BPCL may import Ethane from US for its petchem unit

Last year, RIL announced ethane imports from the US to save Rs 2,000 crore in it petchem units

State-run Bharat Petroleum Corporation (BPCL) could look at importing ethane from the United states to power its refineries.

If BPCL goes ahead with its plan, it will be the second company to do so after the Mukesh Ambani-led Reliance Industries.

"Ethane is available in abundance in the US. We are evaluating the future of ethane in this country and studying if there is demand for the fuel in India. We could use it to fuel our ventures. The cost of importing and the savings the fuel is being worked out," said an official from BPCL. 

BPCL has an integrated refinery expansion project at Kochi at the cost of Rs 14,225 crore augmenting its refining capacity to 36.5 million metric tonnes per annum (mmtpa) from the present 30.5 mmtpa which is about an increase of 20% in refining capacity. An additional 5.3 mmtpa of petroleum products will be available in the market after the expansion.

Due to the US shale gas revolution, there is a surge in production of natural gas liquids (NGL) supply, impacting US LPG exports. Ethane is the cheapest and most abundant NGL available from the shale gas revolution. 

Ethane is used as a petrochemical feedstock. The ability of a petrochemical plant to switch feedstock slates to be able to run ethane rather than competing feedstocks, particularly naphtha, propane, butane and gasoil as a feedstock.  

The cost of feedstock is the largest that petrochemical companies bear. Currently are three naphtha based, three gas based and one mixed feed cracker complex in the country. Feedstock accounts for 40-60% of total costs.

While naphtha for petrochemical units is easily available, propane and butane are not easy options considering the pricing and domestic availability. LNG imports have therefore been an increasingly resorted to.

Reliance Industries said August 2014 that it is sourcing 1.5 million tonnes per annum (mtpa) of ethane from the US to feed its crackers in India. RIL at present is primarily a Naphtha-based petrochemical player. 

The ethane imports could save RIL Rs 2,000 crore annually, analysts estimate.

In December 2014 RIL signed shipping agreements with one of the world’s largest shipping companies Mitsui OSK Lines Ltd (MOL) to transport liquefied ethane from North America to India. MOL will supervise the construction of six Very Large Ethane Carriers (VLECs), ordered by Reliance. MOL will also operate and manage the vessels after they are built and delivered. 

RIL said it had executed storage and capacity agreements for liquefaction and export of ethane with a North American Terminal, which is expected to commence operations in the second half of 2016. 

"The ships are expected to be delivered starting last quarter of 2016 in synchronisation with the readiness of terminal in North America. Proposed capex of $1.5 billion (Rs 9,000 crore) for this includes $723 million (Rs 4,338 crore) for building six of the world’s largest ethane carriers through Samsung Heavy Industries, South Korea. Imports will commence from second half of calendar year 2016," RIL had said in August 2014.

Reliance is also building a world-scale receiving and storage facility in India for liquefied ethane and pipeline to deliver ethane to its crackers. Reliance will be upgrading its crackers to maximize cracking of Ethane.

RIL is nearly doubling its petrochem capacity by FY16. Over 60% of RIL’s $30 billion (1.8 lakh crore) plan over five years is towards core businesses.