Reliance Industries has signed a long-term deal with one of the leading global shipping companies, MITSUI O.S.K. LINES, LTD. (MOL). Under this deal, the two companies will together facilitate transportation of Liquefied Ethane from the United States to India.
This deal will make MOL the first-ever shipping company dedicated towards continuous Liquefied Ethane transportation by Very Large Ethane Carriers (VLEC). Ethane will be transported from North America to India through six VLECs.
Construction of the VLECs
Samsung Heavy Industries Co. Ltd. will work to build the VLECs. These are expected to be delivered by the last quarter of 2016 and will be operational for the service thereafter. The vessels are carefully designed to adhere to the latest environmental regulations. The superior design parameters will offer great safety. MOL will be supervising the construction of six VLECs at the yard. After the VLECs are constructed and delivered, MOL will operate and manage the vessels, during the charter period for Reliance. These vessels were ordered by Reliance Industries, four months back.
Role of MOL
MOL is a Japanese transport company headquartered in Tokyo, Japan. Founded in 1964, the company's main area of operations is international shipping.
MOL earlier announced in New Midterm Management Plan, "STEER FOR 2020." This is a direction to allocate management resources.MOL expects a high growth and stable long-term profits in their business. Taking advantage of the Shale Revolution, this strategic association with Reliance has been concluded in line with this direction.
VLECs are a hybrid of LNG carrier and LPG carrier. It requires expertise in both LNG carriers and LPG carriers. MOL has a rich experience for both types of carriers. The Japanese company is in better position to leverage on its existing capabilities and tap this new opportunity.With the rising demands for energy transportation, MOL will carry on its efforts to provide with safe and stable sea transportation services. It also assured high standard of safety in the transportation system.
The impact on Reliance Industries
Shipping ethane to India is part of RIL's plans to attain long term feedstock competitiveness. Reliance Industries invested heavily in shale gas in North America plans to import ethane that has become the dominant feedstock for crackers, replacing liquids.
The transportation will double RIL's ethylene production capacity to 3.3 mt a year. Reliance Industries is looking to source about 1.5 mt per year of ethane from US. It entered into agreements to long haul US-produced ethane to feed its cracker at the Jamnagar refining plant in Gujarat.
Reliance, with this strategic tie-up with MOL, has achieved a key milestone for the successful implementation of Ethane import project to feed crackers in India. The Mukesh Ambani flagship is also building a world-scale receiving and storage facility in India for liquefied ethane and pipeline to deliver ethane to its crackers.