MUMBAI: Reliance Industries (RIL) will bankroll the first new oil refinery project in the US in 50 years, marking one of its biggest overseas bets and a return to the American energy market after four years.
America First Refining (AFR), the startup developing the refinery at the Brownsville port in Texas, said it received a "nine-figure investment from a global supermajor at a 10-figure valuation" in Feb but did not name the investor. "For the first time in half a century, the US will build a new refinery designed specifically for American shale oil," said AFR chairman & founder John Calce.
US President Donald Trump, announcing the refinery project on his social media platform Truth Social, named RIL as the investor and called the investment by India's largest privately held energy company "tremendous".
This announcement comes after RIL exited the upstream oil and shale gas business in the US in 2021.
Construction of the 168,000-barrels-per-day shale oil refinery is expected to begin in the second quarter of this year.
‘Opportunity for Indian co to enter US refining ecosystem’AFR also said the “same global supermajor” had signed a 20-year agreement to purchase the refinery’s output.
The project is also expected to help narrow India’s trade surplus with the US, an issue that has long been a point of concern for Trump. “This is a historic $300 billion deal, the biggest in US history,” read Trump’s post on Truth Social.
According to AFR, the figure reflects the long-term offtake arrangement under which the global supermajor will purchase 1.2 billion barrels of shale oil valued at $125 billion and 50 billion gallons of refined petroleum products such as gasoline, diesel and jet fuel worth about $175 billion. Combined, the transactions are expected to improve the US trade balance by $300 billion, it said.
Analysts noted that the actual equity investment in the refinery itself has been described as a “nine-figure” sum, implying several hundred million dollars, while the project valuation is in the “ten-figure” range, indicating that the capital commitment is likely to remain below $1 billion.
The Texas refinery will mark RIL’s second greenfield investment outside India. In 2021, the company announced a partnership with Abu Dhabi National Oil Company (ADNOC) to build a $2 billion petrochemicals plant in the UAE.
Industry experts say the project could deepen economic cooperation between India and the US. M S Banani, joint managing director of Axiom Gas Engineering, a fuel station developer, said Texas is one of the world’s most important energy hubs, hosting major companies such as ExxonMobil, Chevron, Shell and BP.
“Establishing a refinery there provides direct access to crude supply and one of the largest fuel markets globally,” Banani said. “RIL has extensive experience in processing heavy and sour crude at its Jamnagar refinery complex, which gives it a strong technical advantage in refining diverse crude grades, including those available from regions such as Venezuela.”
From a business perspective, the investment represents an opportunity for an Indian company to enter the American refining ecosystem and potentially expand into fuel distribution and retail in the future, Banani added.
“It reflects both the growing global presence of Indian industry and the strengthening strategic partnership between India and the US.”
The development coincides with volatility in global oil prices driven by the intensifying conflict in West Asia. However, the announcement had little impact on RIL’s shares. At close of trading, the stock was down 1.3% at Rs 1,391 on the BSE. RIL did not comment on the announcement.
Reeba Zachariah is assistant corporate editor at The Times of Ind...
Read MoreReeba Zachariah is assistant corporate editor at The Times of India, Mumbai. She has been covering large Indian business houses such as the Tata Group. She also reports on a host of sectors like hospitality, retail, travel, liquor and consumer durables. She has been writing on mergers and acquisitions and private equity.
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