GROWTH STORY

Mumbai, Jan. 30: Reliance Industries expects its refining and petrochemical businesses to offset the pressure in the exploration and production (E&P) segment following a decline in gas output from the KG-D6 field.

RIL has been an under-performer in the equity market over the past one year, and the lower-than-expected gas output from KG-D6 is a major reason.

During the third quarter ended December 31, gas output from KG-D6 averaged 54.5 million standard cubic meters per day (mmscmd), down from 60mmscmd in April.

This resulted in RIL witnessing a 12 per cent sequential decline in earnings before interest and tax in its E&P business.

However, analysts are betting on better prospects in the petrochemicals and refining businesses of the Mukesh D. Ambani flagship.

“RIL’s two cyclical businesses, refining and petrochemicals, are set to see improving margins, with the worst behind us globally. For every dollar increase in gross refining margins (GRMs), RIL’s earnings increase 8 per cent,’’ Vinay Jaising and Rakesh Sethia, analysts at Morgan Stanley, said in a report a week before RIL came out with its third quarter numbers.

GRM is the difference between the total value of petroleum products produced by a refinery and the cost of crude.

According to the analysts, while the refining environment was improving in Asia, petrochemicals will enter a “super cycle’’ in the second half of this year.