambitious $5.7 billion expansion of Jamnagar Refinery Project under the special economic zone by March 2008 to emerge as the world's largest single-location refinery.
The company has already started implementing the massive 30 million tonne per annum refinery without waiting for the petroleum ministry to formulate and notify the policy for export-oriented refineries.
According to RIL sources, 50 per cent of the front-end engineering design of the Jamnagar expansion is complete and the company has started procurement of major equipment. The construction is expected to start soon to meet the March 2008 deadline.
American major Bechtel is serving as engineering, procurement, construction and management contractor for the project while the technology is sourced from global majors such as Exxon Mobil and Foster Wheeler, the source said. The expansion project would catapult Jamnagar refinery to number one position in the international rankings for single-location refineries with the total refining capacity touching 1.2 million barrels per day.
RIL is currenly placed at number three with 6,60,000 BPD behind Venezuela Paraguana refining of 9,40,000 BPD and South Korea's SK Corp with 8,17,000 BPD.
RIL, which has already emerged as a major exporter of the refinery products, is expected to reap great benefits from Jamnagar expansion on account of cost competitiveness and lucrative benefits.
RIL, which was the first to set up export-focussed Jamnagar under the export promotion capital goods (EPCG) scheme ahead of PSUs and private players, has recorded a 35 per cent hike in export to Rs 21,814 crore (Rs 218.14 billion) in the first nine months of the current fiscal and 80 per cent of these exports were refinery products, the RIL source said.
Incidentally, RIL has now timed the switchover of Jamnagar expansion from domestic tariff area project to SEZ facility to capture the business opportunity emerging in the international market, once again marching ahead of the public sector oil refineries.
The company estimates that the global refining industry is likely to witness a demand-supply mismatch on lack of capacity addition since the companies in US and Europe are unlikely to set up greenfield prjects due to stringent laws.
The sources said that the Jamnagar expansion, when completed in 2008, is expected to give a big push to RIL's bottomline in 2009-10 fiscal, which would be the first full year of its operation.
Since being implemented under SEZ, the project would enjoy customs and excise duty exemption on purchase of all capital goods, raw materials and spares and 100 per cent income tax exemption for a block of five years, 50 per cent tax exemption for two years and up to 50 per cent of the profits ploughed back for the next three years.
Jamnagar expansion project would also be able to set its products in the domestic market once it achieve positive net foreign exchange earnings as per the formula laid down under foreign trade procedure.
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