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Reliance Industries' lower gross refining margin this quarter at $6.8 per barrel, down from $10.1/bbl in the preceding July-September period, has been the talking point in its results declared on Friday.
The company has attributed this ‘sharp decline' to lower demand and high product inventories, which impacted product cracks. Gasoline and naphtha remained ‘particularly weak' even as refineries operated at high levels to meet demand for diesel and fuel oil.
Global phenomenon
According to RIL, refining margins were weak globally. “In the US, margins were lower as the WTI-Brent differential declined despite growing demand for gasoline and diesel in South American markets,” the company said.
Likewise, in Europe, Brent margins stayed low thanks to higher prices which offset gains made in distillate and gasoline cracks. “Asian margins were lower even as the impact of higher distillate and fuel oil cracks failed to offset the decline in gasoline and naphtha cracks,” RIL added.
EBIT margin for the refining and marketing activity halved to 2.2 per cent this quarter while revenue grew 46 per cent to Rs 76,378 crore from Rs 52,524 crore in the third quarter of FY'11.
Oil and gas
As for the upstream oil and gas business, the EBIT margin was higher at 45.7 (36) per cent. Revenue fell 32.2 per cent to Rs 2,832 crore (Rs 4,178 crore). According to RIL, production volumes at KG-D6 fell due to reservoir complexity coupled with the ‘natural decline in reserves in the KG-D6 block'. Gas production was 136 BCF (billion cubic feet), down from 147 BCF in the previous quarter.
Petrochemicals
The petrochemicals business saw revenue increase by nearly 24 per cent to Rs 19,781 crore (Rs 15,962 crore) though EBIT margin fell sharply to 10.9 (15.2) per cent.
The company said margins reduced across the olefins and aromatics chains as well as in certain key chemicals. Demand for polymer products was up thanks to growth in the packaging sector and moulded products, while PVC offtake was higher due to strong demand from the agriculture sector.
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