Less Gulf, more Russia: RIL diversifies crude sourcing amid market turmoil due to Iran war

Mukesh Ambani-owned Reliance Industries Ltd (RIL) increased crude oil sourcing from Russia and Latin America during the June quarter to reduce its dependence on Arabian Gulf (AG) crudes, as the company navigated one of the most volatile periods for global energy markets amid the closure of the Strait of Hormuz and supply chain disruptions.

The company said it "diversified crude basket, with higher sourcing from Russia and Latin America which helped reduce dependence on AG crudes," as part of its operational strategy during the quarter. It also completed the planned turnaround of its crude distillation unit (CDU) and coker unit, while stretching operations at secondary units to minimise the impact of lower throughput.

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The shift came as global crude markets were upended by the Middle East conflict. RIL said Brent crude averaged $104.5 a barrel during the quarter, up $36.7 a barrel year-on-year, following the closure of the Strait of Hormuz, which disrupted an estimated 13 million barrels per day of crude supplies and tightened global oil markets.

Despite the challenging backdrop, the company's oil-to-chemicals (O2C) business reported a 17.2% year-on-year increase in EBITDA to Rs 17,010 crore, supported by stronger transportation fuel cracks and downstream petrochemical margins. The company said performance also benefited from crude basket diversification, efficient product placement in deficit markets and favourable ethane cracking economics.

However, RIL cautioned that "multiple headwinds curtailed margin capture including high crude premiums on physical barrels along with higher freight and insurance costs." It added that it diverted propane and butane to boost LPG production and held domestic retail fuel prices steady to protect consumers, resulting in under-recoveries in fuel retailing. The reintroduction of the Special Additional Excise Duty (SAED) on diesel, petrol and aviation turbine fuel also weighed on domestic margins.

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"The O2C business delivered strong performance during the quarter, supported by all-time high middle distillate cracks and improved downstream petrochemical deltas. This was achieved despite a challenging global energy market backdrop with disrupted supply chains," said Chairman and Managing Director Mukesh Ambani.

He added that the company navigated the environment with operational agility while ensuring adequate availability of essential fuels and materials in the domestic market.

At the group level, Reliance Industries reported O2C EBITDA of Rs 17,010 crore, while consolidated revenue rose 24.5% year-on-year to Rs 3.4 lakh crore in the June quarter.