Reliance Industries profit down 6.4 pct, AS

Thu, Oct 29 08:49 PM

MUMBAI, India (AP) Indian oil, gas and petrochemicals giant Reliance Industries Ltd. said Thursday that its quarterly profit fell 6.4 percent, with rising gas production and strong petrochemicals margins shoring up weak refining margins.

Net profit in the three months ending Sept. 30 was 38.5 billion rupees ($815.0 million), down from 41.2 billion rupees in the same period last year.

Quarterly sales at Reliance, India's largest company by market capitalization, rose 6.1 percent to 488.4 billion rupees ($10.3 billion), roughly in line with analyst expectations. Gross refining margins for the quarter were $6.0 a barrel, lower than expected and far short of the $14.40 a barrel achieved during the first half of last fiscal year.

Deepak Pareek, oil and gas analyst at Mumbai's Angel Broking, said he had been looking for margins of $7.30 a barrel during the quarter. Refiners have faced margin pressure from softening global demand for petroleum products and increasing competition from new refineries in India and China.

"The margins outlook is weak in the refining space. It's largely a macro call," he said, adding that better than expected margins in RIL's petrochemical business made up for the shortfall.

RIL said robust domestic demand for its polymers, polyesters and other fibers, coupled with low inventories, supported margins. In April, RIL began pumping natural gas from the Krisha Godavari (KG) basin, off India's eastern coast.

The company said it has so far produced over 5 billion cubic meters of natural gas from the field, and 222,104 tons of crude oil. That gas is now subject to a bitter legal dispute between RIL chairman Mukesh Ambani and his younger brother, Anil, who wants to buy the gas at below market rates, per a 2005 family agreement.

The case went before the Supreme Court in New Delhi this month. Moody's analyst Ivan Palacios has calculated that if Anil gets his way, RIL could lose $600 million a year in earnings.

Until the litigation is resolved RIL can only sell 75 percent of potential output from the basin, an increasingly troublesome drag on revenues, Pareek said. "Given that the refining business is not doing great, we need new business to step in," he said.

"We need production of KG gas to increase from here on.".

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