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Reliance: Projections going hay wire - Views on News from Equitymaster
 
 
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  • Jul 13, 1999

    Reliance: Projections going hay wire

    Reliance Petroleum has suffered a delay in the commissioning of the pipeline and the single buoy mooring (SBM) facilities, adversely affecting the pre-commissioning work. Moreover, RPL is incurring heavy demurrage for the very large crude carriers (VLCC) that have been waiting at the port to offload the crude. A month back, a leaking pipeline at the SBM had led to a similar situation.

    Reliance Petroleum Limited is currently setting up the world's largest single location refinery having a capacity of 27 m tons at Jamnagar, Gujarat. Reliance plans to commission the refinery during the second quarter of fiscal year 2000.

    The company's jetty in Jamnagar is not equipped to handle VLCCs and therefore till the time the SBM is operational, RPL will have to work out an alternative method. The rectification of the fault in the SBM is likely to take two-three months. The company has stated that the commissioning of the refinery would not be delayed.

    The company is incurring additional expenses on account of the demurrage charges and the cost of the smaller tankers, which are transporting the crude from the VLCCs. Though the company will receive the penalty, which will be levied on the contractor for the delay in the commissioning of the SBM, the company might have to rework its numbers relating to capacity utlization and freight costs.

    Market View:
    RPL's advantage of size, product mix and marketing ability has led the analysts to rate the stock as a 'BUY'. The product mix is in favor of light distillate, LPG and diesel, all of which have high demand growth. The company plans to market a third of its production to group companies, thus providing it with a ready market.

     

     

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