Reliance Petroleum raises $1.5-billion debt for new refinery

Reliance Petroleum, the newly set up subsidiary of Reliance Industries Limited (RIL), has raised $1.5 billion in syndicated loans from foreign lenders to part finance the new refinery project. This is the single largest syndicated loan facility availed by an Indian company.

The loan has been priced at 135 basis points (1.35 per cent) above the London Inter-Bank Offered Rate (LIBOR).

In typical style, Reliance Industries Limited (RIL) is moving fast with its plans for the mega export-oriented refinery in Jamnagar, Gujarat. RIL has completed some of the biggest projects well ahead of schedule.

It was only last year that RIL announced plans to set up an export-oriented refinery near its existing Jamnagar refinery. The 27-million tonnes per annum project was aimed at exploiting the increasing demand for high-end refined products in western countries. There is a shortage of refining capacity in these countries and the existing refineries cannot process lower grade crude oil.

The proposed refinery would be one of the most complex crude oil refineries ever built. The refinery would be able to handle all grades of crude and would have considerable flexibility in refined products. This would significantly improve refining margins as low grade crude is cheaper. The refining margins of RIL''s existing Jamangar refinery are considerably higher than the margins of other Indian refineries.

RIL would be implementing the $6-billion project through the subsidiary Reliance Petroleum. Interestingly, the existing refinery was also set up by a company called Reliance Petroleum, which was later merged with RIL. The group has revived the name Reliance Petroleum for the new project.

Engineering and design contracts for the refinery have already been finalised. It is expected that the project would be completed in three years.

Reliance Petroleum is also scheduled to come out with an IPO to raise additional funds for the project. The IPO is expected to raise around Rs5,000 crore.

When completed, the new refinery would be one of the largest single- location refineries in the world. The existing RIL Jamnagar refinery has a capacity of over 30-million tonnes per annum. Along with the new refinery, RIL''s Jamnagar refining complex would emerge as the largest single-location refining facility in the world.