NextGen Summit: Petrochemical stalwarts bullish on domestic opportunities

NextGen Summit: Petrochemical stalwarts bullish on domestic opportunities

Industry members exchanged views on increasing access to latest petrochemical technologies, setting up of more PCPIRs, incentives for setting up new units, import substitution, and availability of feedstock

  • By ICN Group | October 22, 2021
The global uncertainties due to COVID-19 pandemic led to huge impact on traditional demand in various industries and petrochemical was no different but it has come unscathed, says Saugata Chaudhuri, Head - Petrochemicals Marketing, Hindustan Petroleum Corporation Limited.
Chaudhuri says, “Refineries across the globe and India as well were trying to cope up with the demand disruptions due to the lockdown. As a result, petrochemical plants had to balance their operating costs and even reduce their maintenance costs. The situation improved after November 2020 but then a storm hit North America, causing disruptions in supply. What followed was the increase in freight rates and shortage of containers. Consequently, trade became more regionalized. Currently, the demand is bullish and we expect that demand will improve after 2021." 
"We have to understand that the petrochemicals market is dependent on many factors. For example, polyethylene demand has been more resilient, given its use in non-consumable products like food packets. Consumer durables, automobile segments supplemented polyethylene demand. If we look into polypropylene, its demand bucked the odds due to its use in fabrics for PPEs and masks as well as food containers for delivery. With crude oil prices dropping, the prices of naphtha and LPG too went down. Eventually naphtha and LPG based crackers benefited greatly as the majority of petrochemical plants in India are based on it. In aromatic space, benzene, toluene and xylene, the demand has been bearish in India and globally, causing the shift towards naptha which is a major feedstock," added Chaudhuri. 
Chaudhuri was speaking alongside other petrochemical industry stalwarts at the ‘NextGen Chemicals & Petrochemicals Summit 2021’ organized by Indian Chemical News from 7-8 October, 2021. Titled as ‘‘Petrochemicals: Driving Sustainable Growth’, the panel discussion was moderated by Sudeep Maheshwari, Partner, Kearney India.
“It is the time to move into a bigger league of petrochemical producing nations globally. The setting is pretty good today as our consumption demand is about 40 million tonnes, as compared to the world demand of 350-400 million tonnes. Nearly 40 percent of petrochemicals are imported by us, which means we make about 25 million tonnes and the balance is imported. To bridge the deficit, we need a proper investment plan. Another opportunity area to be tapped is our emergence as an alternative to China as I am sure multinationals are looking at India as a potential investment destination. If we look at imports, we are importing 200 million tonnes of PVC into India. The reason for importing, despite having so many manufacturers here, is the expensive power consumption and other factors required for it. We import 700 tonnes of styrene and nobody is making it here, which again is a great opportunity. Again, a million tonnes of acetic acid is imported which can be made here. We are planning to invest in a 300 million tonnes TPA plant," said B. Narayan, Group President - Procurement & Projects, Reliance Industries Limited.
To move forward, we need to know how to use renewable energy options. At manufacturing facilities, companies can replace fossil fuels with solar energy to reduce the carbon footprint. In this direction, our company has set a big goal of achieving net zero by 2035. It is a strong challenge but we are steadily moving towards that,” added B. Narayan. 
“India is an attractive investment destination for petrochemical players. Our projection is that by 2025 we will achieve US $300 billion. Be it our policies and government initiatives such as PCPIR, we are having high demanding positions. We are encouraging infrastructure, logistics, ease of doing business, and a strong consumer market. We will have a 1.03 billion young population by 2030 which will help in meeting the requirements of skilled manpower. Development of five industrial corridors will attract investors. We have 3,382 industrial parks with a highly encouraging ‘Make in India’ programme, besides US $357 billion in FDI. The PLI scheme is expected to benefit domestic manufacturers. Industrial licensing has been abolished in all sub sectors except in case of a few hazardous chemicals. Skill development programmes are going on across India to create a technologically sound workforce. Among the few areas where we can do better in the petrochemicals sector are driving sustainable growth, better capacity utilization, increasing the production and custom duty reduction," says Sanchita Banerjee, Executive Director - Special Projects, Oil India Limited.
“When a company plans its foray into the petrochemical derivatives, the question asked is whether it should go like others or take the niche way which sounds lucrative but has roadblocks. These are accessibility to highly guarded technology, feedstock availability and complexity of marketing. Firstly, based on our experience the niche petrochemical technologies are not readily available as these are developed in-house by the manufacturing companies based upon their decades of R&D. Only way to access the technology is to go for joint ventures. Second, the obstacle is the availability of feedstock which is refinery oriented. India has only one standalone naphtha cracker which is Haldia Petrochemicals whereas in Middle East and US where you find abundant gas supply, leading to best contribution by petrochemical assets, not available in India. Local players have evolved their setups mostly from refineries as the motive of the integration is to get feedstock and also to drive cost benefits and competitiveness," says Subikash Jena, Executive Director - I&C, Bharat Petroleum Corporation Limited.
The focus is on the basic commodity products where technology licenses are available. As a result, the options for downstream derivatives are lacking. That’s the reason industries are not coming up with products such as polyacrylates. Complex marketing setup leads to increase in costs. Even niche products produced by SMEs for the Middle East have no clear marketing strategy," added Jena. 
“All the sub-segments within petrochemicals require specific analysis and attention. For example, India is the net exporter of benzene and butadiene while being net deficit on the downstream side. By 2040, we will see Ethylene deficit by 12-15 million tonnes and Propylene deficit by 60 million tonnes. It is an important issue to be addressed by the industry. Certain steps need to be taken which include maximizing the utilization of existing naptha plants and also replacement of naphtha by natural gas. Currently 7-8 million tonnes of naptha which is scattered across the country is being exported. There is a need to club the naptha together and then replace the refinery fuel with natural gas, to set up the three world size crackers. Another option is that we can set up olefin based production. Indian refineries are said to have a surplus of 8 million metric tonnes of petrochemicals after taking into account whatever gasification projects are being thought of," says Manoj Jha, General Manager - Petchem Strategy, Indian Oil Corporation Limited.
Government can provide incentives to set up gas and condensate for import infrastructure purposes. As an alternative to feedstock import, intermediates can be manufactured in the surplus countries and then imported for the finished products in India. We have to focus on refinery integrations and adoption of newer technologies,” added Jha. 
Sudeep Maheshwari, Partner, Kearney India believes that petrochemicals are a rising star in India, especially when in the last decade it has grown by 7-10 percent. 
"What is more exciting is that this journey will continue further as India is deficit in petrochemicals and will require at least one world scale cracker every year to ensure that imports don’t shoot up. We have a robust demand, new announcements to fix supply chains, and policy wise we need to encourage the sector more. In terms of policy decisions by the government, setting up of PCPIRs such as one in Dahej has been a great decision. But then a lot of others are yet to take off,” added Maheswari.

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