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ANALYSIS: Reliance's new energy push won't dilute its sharp focus on oil and gas


Reliance rightly focused to deliver value across energy mix: Platts Analytics

Actively pursuing its oil tie-up with Aramco, petrochemicals investments

Company announces series of partnerships in the clean energy space

Reliance Industries has snapped up multiple partnerships in the clean energy space, such as solar and electric mobility, while pursuing its oil and petrochemical plans, an indication that India's biggest private refiner will maintain its razor-sharp focus on its core business despite embracing energy transition goals.

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Although the pledge by Reliance to invest $10 billion in the next three years in clean energy will serve as a wakeup call for other oil companies, analysts said the partnership with Saudi Aramco and the announcement to pursue petrochemicals expansion and investments is a sign of how Reliance is striking a balance between new energy and core businesses.

Chris Midgley, global head of analytics at S&P Global Platts, said the world would continue to need fossil fuels well beyond 2050 despite an accelerated growth in renewables.

"If we can take away one thing from the current market it is that we cannot rely on renewables on their own displacing fossil fuels. Reliance are rightly focusing on bringing their energy and supply chain expertise to deliver value across the energy mix," Midgley said.

Reliance is actively pursuing all its plans in the fossil fuels space. Aramco has moved closer in purchasing a stake in the oil-to-chemicals unit of Reliance, following the recent appointment of its chairman Yasir Al-Rumayyan as an independent director to the board of Reliance Industries. The deal was announced in 2019 but could not progress in 2020 after the oil price crash and the demand destruction caused by the pandemic.

Reliance Industries plays a key role in India's energy landscape

In the gas segment, Reliance and BP announced in April the start of production from the Satellite Cluster gas field in block KG-D6 off the east coast of India. The two companies have been developing three deepwater gas projects in block KG-D6 -- R Cluster, Satellite Cluster and MJ -- which together are expected to produce around 1 Bcf/d of natural gas by 2023.

Focus on the core

Reliance earlier in August rolled out plans to double its PET recycling capacity to five billion post-consumer bottles, and said it would establish a recycled polyester staple fiber manufacturing facility in Andhra Pradesh for the same, according to a company release.

It also has planned to invest $2 billion in the UAE's TA'ZIZ chemical joint venture between Abu Dhabi National Oil Co and sovereign wealth fund ADQ. Reliance and TA'ZIZ will build plants with a capacity to produce 940,000 mt/year of chlor-alkali, 1.1 million mt/year of ethylene dichloride and 360,000 mt/year of polyvinyl chloride at the TA'ZIZ Industrial Chemicals Zone.

"Reliance Industries is also talking about huge investments in green businesses, but oil and petrochemicals is in a strong position and this will continue," said Jignesh Shah, CEO and founder of Capital Advisors, an investment advisory firm.

"Over the decade, environment [issues] will become very big and there will be emergence of new technologies, new ideas, new products and Reliance is moving in this direction," he added.

Reliance New Energy Solar Ltd., along with Paulson & Co. Inc. and Bill Gates, and a few other investors, announced in August an investment of $144 million in Ambri Inc., an energy storage company based in Massachusetts.

The move comes after Reliance Chairman Mukesh Ambani announced plans in June to build a gigafactory in Jamnagar for the storage of intermittent energy, as part of the Dhirubhai Ambani Green Energy Giga Complex project.

Electric vehicles space

Reliance BP Mobility Ltd. -- the fuels and mobility JV between Reliance and BP -- and Indian online food delivery platform Swiggy announced early-August the start of trials that would increase the deployment of electric vehicles in Swiggy's delivery fleet. The partnership is aimed at promoting the adoption of battery-operated EVs, and is an effort by Reliance to place a foothold in the EV ecosystem.

"With big players like Reliance making big commitments, this will drive further investment into clean energy space and drive the prices down further for renewable energy and battery storage and help India achieve its target of domestic manufacturing," said Vibhuti Garg, lead India energy economist at the Institute for Energy Economics and Financial Analysis.

As most of the funding is now available through the environmental, social and governance route, companies are keen to access this pool of capital. Reliance venturing into the clean energy space allows the company ability to raise more funds into this new business and raise its market value as well, she added.

Shah of Capital Advisors said the new businesses would need long-term investments, so it is expected that the growth could take place in the next seven-10 years.

"Yes, 2030 could be the pivotal point for this," Shah said.

"The opportunities are enormous, and so are the complexities given the high technology requirements of these industries. While the challenges are obvious, Reliance has a history of successful disruption. This will not be easy to pull off, but Reliance track record makes us believe that if anyone can do it, they can," Bernstein analysts said in a research note.