The Reliance conundrum

Bernstein Research are pouring cold water on suggestions that Indian gasoline exports are heading for US markets, for now at least. There is a lot of interest in Reliance Industries’ second Jamnagar refinery, particularly with regard to it exporting to the US and Europe. The large refinery can make products to US and European specifications, is well positioned for these and Asian markets, and Reliance’s buying of storage capacity in the US prompted speculation that it could become an important new player there, as some US refineries are threatened by falling demand.

There have been reports of gasoline shipments destined for the West coast and even shipments, probably of heating oil, arriving in the East coast.

But Neil McMahon and Alexander Inkster at Bernstein Research say Reliance does not appear to be shipping gasoline to the US right now. Tracking shipments is a difficult art, but they provide a strong argument: over the past year and particularly in the past few months, it has become a less attractive destination for gasoline than Singapore.

Our observation of tanker movements have confirmed this analysis, with one boat recently completing the journey from Jamnagar to Amsterdam, which suggests that diesel is being shipped to Europe. On the other hand we can observe that no tankers have yet made the journey from Jamnagar to the US West  Coast. We believe that diesel is heading to Europe, gasoil to Saudi Arabia and gasoline to Iran. Current tanker destinations also suggest that product is bound for South America and Africa.

Bernstein say while the US West coast would have been a good prospect for Jamnagar for much of this decade, yielding a price premium of up to $15/bbl over other destinations, with the odd blip during the northern Winter when Singapore would have been better. Since late 2007 however that situation has almost reversed, with Singapore being more lucrative in the main. The US East coast has been even less promising.

Europe, they say, remains the best market for Jamnagar diesel.

Related links:

Not just a refinery, a super refinery (FT Alphaville)
New refineries in the US? More likely, a closure (The Barrel/Platts)

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