Jamnagar, October 11:
Sitting on the edge of the water in the Gulf of Kutch on Indiaâ€™s western shore is one of Americaâ€™s dirty secrets. A mass of steel pipes and concrete boxes stretches across 33sq km â€” a third of the area of Manhattan â€” which will eventually become the worldâ€™s largest petrochemical refinery.
The products from the Jamnagar complex are for foreign consumption. When complete, the facility will be able to refine 1.24 million barrels of crude a day.
Two-fifths of this petrol will be sent 15,000-km by sea to America. Indiaâ€™s biggest private company, Reliance Industries, with a market capitalisation of $33 billion, runs the plant. Controlled by billionaire Mukesh Ambani, whose father Dhirubhai founded the company, Reliance towers over its industry rivals, contributing eight per cent of Indiaâ€™s exports.
The companyâ€™s ambitions in Jamnagar have helped India move from being a net importer to an exporter of refined petroleum products. â€œWe want to make a statement that India can be an industrial giant. Jamnagar is a refinery for the world, based out of India,â€ said Hital Meswani, executive director of Reliance Industries.
â€œIn the mid-90s when this project was conceived, no one believed it would work. We were told there was too much capacity, returns were not great and every management consultant we hired told us donâ€™t bother.â€ In the dizzy days of the 90s internet boom, distilling crude into diesel, petrol, home-heating oil and aviation fuel was considered a dinosaur business, with low margins and large outlays. Oil refining was yesterdayâ€™s business, not tomorrowâ€™s.
Reliance says it gambled on a â€˜paradigm shiftâ€™ in the economics of the refinery business. The company, which began as a textile trader but moved into producing polyester, had noticed that India was importing millions of tonnes of refined hydrocarbons a year. Its managers projected prices creeping upwards largely due to three global oil trends.
First the oil being produced from the worldâ€™s hydrocarbon reservoirs was increasingly â€˜sourâ€™, or heavy, full of sulphur and other impurities that older refineries could not cope with. Second was that no new capacity was being built around the world.
Environmental concerns and the rising costs of infrastructure projects discouraged the oil majors from putting up refineries in Europe and America. No new oil refinery has been built in the US since the 1980s as environmental legislation has tightened.
Third was Relianceâ€™s belief that Asian economies would become dynamos of world growth â€” inevitably increasing demand for petro-products. It also saw that many European countries wanted cleaner petroleum, which required complex refining techniques.
According to its strategists, commercial logic dictated that new, hi-tech refineries would be needed â€” and soon. Meswani says, â€œReliance decided to build big.â€
Work started in 1996 on a dry, sandy stretch in Jamnagar, about 500 miles north of Mumbai in the Gulf of Kutch with almost 100,000 workers toiling around the clock. Although the area was off the beaten track and served by just one small airstrip, supertankers could deliver by sea.
The first stage was to build a refinery that could process 660,000 barrels a day. In many ways Jamnagar was a turning point for Reliance, silencing critics who claimed its talents lay with manipulating government policy to its advantage rather than creating wealth through project management skills.
Having built from scratch the worldâ€™s third-largest refinery complex, stage two in the Reliance plan is to double capacity by 2008. Other nations have woken up to the potential of refining.