Reliance Industries pushes to complete Jamnagar refinery


Night view of Reliance Industries

In a race against overcapacity, Mukesh Ambani's Reliance Industries aims to complete its massive Jamnagar refinery complex by mid-2008


THE VIEW at night is spectacular. On a vast, arid tract along India's west coast, in the state of Gujarat, Reliance Industries' Jamnagar facility glitters like the skyline of New York.

Within a year, however, the scene will become yet more extraordinary. Adjacent to the 660,000 bbl/day refinery that has operated at Jamnagar for eight years, a 580,000 bbl/day export-focused refinery is quickly rising into the sky.

The awesome sight reflects Reliance chairman Mukesh Ambani's grand ambitions, his propensity to conceive massive projects, and his ability to get them built.

Ambani thinks about the future, and he likes to think big - traits which, by all accounts, he inherited from his father Dhirubhai Ambani, a man who began his working life as a gas station attendant, but finished life as founder of the Reliance empire, a true rags-to-riches story.

In all sectors where Reliance has an interest, the vision is similar: look to the future, use high technology, integrate along the value chain and go for large scale.


When Reliance built its first refinery at Jamnagar in 1999 for $6bn (€4.4bn), it was one of the world's largest and most sophisticated plants. Soon after, Ambani was considering a second big refinery alongside the first, with greater sophistication to process heavy crude and produce expensive types of fuel.

Together, the two units would constitute the largest refinery complex in the world, able to process 1.2m bbl/day. That complex is now close to being realized.

The new refinery will process heavier, 24 API crude, and it will have a Nelson Complexity Index of 14.

The existing unit has a crude slate of 27 API and an 11.3 Nelson Complexity Index. The new refinery will also house a polypropylene (PP) unit with a capacity of 900,000 tonnes/year. The project is situated in the special economic zone next to the existing refinery in Jamnagar.

US oil major Chevron has bought a 5% stake in the new refinery for $300m. Chevron will supply the plant with its low-quality, hard-to-market Neutral Zone crude. It will also assist in marketing the high-octane fuel in the US and elsewhere. Chevron has the option to raise its stake in the plant to 29%, and it has indicated that it might do so once the project is completed.

Refining profits are currently high and global refining capacity short, but numerous other projects are under way and so speed is essential. Analysts say that in about five years, there is likely to be overcapacity, especially in Asia, as US demand growth slows. Ambani is, therefore, pushing to get the second refinery functioning, while the profit window is still wide open.

"A typical refinery takes 40-45 months to build, but Reliance will be building in less than 36 months. This is the best schedule to be achieved in difficult market conditions," says Hital Meswani, executive director of the company.

Reliance is targeting a start-up date of mid-2008. According to Jamnagar site president P K Kapil, 63% of the overall project is complete, including 86% of the engineering work, 84% of the procurement and 36% of the construction phase. "We are now accelerating into the construction phase," he says.

The former executive director of the Indian Oil Corp. (IOC) Panipat refinery, Kapil observes that the project has been able to proceed ahead of schedule and within budget because it is being executed by a private company and not by a government oil firm.

"In the public sector, the system is vitiated against the project, and procedures always outweigh end results," he says.

Perennial time and cost escalations in government-sector projects are the result. "The concept of extended owner-manager that exists within the Reliance setup greatly helps in work execution, a notion absent in the public sector," he asserts.

Reliance is focused on keeping costs under control. "The first way to reduce costs is to compress the implementation time," says Meswani, executive director of the company. Reliance booked vendor capacity in advance and ordered long-lead items first. Equipment was standardized to take advantage of bulk buying. And, instead of taking the standard lump-sum turnkey (LSTK) approach to the project, Reliance has been closely involved at every stage to expedite completion, adds Meswani.

The pay scale also keeps construction costs low. Skilled workers such as welders earn around $8 a day, and laborers, $3 a day.

The new refinery is being built for $6bn - nearly 40% less than international costs. The project is expected to cost just $10,300/bbl of refining capacity, nearly one-third less than the estimated cost of building two huge refineries planned for in Saudi Arabia.

It helps that Reliance had only recently executed a similar refinery project at Jamnagar. "We have not repeated the same mistakes this time," says S. S. Saini, senior vice president for operations and the man in charge of running the two refineries. Reliance has mobilized the entire project team that worked in the first refinery. Saini says that 90% of the operations team for the new refinery is also already in place.


Building the new refinery at Jamnagar involves over 200,000 engineering and supplier documents, the installation of 165,000 tonnes and 53m cubic feet (1.5m cubic meters) of concrete, 138,000 tonnes of structural steel (equivalent to 15 Eiffel Towers), more than 4,400 pieces of major equipment in over a dozen complexes within the refinery, and 13m feet (4m meters) of piping.

The project site covers an area larger than London, and more than 80,000 workers will be employed during the peak of construction - around the same number deployed in building the first refinery.

To overcome the shortage of skilled construction workers, Reliance has set up a facility in Jamnagar to train an estimated 8,000 welders, 5,000 carpenters, 5,000 pipe fitters and a few thousand grinders and mill wright fitters.

Reliance is also installing a 2m tonne/year gas cracker at Jamnagar. The $3bn unit will use offgases from the two refineries to make olefins and derivatives that Reliance officials say will lower production costs, making it comparable to crackers in the Middle East.

"I believe that just as we created a competitive position in propylene [through refinery integration], we will be doing the same in ethylene," says Meswani.

The time frame for completion of the cracker is 2010-2011, and officials say the company will concentrate fully on the cracker once the refinery is commissioned next year.


The full configuration of the cracker is expected to be announced within three months, and a Reliance spokesperson told ICIS that the capacity is likely to increase by about 15%.

Reliance is looking at producing derivatives such as high-density polyethylene (HDPE), low-density polyethylene (LDPE), linear low-density polyethylene (LLDPE), monoethylene glycol (MEG), isopropyl alcohol, propylene oxide (PO) and acrylonitrile (ACN).

Company officials say Reliance is keen to pursue downstream projects in the Special Economic Zone where the refinery is located in partnership with specialty players. The first such joint venture, established with Rohm and Haas, is exploring the joint construction of an acrylic-monomer complex at Jamnagar.

Not surprisingly, a project of such size, built at such speed, has generated its share of controversy.

For instance, Reliance is often accused of influencing state and central governments in India to further its interests, and some observers see examples in benefits received by the Jamnagar project.

When the first refinery was conceived, the Gujarat state government granted the company a 10-year holiday from steep sales taxes. Now the Indian government has agreed to Reliance's request to convert the existing refinery into a fully export-oriented facility, a status automatically accorded to the new refinery located in the Special Economic Zone.

Mukesh Ambani, however, conceives of Reliance as a force for good in both Gujarat and India. One of the speakers at the Vibrant Gujarat Global Investors' Summit 2007, held in January, he announced that Reliance Group would be investing Indian rupees (Rs) 675.5bn ($16.8bn, €12.1bn). When he concluded, it was with the flourish of an ambitious native son.

"Reliance is a Gujarati company. It is an Indian company and it is a global company. That is how it was conceived by my father Shri Dhirubhai Ambani."

Major process units at the new refinery

Category Capacity
Crude distillation units 580 kbpsd
Vacuum distillation units 305 kbpsd
Catalytic feed hydrotreaters 220 kbpsd
Fluidized catalytic cracker 200 kbpsd
Delayed coker 160 kbpsd
Hydro cracker 110 kbpsd
CCR platformer 85 kbpsd
Alkylation 85 kbpsd
Catalytic product hydrotreaters 360 kbpsd
Polypropylene 900 ktpa

kbpsd = thousand barrels per stream day
ktpa = thousand tonnes per annum



Reliance is setting a frantic pace to build its second refinery at Jamnagar. To make this possible, it has already deployed 65,000 personnel for the project, a number that is set to rise to 80,000 in two months as the project enters the accelerated construction phase.

This figure includes 2,500 engineers working for Reliance and 4,500 engineers attached with contractors. One of the largest construction sites in India, Jamnagar draws workers from all over the country.

For some of them, being separated from family on the desolate west coast of India can be as taxing as the frenzied pace of the project. Many, though, were excited to be associated with the scale of the work and the responsibilities their jobs offered - individuals such as engineer Deepak Shukla, a native of Gujarat, or 19-year-old Padmadhar Boro, a bellhop at the sprawling Reliance guest house in Jamnagar. Boro comes from Assam, a state in Northeast India known for its reluctant travelers. He said there were 22 other young men from his state working on the project in Jamnagar.

Some miss the big city. Engineer Sujit Mahanta, who married Wipro executive Rishika earlier this year, is a good example. Spending some rare quality time with his wife, who had flown over from Gurgaon, near Delhi, for the weekend, he admitted that he is open to prospects in Delhi.

Captain Sawresh Gon also misses Delhi. A strapping young seaman who sailed with a Norwegian carrier until a year ago, he manages a deepwater jetty, where tankers dock to unload crude or receive refinery products.

"I miss Delhi very much, even though I have my family here," says in his office, which used to be Reliance founder Dhirubhai Ambani's meditation room. "While the work is challenging, there is not much to do outside of work."

Reliance has done its best to make Jamnagar homely. The township for employees has schools, health centers and recreation facilities such as gyms, swimming pools, movie theaters and even a new Reliance hypermart.

A total of 3,000 apartments are being added now to house the engineers and technocrats descending on Jamnagar for the project. For construction workers arriving mainly from the states of Bihar, Orissa, Uttar Pradesh and Andhra Pradesh, five new colonies are being developed on 250 acres of land near the construction site, each with their own infrastructure facilities.


Whether it's petrochemicals or mangos, Mukesh Ambani dreams big. In the process of building the world's largest refining complex at Jamnagar, Ambani has also established Asia's largest mango orchard, and the company plans to become India's biggest mango exporter, selling 3,600 tonnes/year.

Every refinery in the country is required by law to establish a green area. Reliance decided to do this in a big way, setting up a 7,500 acre (3,038ha) greenbelt around the refinery. The green belt includes more than 100,000 mango trees, producing 110 varieties of the fruit. The green belt also has 32 other kinds of produce, such as guavas, pomegranate, oranges and cashews.

Chief horticulturist T. M. Thimmiah recently gave a tour of the greenbelt, which has short mango plants, instead of regular trees. "We do not allow the mango trees to grow beyond 10ft [3.05m] as it is easier to maintain and pluck this way," he explains.

Besides major Indian mango varieties such as Kesar, Alphonso, Ratna, Sindhu, Neelam and Amrapali, foreign variants like Tomy Atkins and Kent from Florida and Lily, Keit and Maya, from Israel are also grown in the orchard.

Small pipes originating at the refinery carry waste water and desalinated seawater to the mango orchard for irrigation. Gypsum and sulfur by-products from the refinery are used to address the salinity.

While about half of the mango produce is exported. The rest is sold through the nationwide Reliance Fresh grocery outlets, which are part of the company's ambitious retail venture.

A Reliance official says the profit margin from mangos is higher than that of any of the petroleum products Reliance produces.

As the Jamnagar project enters its accelerated construction phase, up to 80,000 workers will be deployed


Reliance Industries' new refinery at a special economic zone in Jamnagar, on the west coast of India, could well be the start of a chain of petrochemical projects at the megasite.

A cracker with an olefins capacity of at least 2m tonnes/year, based on offgases from the new and existing refineries, has been announced, and more projects are in the pipeline.

"With the completion of the new refinery, Reliance will have a total refining capacity of 1.25m bbl/day. That gives us ample opportunity to play around with lots of feedstocks," says Nikhil Meswani, executive director of the firm.

The two refineries will provide 6m tonnes/year of petroleum coke. "That is as good as coal on the ground with lower ash content," he says. "There are several possibilities."

A study is also under way to examine the feasibility of producing various petrochemicals, including acetic acid.

Reliance will be looking at each value-added product in the C1 to C8 chain. And it is open to partnerships. The aim is to create a new petrochemical business with greater value addition in order to sail through the next downturn.

The company has already signed an agreement with Rohm and Haas for acrylic acid production at Jamnagar. Some of the other products identified for Jamnagar are propylene oxide (PO), isopropanol (IPA), acrylonitrile (ACN), styrene butadiene rubber (SBR) and butyl rubber. Technology contribution would, of course, be key to any joint venture.

But the bread and butter commodity products will continue, with polyethylene (PE) and monoethylene glycol (MEG) likely to be the key derivatives downstream of the cracker and aromatics from the refinery likely to come afterwards.

After having successfully established global competitiveness in polypropylene (PP) by integrating with propylene from the refinery, the focus now is on PE.

Another possibility is chlor-alkali and polyvinyl chloride (PVC), with Reliance using its gas finds to produce cheap power, and tapping India's west coast for salt. "We are looking at two to three options and will come up with some innovative solutions soon to manufacture PVC. We are not far from it," says Meswani.