A Case of Petroleum Refinery project

The experience in creating the Reliance complex at Jamnagar, that has 4,500 engineers, managers and 80,000 other workers today, form an exemplary study in project management. The project was conceptualized at a time when it was thought unimaginable. In December 1996, Reliance started to build this integrated petroleum petrochemical and power complex involving an investment of Rs 25,000 crore. It was spread over 7,500 acres of land – a third of Mumbai’s land area. With optimism, confidence and professionalism, the company set about chalking out a meticulous strategy in project planning, design, implementation and business strategy.

The refinery was built in a record 36 months. After completing construction in a record time, the project was commissioned in 60 to 90 days as against the normal 6 to 18 months. Perhaps nowhere in the world had such a refinery been built in this time frame. It is the largest single investment ever in Indian corporate history. It is the largest investment ever made at any single location in India. In one step, it represents 29% of the total refining capacity in India. It represents 4% of all investments under implementation in India. It is 5% of the gross assets of the entire corporate sector in India. At the international level, it demonstrates that a mega project of this size and complexity can be implemented in India in less than 36 months.

Reliance viewed time as a critical and scarce resource. As its Vice-Chairman Mukesh Ambani (now Chairman) would say, Lost money can be regained. Lost time is lost forever. This was a tenet guiding this project. Also, from the outset, the company was acutely conscious that the people in the area must see the project as being community friendly. The company was therefore, keen to build a refinery that shared social concerns for the protection of ecology and environment.

The mammoth project followed carefully and consistently, the Reliance philosophy of trusting people. Trust is the cornerstone of all our initiatives. We believe that trusting our people results in superior performance says the Chairman of Reliance.

The Jamnagar Refinery project seems to illustrate the high level of applicability of certain general principles in the management of projects.

Out of the box thinking while conceptualizing the project:

Thinking out of the box, the company saw value creation opportunities at the convergence of petroleum refining, petrochemical and power generation businesses. Reliance designed the refinery to integrate with petrochemicals and power generation. This would enable it to capture the highest value from every barrel of crude oil processed to get maximum value investment rupee. It built a refinery that was large in scale, technically complex, integrated with petrochemicals and power generation and environment friendly. Reliance had redefined an industry.

The refinery was designed to process a whole range – virtually every type of crude oil in the world. This increased the capital cost, no doubt. But it enabled the company to quickly capitalize price differentials in crude oils and earn superior returns. The right choice of technologies and product configuration yielded significant value. They planned for the refinery to give a high proportion of lighter fractions that are more valuable. Consequently, Reliance could have superior rates of return on invested capital.

Thus, while older refineries produced 2% of their product slate as high value LPG. Reliance could produce 12%. While the older refineries reduced 15% low value fuel oil products, Reliance would not produce any. While the other older refineries had a narrow crude oil input capability, Reliance had the ability to process all types of crude oil. Reliance had redefined technology integration.

Getting ordinary people to do extraordinary things:

The project management at Reliance institutionalized a concept of system wise ownership. The project was broken into eight major sections, 42 different units and thousands of systems. Each system head was vested with ownership. The system heads were motivated to cat as owner managers rather than mere employees. About 80,000 activities were tracked and performance monitored daily in a ‘war’ room.

The project was completed at a cost that was 30% to 50% lower than similar refineries in other parts of the world. Thus, getting ordinary people to do extraordinary things is a function of setting challenging tasks, placing trust, underlining managing processes and developing ownership. This is an important lesson in project management.