Reliance Industries' Refining and Petrochemical Business Sees Rise in EBITDA Growth, Sales Increase Concurrently

Reliance Industries Ltd. reported that EBITDA for its oil-to-chemicals (O2C) business rose 17% year-on-year to 170.1 billion Indian rupees (about $1.7 billion) in the first fiscal quarter ended June 30. The company said the growth was mainly driven by a sharp improvement in transportation fuel crack spreads and downstream margins. The O2C segment also benefited from diversification of its crude sourcing slate, efficient product placement in supply-constrained markets, and favorable ethane cracking economics. Revenue from the segment surged 30.4% year-on-year to 2 trillion rupees, mainly due to a 54.1% increase in crude oil prices. However, lower output due to planned maintenance turnarounds partially offset these gains.

Due to supply disruptions caused by the Middle East crisis, product prices have risen, improving the profit margins of downstream chemical products. However, the company pointed out that the rise in raw material prices has partially offset these gains. Notably, driven by high crude oil prices and ongoing supply constraints, the prices of naphtha and 1,2-dichloroethane (EDC) soared by 61% and 98% year-on-year, respectively. Meanwhile, the average price of ethane in the United States was 21.3 cents per gallon, down 11% year-on-year, which is related to the decline in U.S. natural gas prices and has also provided favorable economic benefits for ethane cracking.

The company stated that polyethylene (PE) prices rose 46% year on year to $474 per metric ton, reflecting the impact of supply disruptions in the Middle East. Polypropylene (PP) prices edged up 3% to $372 per metric ton, as firm naphtha prices offset some of the gains from higher product prices. However, PVC prices fell 10% because raw material costs increased faster than product prices.

The company added that following an unplanned PTA plant shutdown in China, newly added polyester capacity decreased and operating rates fell, leading to an improvement in polyester product profit margins and pushing the profit margins across the polyester industry chain to their highest level in two years. Driven by supply constraints and strong demand, PET profit margins improved, while MEG profit margins declined due to a sharp rise in naphtha prices.

In the first fiscal quarter, Reliance Industries also supplied more liquefied petroleum gas (LPG) to state-owned companies in accordance with the Indian government’s LPG control order, leading to lower production of alkylate and petrochemical products. The company said that aromatic production was reduced to meet internal captive demand, while it took advantage of the widened price spread between motor gasoline and naphtha by diverting reformate oil to gasoline production.