But Reliance says it gambled on a "paradigm shift" 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 world's hydrocarbon reservoirs was increasingly "sour", 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 Reliance's belief that Asian economies would become dynamos of world growth - 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 - and soon. Reliance, Mr Meswani says, decided to build big.
Thursday, October 12, 2006
The world's third largest refinery complex is coming up at Jamnagar, India. The Guardian reports.
Thanks to the New Economist.