NextGen Summit 2022: Indian petrochemical industry has strong demand fundamentals

NextGen Summit 2022: Indian petrochemical industry has strong demand fundamentals

Improving access to technology and setting up one new cracker plant each year critical for the industry to gain self sufficiency

  • By ICN Bureau | August 19, 2022

The Indian petrochemical market is expected to witness a significant expansion owing to the strong market fundamentals and rapid growth in petrochemical demand. The key drivers include robust GDP outlook, under penetrated markets, rapidly growing end-user industries, and significant import substitution opportunity. 

Experts point out that to help the demand grow, the country would need access to technology and one new world scale cracker plant every year to move towards self-sufficiency. In this context, the leading industry stakeholders shared their views on the current scenario in the Indian petrochemical market at the ‘NextGen Chemicals & Petrochemicals Summit 2022’ organized by Indian Chemical News on July 21, 2022. The panel discussion themed, “Petrochemicals: Speeding up investments” was moderated by Dr Sudeep Maheshwari, Partner, Kearney.

The demand is definitely very good as last year we witnessed almost year-on- year 9% growth which is highest in the world, says Chandan Sengupta, Senior Advisor-Marketing & CBT, Haldia Petrochemicals Limited.

“This year too we are looking at good growth and even for the next 25 years we are looking at significant growth. Government has a ‘Perspective Plan 2040’ where they are looking at an annual CAGR of 8%. In the petrochemical space, we are going to witness changes in feedstock usage besides a whole lot of impact with regard to regulatory and sustainability. Therefore, we are going to see a lot of changes including the usage of single use-plastics. We have seen the usage pattern changing more towards infrastructure and single material multi-layer packaging. I think technology is going to be quite the biggest game agent going forward. We are going to witness the companies adopting technological changes at both downstream and cracker level,” Sengupta.

 Multinationals by the way they operate across various environments and countries like to live within a matrix, guided by a set of principles in their day to day business for stability, says Mathew George, General Manager-Corporate Planning, Indian Oil Corporation Limited.

 “I would say we are yet to provide the right kind of business environment. Our intent is at the right place and we do want to provide those matrices but sadly we have not. MNCs have adopted a careful attitude towards investing in India partly due to some kind of negative publicity and perception that arises out of it. There is also a concern that when they take an investment decision, 5-10 years down the lane they have to fear the taxes or other barriers. Another factor that holds back the MNCs from investing is lack of feedstock. Technology access There are critical products like super absorbent polymers which given the growth of feminine sanitary products and baby diapers has good potential. But we have not been able to gain access to the technology. Due to being an inherently low margin market, MNCs might not feel encouraged. To change that, we need a collaborative approach,” opined George.

Indian petrochemical infrastructure has evolved through an integrated approach, largely driven by refiners who are in lookout for better realization, says Tarun Kumar, General Manager-Petrochemical Marketing, Bharat Petroleum Corporation Limited.

 Kumar elaborates further: “The focus also remains on the commodity chemicals where technology licensees are readily available and easier to get. Barring BPCL which has come up with the propylene based petrochemicals and IOCL which is on anvil of taking up ethylic acid and some of the esters, but there is still a limited capacity as far as down-streaming derivatives in specialty segments is concerned, whether it is C1, C2 and C3 building blocks. But if India has to overcome all this, it requires massive infrastructure which becomes a major challenge to the growth of the petrochemical industry. If India has to overcome the challenges, we need to emulate the way Belgium and Jurong have shown the direction.  We need to have a framework or masterplan to integrate them. Conceptualizing this, we should be building common utilities such as cryogenic pipelines. Direct investments into petrochemicals, e-examining the tax structure, joint ventures on technology between Indian manufacturers could be the answer.”

We are dependent on technology in petrochemicals unlike chemicals where we are still manufacturing many key chemicals, says Joy Shah, Founder & Chief Consultant, Innov8 ProTech Solutions.

 “We can divide into first and second generation technologies. Few of these are available and, therefore, setting up of plants is easy. In my view, 42-43% of the molecules have commercial technologies available and there are two people competing with each other to develop the products. That is 43% of the total trade deficit. 57% is closely guarded technology that can’t be afforded due to high cost. We have to roll out the red carpet for the MNCs as we can’t develop the technologies so fast. At the same time, we have positive developments such as PCPIRs and petrochemical parks. Another factor is the joint ventures with MNCs that can help in the development of technologies. If we look at China, every alternate month there is news that they have developed a new technology. India has got a good research infrastructure including engineers and scientists as well as a market. What is required is direction, interpretation and collaboration,” adds Shah.

 In terms of digital transformation, we have a long way to go. It will become a necessity in the next ten years. There will hardly be any other option as the feedstock will be less and feedstock optimization will help through pattern recognition and cumulative AI, says Chetan M. Badhe, Senior Manager-Digitization, IG Petrochemicals Limited.

“The petrochemical industry, food industry has already initiated it. Predictive maintenance, design simulator and now 3d simulator, management information system, Smart supply management to allow us to get in time raw material. Going forward, we have to get digitalization of products, processes and people. The digitalization of a product means its enhancement, its better delivery in a sustainable manner. By digitalization of process we mean predictive analysis where the operator can take an early action for tripping of equipment. The digitalization of people will require a change in mindset. There has to be proper training of the talent with 3D simulators. Plug and play IoT devices can be used to get data out of equipment. Similarly, the simulations such as designing plants. If the new operator is trained on a new system, he can make fewer mistakes,” said Badhe.

“The select headwinds that are impacting the pace of petrochemical investments in India include slow land acquisition and environmental clearance due to which a lot many projects got shelved. In several petrochemical products the technology is very guarded and we have to import these. The access to feedstock and building block availability is another concern area as it is only limited to players that have refineries. Therefore, the broader access to derivatives is not available due to lack of building blocks. There is a talk about chemical parks and PCPIRs but these have been slow to come up. Capex inflation in the longer run is going to challenge the investments,” commented Dr Sudeep Maheshwari, Partner, Kearney.

The NextGen Chemicals & Petrochemicals Summit 2022 was supported by the leading names of the industry. The platinum partner was Elliot Group. Regulatory Knowledge Partner was GPC. Gold partners of the event included Ingenero, Premier Tech, Carbanio and Deepak Nitrite. Among the associate partners were PIP and Huntsman. The industry partners of the event included AMAI, Croplife India, and ACFI.

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