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"Our Investments Have Provided a Foundation for Sustainable Long- Term Growth,"
Mr. Vipul Shah, Chief Operating Officer – Petrochemicals at Reliance A veteran of the Petrochemicals industry, Mr. Vipul Shah joined Reliance in 2015, after spending 25 years in senior positions at global operations of Dow Chemicals, where his last assignment was as President, CEO and Chairman of Dow India. As Chief Operating Officer – Petrochemicals at Reliance, Mr. Shah is responsible for overseeing the business functions of Reliance’s vast Petchem portfolio. The business reported revenues of $ 3.4 billion in Q2 FY16- 17 and Earnings Before Depreciation, Interest and Taxes of $ 513 million. Over the last few years, Reliance has invested almost $ 17 billion in new capacities, a significant amount of these in the Petrochemicals business. Chemical Engineering World caught with Mr. Shah to get a better understanding of the new projects and the way ahead for Reliance’s Petchem business.

Give us an overview of your new projects and the impact they are likely to have on the future of Reliance's Petchem businesses?
Today, Reliance Industries Ltd (Reliance) is amongst the world’s leading producer of petrochemicals with global scale capacities across polymers, polyester, fibre intermediates, elastomers and aromatics. Integration between refining and downstream petrochemical products is among Reliance's key competitive advantages. The deep integration within each chain helps Reliance mitigate the impact of price volatility in the global energy and chemical industry. This integrated play has delivered amongst the best margins globally for over two decades. The petrochemicals segment has achieved record EBIT of 10,221 Crores, representing a 23 per cent yearon- year growth in FY2015-2016, and in turn delivering one of the best performances in the global petrochemical industry.

We have invested over 1,10,000 crore ($ 17 billion) in refining and petrochemicals businesses over past five years. As the company is near the fag end of its largest capital expenditure cycle, we are now focusing on ensuring a smooth start-up and stabilisation of most of the new projects. These large investments in integrating refining and petrochemicals businesses will create sustained and significant value for stakeholders in years to come.

Broadly speaking these investments will double the capacity of key petrochemicals products. To give you the details, the Refinery Off Gas Cracker (ROGC) and ethane import project are on schedule, to be completed by the second half of FY 2016-17. Along with the aromatics chain expansion, these projects will propel Reliance to be among the largest petrochemical companies in the world.

Reliance is setting up new ROGC with Ethylene capacity of 1.5 MMTPA along with matching downstream PE and MEG facilities and incremental PP output at Jamnagar. The cracker will use low-cost off gases from Reliance’s refinery as feedstock to produce Polyethylene and MEG. This will lead manifold increase in value. This not only provides competitive cost advantage but also gives additional feedstock flexibility to the petrochemicals business. Downstream PE capacities enhance polymer business’ profitability and MEG adds to the integrated chain margin for its in-house consumption in polyester business. Since the Cracker is located at Jamnagar which houses two large-scale refineries, the quantity of off-gases which would be fed to the ROGC makes it not only amongst the world’s largest ethylene crackers but also an integrated Refinery- Petchem model which is unique in the world. Apart from the economies of scale, by utilising low value refinery off gases as feed, ROGC would be in the top quartile in terms of-global cost competitiveness across ethylene crackers.

Last year, we successfully commissioned 650,000 tonne Polyethylene Terephthalate (PET) plant and a state-of-the-art 2.3 million tonne Purified Terephthalic Acid (PTA) plant at Dahej. Reliance’s total PTA capacity has increased to 4.65 Million Metric Tonnes per Annum (MMTPA), with a global capacity share to 4 per cent. The integration of the new PTA plant and PET plant will provide significant logistical advantage to Reliance. These plants are operating at name plate capacity and serving both domestic and export markets.

We are expanding our polyester presence in executing one of the largest PX plants in the world at Jamnagar. The new Paraxylene (PX) plant is mechanically complete and pre-commissioning activities have commenced with production slated to begin in the next few weeks.

The raw material produced is supplied to downstream Polyester Filament Yarn (PFY) facility at Silvassa, one of the most automated and environment friendly plants globally. The plant started production in 2014- 15. This integrated play has strengthened our position as one of the global leaders in production of polyester fibre and yarn.

In addition, Reliance has also started India's largest Styrene Butadiene Rubber (SBR) Plant at Hazira with capacity of 150 KTPA. We have also expanded our Poly-Butadiene Rubber (PBR) capacity. This will help in reaffirming our domestic leadership position in the elastomer segment.

To sum up, our Chairman Mr. Mukesh Ambani said in his recent speech to the shareholders at the company's Annual General Meeting, "These investments will position Reliance among the top 10 petrochemical players globally with a portfolio of products that continue to meet the growing demands of India. The petrochemical business will have a unique earnings model based on integration, top-decile cost positions and annuity earnings stream. As we complete the current investment programme and forty years of Reliance's history as a public company, we will have created a solid foundation for continuing growth for many years to come."

How Reliance is handling volatility in petrochemical products prices due to sharp fluctuations in crude oil prices?
You need to understand that the key competitive advantage that we have is Reliance’s unique Integration between refining and downstream petrochemical products. The deep integration within each chain helps Reliance mitigate the impact of price volatility in the global energy and chemical industry. Reliance also has a diversified feedstock slate, with both naphtha and gas based crackers, which helps mitigate risk involved with feedstock sourcing and margin volatility.

The other key source of our competitive advantage is our focus on technology leadership, cost efficiencies, responsible operational practices.

What are your thoughts on the changing dynamics of petrochemicals industry currently; especially given the impact of drop in crude oil prices, recession in the Middle East and new facilities expected to come up in the South East Asia. How is Reliance realigning its business?
The fluctuation in the crude price brings in a major element of uncertainty in the business environment for the petrochemical industry. Fall in crude prices does not only impact India but also the global market. While low crude oil prices have put downward pressure on other commodity prices, including polymers, in the long term this could only benefit an oil importing economy like India. Once the price volatility is over, low but stable prices would only give a boost to the demand for polymers and hence would be beneficial for the future growth of our industry as well. For downstream companies in polymer products and applications, capturing the incumbent growth would be the key to using these low prices to their advantages. In the Indian SME context, cash flow cycle, working capital and cash turnaround at customer end is quite important. Low crude and product price scenario allows this

I expect Indian market to show healthy growth in a market scenario of low petrochemical prices. This would benefit our customers in a significant manner. As the benefit of low polymer prices are passed down the chain, there would be more demand for plastic and polyester products.

In addition, passed on reduction in prices of transport fuels and household gases is likely to place higher disposable income in the hands of consumers for discretionary spends. This is likely to help catalyse the sales of our downstream product manufacturers too.

As for the competitive landscape, it has certainly evolved over the years. The customer is now at the epicentre and the focus is primarily on improving service levels across the board.

At Reliance, we continue to leverage economies of scale, as evident with our upcoming J3 project, in order to provide our customers with the highest quality at the most competitive price point. Additionally, our long-standing relationship with customers, extensive sales network and increased focus on R&D - both internal and joint development - with industry leaders and speciality producers is keeping us ahead of curve.

Please share insight on some of the cuttingedge technologies for petrochemicals developed by Reliance at its R&D centres?
As a company, Reliance has always laid great emphasis on Research and Development and invested significant resources in developing and refining cutting edge technologies. Though far less talked about then our project execution skills, this aspect has always been a significant contributor to the company's competitive advantage.

As far as the Petchem business is concerned, our state-of-the-art laboratories employ more than 400 scientists. Reliance’s efforts in R&D have helped it to improve efficiencies and strengthen its product portfolio with unmatched quality. Some of these efforts listed below.

We are developing a proprietary process to manufacture Chlorinated Polyvinyl Chloride (CPVC) resin. RIL's CPVC technology undergoes photo-chlorination with visible range radiation as compared to other producer’s processes that use ultra-violet radiation. The benefit is that RIL’s technology eliminates the need to handle hazardous UV radiation and the subsequent disposal of used UV lamps.

Reliance has implemented Proprietary Morphological Catalyst Precursor Technology to produce High Performance Catalysts for better Operability of polypropylene production and operational reliability.

Reliance has implemented High Productivity Self Extinguishing Catalyst with performance enhancing donor (RELCAT 100Y / RELD System) for Polypropylene with improved properties such as Raffia Grade. This technology helps produce desired balance of microstructure and molecular weight characteristics suitable for high speed processing lines of PP raffia grade.

High Melt flow Impact Copolymer Grades with Proprietary (RELCAT 300Y) Catalyst Technology. This Reliance Catalyst Precursor is used to develop catalyst system with good hydrogen response to produce high melt flow impact copolymer grades especially suitable for automobile industries.

Reliance has taken major initiatives to develop Next Generation Catalysts and Processes for producing high performance and specialty polyolefin grades such as ultrahigh molecular weight PP and metallocene Polyethylene Resin with IPR.

On the whole, Reliance has 140 Patents / applications filed in the area of Polyolefins with granted patents in USA, Europe, India, etc.

Apart from product development and process improvement, one of our key focus – as a company, not just the Petchem business – has been to reduce the impact of our operations on the environment. We have therefore developed and deployed world-class technologies across all sites to reduce fresh water consumption per unit of production by maximising waste water recycling and minimising external discharge.

Customer Centricity is a core value with Reliance. We have adopted the expression of ‘Chemistry for Smiles’ on the back of the motto - ‘Transforming Life into Quality Life’, to grow jointly with the customers and add value to the intangible emotions of life for the end-consumers. In line with this, our R&D and customer service centres not only work towards improving efficiencies of manufacturing process and products but also help customers to manufacture quality products for their end customers and thereby enhancing value and experience throughout the manufacturing chain.

Perhaps a few examples that follow would help explain this better.

We have developed one of the greenest ecofriendly fibres in the world, by recycling used PET bottles which are branded as Recron® GreenGold fibres. One range of fibres under this umbrella, Recron® GreenGold EcoD is pre-coloured fibres which reduces usage of water significantly.

Our commitment to our customers in the plastic processing industry in unmatched and is reflected in actions such as new grade introductions targeted at specialty applications, continuous grade improvements, enhancing quality consistency and productivity of grades, regular interaction with customers for feedback on grade performance and strengthening of distribution network and reach.

PRODUCT APPLICATION & RESEARCH CENTER (PARC)
Reliance has several state-of-the-art facilities spread across the country that help us co-create and collaborate with our customers to develop new value-added applications for our end-use segments. The most prominent amongst these are our three facilities at Vadodara - Product Application & Research Centre (PARC), Plasticulture Development Centre and Elastomer Customer Application centre.

These facilities cater to the technical needs of our large and the growing segments of customers across MSE and SME's in plastic processing, agriculture and tyre & non-tyre industry etc. These facilities are equipped with the latest processing and testing equipment to meaningfully service and support customers on issues related to grade selection, product development, processing techniques and end product performance etc.

The PARC at Vadodara is being now expanded from the present 13255 sq. ft. to 33000 sq. ft facility and we will be adding more Processing machines & Laboratory Instruments from a present 60 to 112.

In the coming year, we intend to expand our product development focus on a wider array of sectors including Automobiles, Wire & Cable, and Pharma.

A recent independent external survey of PCT applications filed by Indian organisations found that Reliance was ranked third amongst all Indian applicants. This is testimony to the success of our R&D efforts. Additional proof about the quality of Reliance's inventions is evidenced by the enquiries we have been receiving from domestic and international manufacturers for licensing our technologies.

Reliance operates the world's biggest integrated refining & petrochemicals complex in Jamnagar where two refineries process about 1.4 million barrels per day (bpd) of crude oil. How does this help in giving the company a competitive advantage?
One of Reliance's key competitive advantages is the Integration between refining and downstream petrochemical products. The deep integration within each chain helps Reliance mitigate the impact of price volatility in the global energy and chemical industry. This integrated play has delivered amongst the best margins globally for over two decades. It offsets global volatility in oil prices, and a diversified feedstock slate helps mitigates risk.

This will be further enhanced once our new ROGC 1.5 MMTPA Ethylene capacity of along with matching downstream PE and MEG facilities and incremental PP output at Jamnagar comes on stream.

What will be the impact on the Petchem industry, once GST is finally implemented? Apart from GST in your opinion, what are the lacunae that still need to be addressed to create a level playing field for petrochemicals product manufacturers & refineries in India in the domestic market; and building globally competitive industry?
The GST is a welcome step for industry, and the determination of the government to implement it at the earliest is commendable. We would also like to see GST being made applicable to the upstream Petroleum and some of the products left out of its ambit.

The issue of a level playing field is very important to us in light of the Free Trade Agreements signed as well as planned. While our facilities are amongst the most modern and efficient in the world, the higher interest and infrastructure costs necessitate a corresponding offsetting duty in the FTA's to maintain a level playing field.

We believe that Petrochemicals industry is an enabler for other industries and goes into manufacturing of mass consumption goods, hence should be taxed at merit rate.

What are your thoughts on the government’s Make in India initiative? How does Reliance plan to leverage upon this opportunity?
Make in India is a core philosophy that Reliance has inherited from our visionary founder Chairman, Late Mr. Dhirubhai Ambani. Every product we create with the ‘Made in India’ tag is a source of great honour and pride. It is this philosophy that prompted us to start an investment programme of $ 17 billion, a few years ago, when private sector capital investments were drying up in face of global and domestic economic uncertainty.

Our petrochemicals business adds value to the refinery streams and is focused on improving quality of life of millions. Petrochemicals business meets the rawmaterial needs of over 30,000 small and medium scale units directly. This supports India’s manufacturing growth and generates employment for more than 4.5 million Indians.

India is fast emerging as an automobile hub with resulting growth in elastomers demand. We have strengthened our elastomers portfolio by commissioning 150,000 tons per annum of SBR capacity. This is on top of the expansion of the PBR capacity by 115,000 tonnes per annum in 2014. All these petrochemical investments are geared to deliver superior performance in the years to come by focusing on capital cost competitiveness, continuous cost reduction initiatives and operational excellence.

We believe that these will strengthen the Government’s Make in India initiative as each of our petrochemical ventures provides raw material to tens of thousands of downstream processors that provide livelihoods to millions of Indians.

As part of Make in India initiative and for driving customer value, new products have been developed and are in process of getting commercialised. Some of these are:
  • Cobalt based PBR Cisamer 1220 H: The product has less gel content and is manufactured at Vadodara Manufacturing Division for high-impact polystyrene application
  • Neodymium Based PBR Cisamer 700: This product is manufactured for the first time in India at Hazira Manufacturing Division and is specially being targeted for low rolling resistance and procured tread rubbers with abrasion resistance.
  • Styrene Butadiene Rubbers (SBR 1783 and SBR 1723): This product is mainly designed for usage in high performance tyres which provide improvement in wet traction/ rolling resistance
The other big initiative at Reliance, which we believe will play a big role in 'Make in India', is our newest and most exciting business Jio. As our Chairman Mr. Mukesh Ambani said in his recent AGM speech, "The world's demand for Digital oxygen, that is data, is growing explosively. Jio’s mission is to meet this exploding need for India, and to take our nation from data shortage to data abundance. And to enable a Digital Life for a Digital India"

"A Digital India - where the Digital Life of no Indian is ever threatened by scarcity, poor quality or unaffordability of data. Where access to information knows no barriers. Where quality education reaches the most inaccessible corners of the country driven by digital learning. Where quality healthcare percolates right up to the remotest regions powered by e-Healthcare. Where farmers are empowered with real-time Information to be connected with global markets. Where mobile and e-banking ensures financial Inclusion. Where connected Indians drive innovation and the world looks to India for the next big idea."

What are the future plans of the company in India and globally?
As I mentioned earlier, we are just approaching the end of the largest ever investment cycle not only in the history of Reliance but the largest such investment cycle ever undertaken by an Indian corporate. The time is to now stabilise all the projects, consolidate the enhancement in stakeholder value that will accrue from these projects, before going back to the drawing board.