Cabinet Approves Reliance Gas Cracker

Dual feedstock of natural gas and naphtha cleared for increased capacity

The Union cabinet has cleared Reliance Industries Rs 4,300 crore Assam gas cracker. The petrochemicals project had been hanging fire for nearly seven years due to controversy over technical and economic aspects.

The dual feedstock system sought by the promoters has been approved. The plant will utilise natural gas as well as naphtha to manufacture ethylene. The government has given a commitment that natural gas and naphtha sufficient for a capacity of 4 lakh tonnes will be made available to the project. It has also cleared ownership of the gas separation plant by Reliance Assam Petrochemicals, a joint venture between Reliance Industries and the Assam government.

 

Now that the cabinet has cleared the project, Reliance Assam Petrochemicals is planning to tie up with Oil & Natural Gas Corporation and Gas Authority of India Ltd for supply of natural gas, and with Bongaigaon Refinery & Petrochemicals Ltd for supply of naphtha.

The gas cracker project, a joint venture between Reliance Industries and the Assam government, will have a debt-equity ratio of 2:1. Of the equity component, Reliance will hold 40 per cent and the state government 11 per cent, with the rest held by the public.

The company had earlier sought from the ministry of chemicals & petrochemicals a commitment to making available up to 2 lakh tonnes of gas and 4 lakh tonnes of naphtha in order to make the plant financially viable.

Industry sources say an increase in the output capacity has been necessitated by the dual feedstock system, which needs a capacity greater than the 3 lakh tonnes envisaged originally. As a result of the proposed increase in capacity, the cost of the gas cracker project could escalate by a whopping Rs 800 crore.

The revised cost estimate stands at Rs 4,300 crore, against the original estimate of Rs 3,600 crore. However, industry sources say this is a preliminary estimate and will change substantially in the future. Besides the dual raw material base, which will push the cost sharply higher, the revised cost will also take into account the increase in capacity. However, the increase in cost will not alter the equity pattern, say sources.

The gas cracker project was also mired in a management problem regarding the air separation plant, which is an integral part of the project. According to experts, the project is facing cost overruns amounting to Rs 1 crore per day due to the delay.

The Assam government has been keen to get all the clearances from the ministry of chemicals and petrochemicals so that the project can be executed this year. According to the state government, the project will help recycle gaseous wastes from petroleum refineries.