Top Refiner Aims to Replace Diesel and Gasoline With Clean Fuels
Top Refiner Aims to Replace Diesel and Gasoline With Clean Fuels
(Bloomberg) -- Reliance Industries Ltd., operator of the world’s biggest oil refining complex, plans to replace sales of road fuels like diesel and gasoline with cleaner alternatives as it seeks to position itself to ride the global energy transition.
The company will instead convert these fuels into petrochemicals, while focusing on batteries for electric vehicles and hydrogen for transport, Chairman Mukesh Ambani told shareholders at its annual general meeting Wednesday.
Reliance “has proprietary technology to convert transportation fuels to valuable petrochemical and material building blocks,” said Ambani, Asia’s richest man and head of India’s biggest company. “And at the same time, we will replace transportation fuels with clean electricity and hydrogen.”
Even in spite of Reliance’s shift toward telecommunications and e-commerce, the move would be a drastic change for the company, which was built on a foundation of fossil fuels. Its massive Jamnagar refining complex in western India, the world’s biggest, churns out gasoline, diesel and aviation fuels that are shipped across the country and to markets as far flung as the Americas and East Asia.
It also appears at odds with retail and oil refining alliances the company has sought to develop, including a partnership in India with BP Plc and a possible equity deal with Saudi Arabian Oil Co., the world’s biggest oil exporter and a massive fuel-maker on its own.
Ambani didn’t give a time line for the transition in his comments, and the company Thursday was unable to provide details.
Staying Ahead
“The world is moving to cleaner fuels and Reliance wants to stay ahead of the curve,” according to K. Ravichandran, senior vice-president at credit assessor ICRA Ltd., the local unit of Moody’s Investors Service. “Replacing transport fuels is doable over a period of time.”
Ambani’s comments on the fuel shift came alongside an announcement of his plans for the company to reach “net carbon-zero” by 2035, similar to pledges by global energy giants such as Royal Dutch Shell Plc and BP Plc to eliminate all net emissions from their operations.
“The target is ambitious at face value and implies a transformation in RIL’s refining business away from petroleum fuels,” Richard Chatterton, lead oil demand analyst at BloombergNEF, said in a note. “Yet a number of key questions remain unanswered, leaving investors with questions around Ambani’s strategic vision,” including whether the fuel shift would be partial or complete.
Ambani’s vision for Reliance echoes Prime Minister Narendra Modi’s wider ambitions to transition his country away from its dependence on oil and coal, which have contributed to the world’s deadliest air, and toward low-carbon clean energy.
‘A Long Way’
“It’s a very bold and forward looking statement around moving toward hydrogen and electricity for transportation fuels in India, which is widely seen as the world’s most important growth market for oil demand,” said Neil Beveridge, senior resources analyst at Sanford C. Bernstein & Co. in Hong Kong. “We are a long way from that yet, so we will have to wait and see what this is backed up by.”
Reliance signaled such a transition last year in its annual report, predicting its refineries would produce only jet fuel and petrochemicals at the culmination of its oil-to-chemicals transition. The company has spent billions of dollars expanding its petrochemical plants to make high-value products from feedstock produced by its refineries, which are some of the world’s most-advanced.
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