Oil to Chemicals

Vision and Mission

Accelerate new energy and materials businesses while ensuring sustainability through circular economy and target to be Net Carbon Zero by 2035.

Operating Framework

The key priorities of the O2C business are as under

Industry Overview

FY 2020-21 was characterised by unprecedented volatility in crude oil and feedstock prices. It was a year of two halves – significant demand contraction in the first half due to pandemic-related lockdowns followed by a sharp recovery in economic activity and demand revival with fiscal stimulus in the second half.

Crude Oil Demand and Supply

Global oil demand plunged by 16.2% y-o-y in 2Q CY 2020 to 82.9 mb/d. It recovered sharply to 92.6 mb/d in 3Q CY 2020. Overall demand in CY 2020 was at 91.0 mb/d, 8.7% below that in CY 2019. China was the only country to register growth.

OPEC and several other oil exporting countries carried out coordinated supply cuts, which peaked at 9.7 mb/d during May-June 20 and averaged 5.3 mb/d for CY 2020. These cuts helped reduce crude inventories and rebalance supply and demand supporting oil prices.

Global Refining Operations

Margins

During FY 2020-21, 10 ppm gasoil and Jet/Kero cracks in the Singapore market were down by 60% and 90% y-o-y respectively. Low jet fuel demand due to disruption in air travel and tourism industry made refiners shift yield towards the gasoil pool, capping gasoil cracks upside.

Global Cracker Operations

Global demand for ethylene registered a moderate 1.7% y-o-y growth to 166 MMT in CY 2020 from 163 MMT in CY 2019, while operating rates fell to 86% from 90%. New capacity addition of 11 MMTA during the year significantly outpaced demand growth. The liquidity crunch caused by the pandemic delayed start-ups as well as final investment decisions for new projects.

Ethane and Naphtha Prices

Average naphtha prices in Asia were down by 21% y-o-y in FY 2020-21 amidst softening of crude price in 1H FY 2021 and slowdown of demand due to low global economic activity. However, prices recovered in 2H FY 2021 with healthy demand from downstream chemicals/ products, improving demand of gasoline blending and higher crude prices.

Elastomer demand gradually recovered as the operating rate of the auto majors increased gradually from 25% in May to 80% in July, and supply chain hurdles eased with the lifting of the lockdown. Tyre majors registered a good performance in 2H FY 2021 amid strong farm and 2/3-wheeler tyre demand which drove up domestic demand for SBR to 7% y-o-y, while PBR demand remained flat.

Domestic Market Environment
Domestic demand for intermediates was impacted due to demand destruction in the textile and polyester industry at the time of the pandemic. Demand for the year contracted by ~14%, reflecting pandemic’s impact on downstream sectors.

The downstream polyester industry in the country bore the brunt of the nationwide lockdown and the closure of downstream units due to mass labour exodus. The industry revived with the gradual easing of the lockdown and festive season demand, reaching pre-pandemic levels by the end of FY 2020-21.

Margins
With reduced global gasoline blending demand, integrated chemical complexes continued to ramp up PX production. This resulted in a high PX inventory (up to 4 MMTA) in China, which was further impacted by capacity expansions of 1.8 MMTA. Global PX operating rates dropped to 71% in 2020 on the back of unprecedented capacity expansions in China. PX prices dropped 28% while PX-Naphtha margins dipped 41% y-o-y, well below 5-year average levels.

PTA markets in China remained oversupplied given the capacity addition of 9.9 MMTA and large market inventories. Global PTA operating rates dipped to 78% in 2020. Overall, in FY 2020-21, PTA prices dropped by 21% while PTA-PX margins firmed up by 1% y-o-y.

EBITDA was also lower with weak demand environment across products in 1H FY 2021. The segment performance was supported by a sharp recovery in downstream demand and deltas in 2H FY 2021.

Overall production meant for sale reduced from 71 MMT to 63.6 MMT. Most of the reduction came from transportation fuels due to global demand destruction. However, with an agile business model and the ability to optimise feedstock usage, Reliance was able to run downstream plants at full throughput.

RBML has become India’s largest fuel door delivery network for specified use, with presence at 1,083 sites in 21 states. RBML has launched light-weight and tamper-proof high density PE fuel containers for doorstep delivery which promises operational ease, efficiency, and quantity and quality (Q&Q) assurance.

In August 2020, RBML took over the operations of RIL aviation fuel stations across the country. It aspires to bring industry-leading technology, best-in-class service and innovative customer-centric solutions to aviation fuelling. RBML fuelled medical, repatriation and cargo flights across India at the peak of the lockdown.

Reflecting the Net Carbon Zero target of RIL, RBML aspires to provide Indian consumers with advanced fuels that have lower emissions, charging infrastructure for electric vehicles and other low carbon solutions.

To support the proposed network expansion of up to 5,500 outlets over five years, RBML kickstarted its franchise onboarding process. It has initiated infrastructure development at all supply locations and started pilot testing of battery swap stations at over 24 select locations. Initial response has been encouraging with strong growth in daily order deliveries.

RBML is committed to create a world class fuelling experience for its customers, with proven customer value proposition, synergies of extended group companies (RIL and bp), company-wide focus on customer centricity and best-in-class technology.

Intermediates and Polyesters

A total of 2.1 MMT was exported in FY 2020-21 across the entire polyester chain. RIL also maintained its market share in the domestic polyester market. Significant PX and Benzene exports in 1H FY 2021 helped maintain the operating rate of aromatics plants. PTA exports during 1H FY 2021 were impacted, curtailing PTA production. Demand destruction in MEG was countered by diverting the surplus volume into exports market.

RIL continued to explore new products and market segments with the introduction of biodegradable polyester and R3S in the paint segment. At the same time, given the unique circumstances, RIL focused on developing essential products like PPE suits, polyester swabs and other medical applications to cater to the needs of critical segments like health and hygiene.

Leadership in adopting circular economy in India

RIL is committed to supporting and leading the industry on circular economy and sustainability. The Company constantly endeavours to imbibe the concept of circularity in its operations and processes. Cognisant of the fact that achieving this objective requires long-term commitment and collaboration amongst various stakeholders, it supports like-minded organisations, NGOs and individuals in waste recycling and diverting post-consumer waste away from landfill while creating awareness about the environment among consumers.

RIL has identified short, medium and long term strategies to support a circular economy for plastics. In the short term, the focus is on increasing the Company’s PET recycling footprint and usage of Multi-layered Plastics (MLP) for road construction. In the medium term, it is focusing on polyolefin recycling and ‘waste to oil’ strategy. In the long term, the Company is looking at chemical recycling, plastic waste composites and design for circularity. Various initiatives are on the go.

Alliance to end plastic waste
RIL is the founding member and the lone Indian company to participate in the global effort to eliminate plastic waste in the environment through the Alliance to End Plastic Waste (AEPW). The Company aims to bring the best technologies and companies to India for elimination of plastic waste.

Scaling up Digital Platforms to Enrich Customer Experience

The COVID-19 pandemic led to a sudden change in the way of working, supported and sustained by digital collaboration platforms. The following digital initiatives were implemented in a short span of time to support the shift in business condition and ensure seamless migration to a virtual working environment.

Digitisation and Analytics for process optimisation

CASE STUDIES

Ecosystem for indigenous PPE production

RIL scaled up production of PP fibre and filament grades that are used as raw material for N95 masks and PPE suits. It developed very high-flow melt blown grades (1800-2300 MFI) in collaboration with a domestic compounder and masterbatch manufacturer to produce indigenous PPE kits with higher Particulate Filtration Efficiency (PFE). As a result, India became the world’s 2nd largest PPE kit manufacturer and net exporter, even though it did not have capacity to produce PPE kits till January 2020.

Redefining fuel retailing through e-commerce in India

RBML is the first Oil Marketing Company (OMC) to get the approval of Mobile Dispensing Unit and the only OMC to use HDPE containers (non-metallic) for on demand delivery of fuel. With its services spanning across India, it is uncovering the latent needs of the non-transport sector, and meeting these needs with great efficiency, leading the way to market leadership in the non-transport sector.

Transconnect: Building strong relationships

RBML’s large network, channel participation and field force focus with customised IT tool helps it drive volume. The Transconnect programme helps it ease the transaction process through secure card-less solution (Trans-mobile). Through Transconnect, RBML leveraged contactless operational capability during the lockdown, leading to significantly higher fleet volume share and highest ever monthly sales in FY 2020-21.