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India’s manufacturing sector may not be seeing an investment pick-up but major petrochemical companies are in the process of mega investment plans for capacity enhancement.
Reliance Industries (RIL) commissioned the first phase of a paraxylene (PX) plant at Jamnagar, Gujarat, last month; it says it hopes to become the world’s second-largest PX producer on full commissioning. Government-owned GAIL (India) and Hindustan Petroleum Corporation (HPCL) plan a Rs 30,000-crore petrochem unit in Andhra Pradesh.
IndianOil Corporation (IndianOil) — that exports to 70 countries — plans to invest Rs 34,000 crore in a petrochem complex at Paradip in Odisha by 2021. The first unit, to produce polypropylene, is scheduled to be completed at a cost of Rs 3,150 crore by December this year. Bharat Petroleum Corporation (BPCL) is planning a propylene derivative petrochem project at its Kochi refinery, at a cost of Rs 4,600 crore.
GAIL’s plant, at Andhra Pradesh, is part of a plan to expand its presence in petrochemicals. The unit will have three feeds — naphtha, ethane and propane. Naphtha will be supplied from the Visakhapatnam refinery of HPCL, through a 150-km pipeline. The ethane and propane feeds will be imported, via the Kakinada port. The complex will produce a million tonnes of ethylene with derivatives, to go into manufacturing of detergents, paints and coatings, cosmetics and textiles. A detailed feasibility report (DFR) is under work. “It will take probably six months for the DFR, financial appraisal and approval process to complete,” B C Tripathi, chairman and managing director of GAIL, told this newspaper.
GAIL and HPCL joined hands after HPCL’s plans to team with France’s Total, the Lakshmi N Mittal Group and Oil India for a 15-million tonne a year unit at Visakhapatnam was put on the back burner, citing viability issues. The two companies are now in talks to bring in a third partner. There are also plans to import ethane from the US for the plant.
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GAIL has interest in three petrochem plants, including its own complex at Pata in Uttar Pradesh that has been expanded to a capacity of 81,000 tonnes annually. It has 70 per cent equity in a joint venture company, Brahmaputra Cracker and Polymer (BCPL), at Dibrugarh, Assam. GAIL also has stake in Oil and Natural Gas Corporation Petro additions’ (OPaL) new petrochem project at Dahej, to produce high and low density polyethylene, or PE, (HDPE and LLDPE) and polypropylene.
“We are also working on stabilisation of our plant at Pata, where we have reached capacity utilisation of 70 per cent. We will try to scale up Pata and BCPL to 100 per cent utilisation over the next five-six months,” said Tripathi. BCPL, at Lepetkata in Assam, has a capacity of 280,000 tonnes per annum.
Though India imports certain categories of petrochemicals, it is also an exporter of some. RIL and IndianOil have been exporting petrochemicals for some time now. GAIL entered the overseas market for the first time this year with about 7,500 tonnes of polymer exports so far to Bangladesh, Nepal, Vietnam and China. GAIL produces HDPE and LLDPE. They account for 88 per cent of India’s total PE consumption.
According to a recent HDFC Securities report, PE consumption in India grew at a compounded annual growth rate (CAGR) of seven per cent in the five years ended 2015. However, production grew only a five per cent yearly. “This has made India a net importer of PE. The import share in total consumption has increased from 14 per cent in FY08 to 42 per cent in FY15.” However, over the next two to three years, the demand-supply scenario will reverse. Indian players are almost doubling total PE capacity, which remained 2.9 million tonnes a year over those five years.
“RIL, GAIL, IndianOil and Haldia Petrochemicals (HPL) are key PE players in India. HPL was operating at lower utilisation due to working capital funding issues,” the report said.
It cited studies by Assocham and GAIL to suggest demand for PE in India will rise at a CAGR of eight per cent over the next few years. “Indian will again become a net importer of PE in two years, even if all planned capacities come online,” said the report.
Refinery plans of all petroleum refiners are linked to their petrochem plans. BPCL, for instance is investing Rs 4,600 crore, out of its Rs 1.65-lakh crore expansion plan for its Kochi refinery, in a propylene derivative petrochemical project. The company expects to complete the refinery expansion by the end of FY17 and to start operations in 2017.
RIL’s investment in the PX project referred to at the outset is part of its refinery and petrochem expansion. “Commissioning of the new PX plant marks the beginning of the culmination of a series of projects, including the refinery off-gas cracker, ethane import project and petcoke gasification. These projects are part of the largest contemporary investment, in excess of Rs 1 lakh crore, in refining and petrochem anywhere in the world,” said Mukesh Ambani, chairman, RIL, after commissioning of the first PX unit last month. After full commissioning, RIL’s capacity in PX will more than double to 4.2 million tonnes.
