RIL: Bigger Than The Dream

Had Dhirubhai Ambani been alive, he would have smiled indulgently. Way back in the 1960s, when he started his entrepreneurial career as a polyester yarn trader, the late Ambani had a clear vision of building a fully “integrated” company with operations spanning the entire range from oil and gas exploration to synthetic textiles. Today, Reliance Industries — run by his elder son Mukesh Ambani — is a rare company in the world that not only produces oil and gas, refines the crude product and manufactures petrochemical intermediates but also manufactures and markets branded textiles. Its journey from being a yarn trader to one of the largest private sector companies in the world is largely because of its relentless focus on oil, gas and petroleum over the last two decades. There is no dearth of critics; but even they grudgingly admire its spectacular emergence as an oil and gas global heavyweight.

Reliance got into the exploration and production business by getting into an unincorporated joint venture with British Gas and ONGC in the PannaMukta and mid and south Tapti blocks. As of now, apart from PannaMukta and Tapti blocks, its portfolio in the domestic market has another five conventional oil and gas blocks. They are in Krishna Godavari, Mahanadi, Cauvery Palar, Gujarat Saurashtra & Cambay Basin and two Coal Bed Methane (CBM) blocks in Sohagpur East and West in Madhya Pradesh. The KG basin gas fields have attracted a lot of controversy and drawn much flak for Reliance in recent times. But it remains the single largest investment in the gas exploration and production sector in the country.

On the international front, Reliance Industries signed production sharing contracts (PSC) for two offshore blocks in Myanmar earlier this year. The company now has five conventional blocks — two located in Yemen, two in Myanmar and one in Peru. That is not all. Back in 2010, Reliance Industries had invested substantial amounts in joint ventures to explore, drill and produce shale oil and gas in the United States. Analysts reckon that shale oil is destined to be the future of the industry. Apart from this, Reliance is all set to commence commercial operations in the coal bed methane blocks where it has been operating for a while.

The entry of Reliance into the petroleum refining sector marks a major landmark for the Indian economy. Till 1999, when Reliance started its refining operations at a spanking new facility at Jamnagar in Gujarat, India was not only an importer of crude oil and gas but also heavily depended on imports of petroleum products. The tide turned dramatically since then. According to available statistics, India became a net exporter of petroleum products since 2002. This had big implications. Petroleum refining is a big step in value addition and played a big role in curbing the value of petroleum imports. According to data from the Ministry of Petroleum, total exports of petroleum products from India in the fiscal year 2014 was valued at about Rs 3,70,000 crore. A large part of the credit goes to the Jamnagar refining operations of Reliance which has a capacity of 60 million tons a year. In fact, Reliance has been the largest player in refining operations in India for a long time; it was only recently that the public sector Indian Oil Corporation beat it to the top position.

What has set aside the operations of Reliance Industries in the sector is its uncanny ability to execute projects at a rapid pace and at globally competitive costs. The 60 million tonne refining plant happens to be the lowest cost of its kind in the world. In fact, the entire Jamnagar refining complex was constructed at costs much lower when compared to refineries across the world.

Even gas production at the Krishna Godavari basin was kickstarted in record time, before it ran into trouble subsequently. This has ensured that Reliance remains one of the most cost competitive and profitable oil and gas companies in the world, despite the huge decline in oil and gas prices across the world in recent times. Even as there are other corporate houses in the country ranging from Essar to Videocon to Vedanta in the oil and gas business, Reliance Industries has always managed to maintain global scale and profitability.

So no wonder the company is considered not only one of the largest exploration and production players in the domestic market but is also recognised as a significant global player. It recorded a revenue of Rs 3,29,076 for the financial year 2014-15. With a market capitalisation of over $78 billion and CAGR at 21 per cent, it definitely stands as a company that is growing at an unprecedented rate.

So, all in all, from oil and gas to refining and marketing, or for that matter to petrochemicals and retail and special economic zones, the company’s products and services do touch India.

paramita@businessworld.in
@paramitachat

(This story was published in BW | Businessworld Issue Dated 11-01-2016)