India: Reliance  may slice up oil-to-chemicals business to induct new investors

REUTERS/Amit Dave

Reliance Industries Ltd (RIL) may hive off parts of its oils-to-chemicals division to make it easier to induct investors and unlock value after it scrapped a plan to sell a $15 billion stake in the business to Saudi Aramco, according to two officials aware of the development.

As the first step of the new strategy, RIL decided to transfer the company’s gasification assets to a wholly-owned subsidiary on Thursday.

RIL’s oil-to-chemicals assets include its refining, chemicals, fuel retail, and bulk wholesale marketing businesses.

“RIL is looking at the elements of the O2C business in the light of its net carbon zero goals,” said one of the people cited above.

The company may hive off more such businesses, the person said, requesting anonymity.

A RIL spokesperson did not respond to an email seeking comment.

In a statement, RIL said restructuring its gasification assets would allow it to unlock the value of syngas with a collaborative and asset-light approach, involving the induction of investors in the gasifier subsidiary.

Syngas is a fuel gas mixture of hydrogen, carbon monoxide and, often, some carbon dioxide. Syngas as a fuel ensures the reliability of supply and helps offset volatility in energy costs. It is also used to produce hydrogen for the Jamnagar refinery.

“As RIL progressively transitions to renewables as its primary source of energy, more syngas will become available for upgradation to high-value chemicals, including C1 chemicals (compounds containing one carbon atom) and hydrogen. Further, the carbon dioxide released during the production of hydrogen is highly concentrated and easy to capture. These steps will help sharply reduce the carbon footprint of the Jamnagar complex,” RIL said in the statement.

In September, RIL chairman Mukesh Ambani said that while efforts are on globally to make green hydrogen, India can be the first to slash fuel cost to $1 per kg within a decade.

RIL is investing 75,000 crore over the next three years in green energy initiatives, including the Dhirubhai Ambani Green Energy Giga Complex in Jamnagar, as the refining and petchem major shifts its focus from hydrocarbons to renewable power. RIL has set itself a target to become a net-zero carbon company by 2035.

RIL invested $4 billion in setting up 10 synthetic gasifiers in 2012 to convert petcoke, one of the dirtiest refinery by-products, into gas to meet its entire fuel requirement at the refineries and eliminate its petcoke production of 6.5 million tonnes a year, generated from two of its cokers.

The technology for petcoke gasification, RIL said in 2012 would help it produce 23 mscmd (million standard cubic metres a day) of syngas and will aid in reducing R-LNG (regasified-liquefied natural gas) intake for its refineries. The project, however, saw a three-year delay by when the LNG prices moderated.

RIL’s latest statement said it is targeting to have a portfolio, which is fully recyclable, sustainable and net carbon zero.

This will be achieved by transitioning to high-value materials and chemicals with renewables as the source of meeting its energy requirements.

Overall, these steps will help sharply reduce the carbon footprint of the Jamnagar complex, RIL’s statement said.

According to Morgan Stanley Research, RIL’s move to separate its petcoke gasifier assets is another step towards monetizing the potential synergies between its existing energy infrastructure and new energy plans.

“While investors have been sceptical about returns on the petcoke gasifier business for the past five years, the environment of high global gas prices, gasifier’s ability to produce hydrogen, which can be converted into blue hydrogen (using carbon capture) and gasifier output of syngas (valuable in producing higher value add chemicals)—all now make it a highly profitable investment after multiple years of challenges,” said Morgan Stanley Research in a report dated 25 November.

Gasifier output of carbon dioxide is highly concentrated and can be easily captured, lowering the cost of carbon capture.

This should also help reduce RIL’s net carbon footprint and eventually help integrate with plans on hydrogen electrolyzers and solar/renewable electricity.

RIL said it seeks to attract strategic investors for the gasification and new materials/chemical projects.

On Thursday, RIL’s shares rose 6.1% to 2494.40, outperforming the benchmark Sensex’s 0.78% gain.

The article was first published on livemint.com.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.