Grappling with soft margins due to unprecedented pressure on decarbonization, India’s crude oil refiners have announced significant investments in petrochemical capacity expansion, aiming to reduce their carbon footprint and bolster revenue streams for future sustainability. These investments are envisaged from both public and private sector investors, amid oversupply and uncertain returns on low-carbon fixtures. The urgency for fresh ideas and innovative solutions continues to drive the need for upgrades.
Major petrochemical entities, including Bharat Petroleum Corporation Ltd (BPCL), Oil and Natural Gas Corporation (ONGC) Ltd, Indian Oil Corporations Ltd (IOCL), Hindustan Petroleum Corporation Ltd (HPCL), Reliance Industries, and Nayara Energy, have committed substantial investments in petrochemical ventures, indicating a move to diversify their portfolios beyond the traditional refining business. These crude oil refiners are now focusing on the production of petrochemical derivatives, such as polymers, for higher profit margins.
Speaking on the sidelines of a seminar Pankaj Jain, India’s Oil Secretary, stated, “India’s state refiners including BPCL, HPCL, and IOCL, would increasingly focus on boosting conversion ratios from crude oil to petrochemicals to 10-15 percent in the next few years, up from around 4-5 percent at present. The capacity expansion with significant investment aligns with India’s vision of becoming a net exporter of petrochemicals, reflecting the industry’s proactive approach towards sustainable growth.”
| New start-ups |
| Company | Grade | Capacity (‘000 tonnes) | Commencement |
| HPCL-Mittal Energy Ltd | HDPE | 450 | 2023 |
| Nayara Energy | PP | 450 | 2023 |
| HPCL-Mittal Energy Ltd | LLDPE/HDPE | 800 | 2023 |
| Hindustan Petroleum Corporation Ltd | LLDPE/HDPE | 550 | 2024 |
| Hindustan Petroleum Corporation Ltd | LLDPE/HDPE | 550 | 2024 |
| Hindustan Petroleum Corporation Ltd | PP | 1,000 | 2024 |
| Chennai Petroleum | PP | 475 | 2024 |
| Indian Oil Corporation | PP | 450 | 2024 |
| Indian Oil Corporation | PP | 200 | 2025 |
| Gas Authority of India Ltd | PP | 500 | 2025 |
| Haldia Petrochemicals | PP | 900 | 2028 |
Source: Industry
Capacity expansionsThe Indian petrochemical industry is planning to add massive production capacities of both polyethylene (PE) and polypropylene (PP) based on expectations of a rebound in long-term demand from both domestic and international markets. If implemented according to schedule, these capacity additions will not only reduce India’s dependence on imported petrochemicals but also create an oversupply, leading to price pressure in the near term.
According to reports, India plans to add 2.4 million metric tonnes per annum (MMTPA) of new PE capacities and 3 MMTPA of new PP capacities in the next three years. HPCL-Mittal Energy Ltd, a joint venture between state-run HPCL and the private company Mittal Energy, is preparing to commence commercial production on its 450,000 tonnes per annum of high-density polyethylene (HDPE) project, in addition to 800,000 tonnes per annum of linear-low density polyethylene (LLDPE) and HDPE capacity. Russia-backed Indian refiner Nayara Energy is working on a strategy to commercialize 450,000 tonnes per annum of PP production capacity by this month's end.
The government-owned Hindustan Petroleum Corporation Ltd (HPCL) proposes to commence two separate projects of LLDPE/HDPE production with capacities operating at 550,000 tonnes per annum each in 2024. Additionally, Hindustan Petroleum Corporation Ltd is commencing 1 million tonnes of PP project in 2024. Chennai Petroleum and Indian Oil Corporation have decided to commercialize their PP production capacity of 475,000 tonnes per annum and 450,000 tonnes respectively this year itself.
| India’s aggregate petrochemical demand |
| Financial year | Demand (million tonnes) | Demand growth (%) |
| 2024-25(f) | 61 | 7.02 |
| 2023-24(f) | 57 | 7.54 |
| 2022-23 | 53 | 8.16 |
| 2021-22 | 49 | 13..95 |
| 2020-21 | 43 | (-)8.51 |
| 2019-20 | 47 | 7.00 |
Source: Chemicals and Petrochemicals Manufacturers Association (CPMA); (f)=forecast
Indian Oil Corporation has yet another project of 200,000 tonnes per annum scheduled for commercialization in 2025. The public sector GAIL India has also proposed to commence a 500,000 tonnes per annum of PP plant in 2025. Additionally, Haldia Petrochemicals’ PP plant with a cumulative capacity of 900,000 tonnes per annum is expected to come on stream in 2028.
BPCL chairman Krishnakumar Gopalan, said, "We are aggressive on building refining capacity to cater to the emerging demand in the wake of a robust growth estimated for the Indian economy. Moving ahead responsibly, BPCL will be moving primarily from transportation to petrochemicals and balance capacity increase. Crude oil may have a significant presence in the world until 2050. The biggest challenge for Indian refiners is to continue expansion without compromising on carbon emissions.”
Echoing a similar response, Prasad Panicker, Head of refineries at Nayara Energy, commented, “We are commencing our maiden journey into the high-growth petrochemicals industry, keeping in mind the vision to transform India into a net exporter. Our expansion project would have a propylene recovery unit/polypropylene unit project at our Vadinar refinery.”
| India’s petrochemical production (‘000 tonnes) |
| Categories | FY 2022-23 | FY 2021-22 | Variations (%) |
| Synthetic fibre | 4,006.38 | 4,040.01 | (-)0.83 |
| Fibre intermediate | 4,988.03 | 5,481.67 | (-)9.01 |
| Polymers | 11,486.62 | 12,470.65 | (-)7.89 |
| Synthetic rubber | 344.86 | 382.63 | (-)9.87 |
| Synthetic detergent intermediates | 703.02 | 780.39 | (-)9.91 |
| Performance plastics | 1,960.16 | 1,697.68 | 15.46 |
| Olefins total | 11,296.05 | 12,527.02 | (-)9.83 |
Source: Department of Chemicals and Petrochemicals, Government of India
HPCL-Mittal Energy Ltd was considering adding new capacity to its plant at Bhatinda, Punjab. The move aims to tap into new revenue streams while mitigating the cyclicality inherent in the oil and gas industry. The expansion aligns with India’s vision of becoming a net exporter of petrochemicals, reflecting the industry’s proactive approach towards sustainable growth.
Robust long-term demandIndia’s petrochemical demand is projected to rise by 7.5 percent, reaching a record high in the current financial year 2023-24. This growth is attributed to the forecast of robust economic growth fuelled by the government’s massive infrastructure spending and the resurgence of post-pandemic consumer activities. After contracting in the financial year 2020-21 due to pandemic-related disruptions in factories and trade, India’s petrochemical consumption rebounded and outpaced the growth of the gross domestic product (GDP).
According to a report compiled by the apex industry body, the Chemicals and Petrochemicals Association of India (CPAI), India’s petrochemical demand is expected to reach 57 million tonnes per annum (MTPA) in the financial year 2023-24, compared to 53 MTPA reported in the previous financial year. In the financial year 2024-25, India’s petrochemical demand is forecasted to remain at 61 MTPA. This growth projection signifies an increase in the consumption of petrochemical value chains in the future and a healthy growth rate for the industry.
Except for a significant contraction in the financial year 2020-21 due to a slowdown in industrial activities, the overall demand for India’s petrochemicals and raw materials has consistently surpassed the country’s economic growth. According to the recently released report titled ‘Indian Petrochemical Industry 2023’, India’s petrochemical demand declined by 8.5 percent to 43 MTPA in the financial year 2020-21, compared to 47 MTPA in the previous year. India’s National Statistical Office (NSO), under the Government of India, reported a GDP de-growth at (-)6.6 percent (revised from -7.3 percent earlier) for the financial year 2020-21, in contrast to the 4 percent growth recorded in the previous financial year.
Following the de-growth, India’s petrochemical demand gained momentum in the financial year 2021-22, driven by an overall economic recovery and a resurgence in factory activity. As the pandemic’s impact subsided, primary petrochemical and derivative resumed their business activities, coinciding with the recovery in consumer demand. Since then, India’s petrochemical demand for gas consistently surpassed the growth of the country’s economic growth.
Value-added product demand upThe report also highlighted that the demand for products in the petrochemical value chain in India is expected to accelerate simultaneously. Polyolefins are projected to witness a growth at 7.7 percent, while surfactants and synthetic rubber are expected to record phenomenal growth rates of 6 percent and 6.1 percent respectively, in the financial year 2023-24. Other key petrochemicals, according to the CPAI report, may also experience a growth of 9 percent in the financial year 2023-24.
The leading industry body representing the entire petrochemical industry in India further asserts that the vision for the next five years for this sector is to achieve investment-led growth, primarily driven by the private sector. To accomplish this objective, the government is diligently working on policies to attract investment from both domestic and foreign sources. The work plan includes further liberalizing the direct investment (FDI) policy, simplifying labour laws, enhancing the ease of doing business, implementing power sector reforms, and last improvement in banking, insurance, and pension sectors.
Apart from these, the government’s ongoing efforts to promote economic development in India are the main factor influencing the expansion of the petrochemical industry. The government implemented several initiatives to improve the industry’s overall competitiveness, quality, and output. Initiatives such as ‘Make in India’, the ‘Aatmanirbhar Bharat’, and the ‘Production-linked Incentive (PLI) Scheme’ have been implemented to attract domestic manufacturing and facilitate exports.
Meanwhile, the industry has taken several measures to promote growth with the introduction of innovative products. These include mandatory standards set by the Bureau of Indian Standards (BIS), public procurement policies for chemicals and petrochemicals, schemes for establishing plastic parks, and adequate support for research and innovation through the establishment of centers of excellence. All these policy initiatives, along with the low cost of manufacturing capital goods and manpower, and the overall demand scenario, are boosting business confidence to plan larger petrochemical complexes in India.
With substantial capacity additions planned in both primary production and end-product consumption, the Indian petrochemical industry could witness the implementation of new projects worth approximately US$144 billion (over Rs 10 lakh crore) as the country seeks to bridge the gap between the shortage of domestic supply and the increasing consumer demand.
Road aheadIndia’s annual petrochemical consumption is likely to increase to 80 MMTPA by 2040, forcing the country either to invest immensely in building new capacity or increase imports. Population growth, development, and economic expansion are set to drive the demand. Presently, as Asia’s third-largest economy, India annually consumes around 57 MMTPA of various grades of petrochemicals, with the per capita consumption standing at a third of the global average.
DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com
