Reliance Industries has pivoted its crude oil procurement toward Russia and Latin America to navigate global supply chain disruptions. This strategic shift helped the company achieve an O2C EBITDA of ₹17,010 crore in the June quarter despite volatile Brent crude prices and higher freight costs.
Reliance Industries Ltd (RIL) has adjusted its crude oil sourcing strategy, significantly increasing purchases from Russia and Latin American markets. The company, which operates one of the world's largest refining complexes in Jamnagar, implemented this change to reduce its historical dependence on Arabian Gulf (AG) supplies. This strategic pivot comes as the company navigates a period of extreme global energy market volatility, marked by geopolitical tensions and disruptions to critical shipping routes, including the Strait of Hormuz.
Operational Resilience Amidst Market Volatility
Despite a challenging global environment where Brent crude prices averaged $104.5 per barrel—an increase of $36.7 year-on-year—RIL maintained steady operational throughput. This was supported by the company's ability to optimize secondary units during the planned maintenance of its crude distillation and coker units. The focus on a more diverse crude basket allowed the company to manage costs better than relying solely on traditional regional suppliers.
The Oil-to-Chemicals (O2C) segment, a core pillar of RIL’s revenue, reported an EBITDA of ₹17,010 crore, reflecting a 17.2% year-on-year growth. The performance was largely aided by high transportation fuel cracks and favorable economics for ethane cracking. At the consolidated level, the company recorded a revenue of ₹3.4 lakh crore, a 24.5% increase compared to the same period last year.
Margin Pressures and Regulatory Impact
While the company showed operational agility, it faced specific headwinds that impacted overall margin capture. Rising freight and insurance costs, combined with elevated premiums on physical barrels of crude, put pressure on profitability. Domestically, the company had to manage under-recoveries in its fuel retailing business to ensure consistent supply at stable retail prices. Additionally, the reintroduction of the Special Additional Excise Duty (SAED) on diesel, petrol, and aviation turbine fuel by the government acted as a regulatory constraint on domestic margins during the quarter.
Investors should monitor how the company balances its international crude sourcing strategy with evolving domestic energy policies and export duty structures. The ability to maintain high refinery utilization rates while managing the cost of imported raw materials in a fluctuating price environment remains a key factor for the O2C segment’s future profitability. Further updates on the company’s fuel retailing margins and the impact of the current excise duty framework on downstream performance will be important to watch in the coming quarters.