India's top privately run refiner Reliance is expected to raise crude oil imports by about 22 per cent this year as it ramps up production at its giant complex, further stamping its mark on world markets.
To maximise profit margins with its sophisticated refining capability, Reliance Industries is also set to limit African crude imports this year in favour of Middle East grades, if light crude prices continue to strengthen against heavy-sour grades, traders and analysts said.
"I expect Reliance refineries to run at full steam, even if in between there is a small shutdown, they can easily run at about 65 million tonnes," said a trader familiar with refining operations. Reliance declined comment on traders' estimates.
This means that the company's two refineries – the largest facility in the world - will run above their full combined capacity of 1.24 million barrels per day (bpd), higher than last year when its second plant began operating at full rate in the second half.
After the world first saw increasing flows from Reliance in the summer of 2008, with the start of its new 580,000 bpd plant, this year will see the full blast of exports of high-value diesel and petrol made from a diverse slate of the cheapest available crudes.
This will put pressure on weak Western refineries and arbitrage traders at a time oil demand is just starting to pick up, but is still in defensive mode, analysts said.
"It's a powerful refinery, and if they get the right logistics, they can probably penetrate Western markets, gain market share and push some out of the market entirely," said John Vautrain, Senior Vice-President of Purvin & Gertz.
Though Middle East crude remains Reliance's main staple, Opec supply cuts in end-2008 – around the time the refiner started its new plant - prompted it to turn to African crude to make up for the gap when Gulf grades became costlier last year.
This was made possible after the Brent-Dubai price spread, an approximation of the premium at which Atlantic basin light-sweet crude trades to Gulf heavy-sour grades, reversed into steep discounts three times last year, making some West African crudes cheaper, traders said.
The structure has returned to normal this year.