British Petroleum (BP) had signed a licensing agreement with JBF Petrochemicals, a wholly-owned subsidiary of JBF Industries, for supplying purified terephthalic acid (PTA) technology. This would be the first instance of BP supplying the technology to any company.
Under the agreement, JBF would source BP’s PTA technology for its proposed 1.25-Mt plant in Mangalore. The project’s estimated capital expenditure is $600 million (Rs 3,300 crore), and the debt-equity ratio for funding the project is proposed at 1:2. It is expected to be on stream by 2014.
“The commencement of this plant would help us procure raw material for our polyester plant from captive sources. This would make our products cost-effective and reduce reliance on sourcing from others, including imports,” said Rakesh Gothi, managing director, JBF Industries.
Currently, JBF Industries procures about 1 Mt of PTA from three companies--- Indian Oil Corporation, Reliance Industries and Mitsubishi. The company also imports some PTA from Korea and Taiwan.
“This is the first third-party non-affiliate. The licence recognises the quality of BP’s technology and builds on the excellent relationship between our companies. Our PTA technology has significantly lower capital and operating costs, compared with conventional PTA plants. It is more energy-efficient, uses less water and produces less solid waste than its competitors. We have invested significantly in our proprietary technology,” said Nick Elmslie, chief executive of BP’s global petrochemical business.
“There are two routes to monetise this — investment and licensing. We have decided the maximum value to BP would be through investing in projects such as our Zhuhai 3 project in Guangdong, China, and through licensing,” he added.
Licensing to JBF is the first instance of BP licensing PTA technology to a company in which it hasn’t invested and has no stake.
Over the years, the PTA market has grown at a high rate. Asia now accounts for about 80 per cent of the demand, with China alone accounting for about 50 per cent. “The market has now attained such scale---50 million tonnes a year and growing at about seven per cent---that three to four world-scale plants would be needed every year. This creates material opportunity for us to add value by way of our technology,” said Elmslie.
According to B C Arya, chairman of JBF Industries, the investment in Mangalore would make the company’s integrated operations in India and the United Arab Emirates competitive in the long term.