Reliance will begin test runs soon at Gujarat refinery

New Delhi: India's Reliance Industries Ltd will begin test runs in a few days at its new 580,000 bpd refinery, which will boost supply of oil products and erode refining margins, company officials said on Friday.

"Test runs [will] begin in the next few days. We will commission it in phases," one Reliance official, who did not want to be named, told reporters on the sidelines of a conference.

The start up would be within the company's target of December although a top company official said in July the plant being built by the firm's subsidiary, Reliance Petroleum, would begin test runs in September.

The refinery, in which Chevron Corp holds a 5 per cent stake, will have the ability to process cheap, low-grade crude into gasoline and diesel that meet strict Western standards.

"Euro-IV fuel will be produced from this year, and tighter specifications will be produced when the desulphuriser unit stabilises," the official said.

Like its existing 660,000 bpd refinery adjacent to the new plant in the western state of Gujarat, which turned India from being Asia's largest diesel importer to a net exporter nine years ago, the new plant is expected to make waves in the oil market.

The head of Reliance's refinery business, P. Ragha-vendran, told reporters the two refineries together would supply 10 million tonnes of gasoline and 24 million tonnes of diesel.

Asked if the new unit would hurt margins of refiners, he said: "So much product will come from the new refinery. Yes if you believe in economics, it will."

Export-focused refineries face falling demand for oil in industrialised countries such as the United States, but Raghavendran said refined products could be sold elsewhere.

"There are other markets also. Gasoline is required in Africa, Middle East and Far East ... So we are looking at wherever there is a deficit," he said.