>RIL-RPL theoretical refining (MERRILL LYNCH)

# RIL-RPL gains from heavier crude use and Euro III-IV diesel
Singapore complex refining margins have recovered after the weakness in 3Q
FY09 (ie 4Q 2008). BAS-ML Singapore complex refining margin to date in 4Q
FY09 (ie 1Q 2009) is US$7.4/bbl. Theoretical refining margin of Reliance
Industries (RIL) works out to US$11.4/bbl in 4Q FY09 and that of Reliance
Petroleum (RPL) at US$15.3/bbl. Their premium to Singapore margins is due to
ability to process cheaper and heavier crude and produce Euro III-IV diesel, which
realizes higher price. We retain our Buy on RIL and Underperform on RPL.

# BAS-ML Singapore complex margin at US$7.4/bbl in 4QFY09
BAS-ML Singapore complex refining margin was US$6.9/bbl last week and
US$7.4/bbl to date in 4Q FY09 vis-à-vis US$5.9/bbl in 4Q 2008. The recovery in
refining margins seen in the last few weeks is unlikely to sustain, in our view.
Large new refining capacity including that of RPL will ramp up in 1H 2009E and oil
demand can be expected to weaken after winter.

# RIL & RPL’s 4Q FY09 theoretical margin US$11.4-15.3/bbl
RIL’s theoretical refining margin works out to US$11.4/bbl to date in 4Q FY09,
which is higher than US$9.2/bbl in 3Q FY09. This improvement is driven by
recovery in naphtha cracks from minus US$15.7/bbl in 3Q to US$0.5/bbl to date
in 4Q. Theoretical refining margin of RPL to date in 4Q FY09 works out to
US$15.3/bbl, which is lower than US$18.2/bbl in 3Q. RPL has gained in 4Q from
gasoline cracks recovery by US$7.7/bbl QoQ. However, Euro IV diesel cracks
declined by US$11.5/bbl QoQ and Oriente-Dubai spread fell by US$1.1/bbl QoQ.

To see full report: RIL-RPL