BPCL to form JV with LP Chemical

To set up a petrochemical plant at Kochi refinery, marks foray into sector.

Bharat Petroleum Corporation Ltd (BPCL) will shortly seal a deal with the UK’s LP Chemical for a maiden foray into petrochemicals.

A senior BPCL official said the state-run company would form a joint venture with LP Chemicals, based in Winsford off Cheshire, to set up a petrochemical plant at its Kochi refinery in Kerala.

“The negotiations are on. We will seal the deal soon,” he told Business Standard. “Our investments will be to the tune of Rs 13,000 crore and our partner will bring in Rs 6,000 crore. We are looking at 2015 as the deadline.”

Petrochemicals are chemicals made from petroleum (crude oil) and natural gas. BPCL is engaged in discussions with the Kerala government for concession on the investment in the planned petrochemical unit, the official added.

LP Chemicals manufacture and distribute laboratory chemicals and veterinary chemicals to customer specification.

This September, at the company’s annual general meeting, R K Singh, who is BPCL’s chairman and managing director, had announced the company’s plans to spend Rs 40,000 crore in the next five years to set up a petrochemical plant at the Kochi refinery to produce niche products, expand the capacity of existing refineries, gas marketing and exploration and production.

Another BPCL official said the company expected good growth in the petrochemical sector. “It has seen a growth rate of over 16 per cent per annum in the past few years. Polymers constitutes almost 70 per cent of the output in India,” he added.

India’s petrochemical industry is estimated at $700 million annually. About 70 per cent of it is constituted by Reliance Industries Limited, Indian Petrochemicals Corporation and Gas Authority of India.

The BPCL official said the company was looking at producing 500,000 tonnes of propylene derivatives yearly, which are imported at present. “Our partner is a licensor of the speciality chemical we are planning to produce,” he added.

The company is also working on a pre-feasibility report to set up a liquefied natural gas terminal, with an investment of around $1 billion (Rs 4,700 crore). The terminal will have a capacity of five to six million tonnes and it is working on two locations, one on the east coast and the other on the west.

Also, BPCL is planning to expand its Kochi and Mumbai refineries. The 12-million-tonne refinery at Mumbai would be expanded by two-three million tonnes per annum by means of yield optimisation and operational efficiencies.

BPCL, which commissioned its grassroot refinery at Bina this May, said the endeavour in Madhya Pradesh was expected to stabilise by year-end.