The public sector exploration company Oil and Natural Gas Corporation (ONGC) has allocated a capital expenditure of US$1.2 billion to construct two petrochemical projects in India as part of its plan to augment the production capacity of its existing products portfolio. However, this capital expenditure for establishing two grassroots projects will broaden ONGC’s horizon and enhance its potential for future capacity expansions.
According to reports, ONGC will expand its petrochemical production capacity with this substantial capex amidst forecasts of continued diminishing demand for crude-oil-based derivative products such as transportation fuels. Proposed to be situated in two different states, these petrochemical projects are slated for completion by 2028 or 2030. While speaking with analysts after declaring its July-September quarterly earnings last week, the company confirmed its commitment to setting up these two petrochemical projects.
These projects are intended to boost ONGC’s current petrochemical capacity from approximately 3.4 million tonnes per annum (tpa) to at least 8.5-9 million tpa. Although these proposals have received approval from the company board with planned investment projects, ONGC is actively seeking joint venture partners for at least one project. ONGC is yet to seek approval for these projects from the regulator, and the concerned ministries, namely the Ministry of Petroleum and Natural Gas and the Cabinet Committee on Economic Affairs. The government-owned company has not disclosed further details about these projects.
| India’s aggregate petrochemical demand |
| Financial year (April-March) | Volume (million tonnes) | Growth (%) |
| 2024-25 | 61 | 7 |
| 2023-24 | 57 | 7 |
| 2022-23 | 53 | 8 |
| 2021-22 | 49 | 13 |
| 2020-21 | 43 | (-)6 |
| 2019-20 | 47 | 7 |
Source: Chemicals & Petrochemicals Manufacturers’ Association (CPMA)
However, the company announced in its financial year 2022-23 annual report that it is examining multiple brownfield and greenfield options for increasing its current petrochemical production capacity based on the assessment of the International Energy Agency (IEA), which forecasted the petrochemical industry to become the primary driver of oil consumption in future. IEA projected that the petrochemical industry will drive at least a third of the growth in oil demand by 2030.
| OPaL’s petrochemical complex in Dahej, Gujarat |
| Product | Capacty (tonnes per annum or tpa) |
| High-Density Polyethylene (HDPE) | 340,000 |
| HDPE/ Linear-Low Density Polyethylene (LLDPE) | 720,000 |
| Polypropylene | 340,000 |
| Benzene | 150,000 |
| Butadiene | 115,000 |
| Carbon black | 70,000 |
| Hydrogenated Pyrolysis Gasoline | 165,000 |
Source: Oil and Natural Gas Corporation
Energy Strategy 2040Under ONGC’s ‘Energy Strategy 2040’ plan, ONGC is looking to diversify its business from the oil to the petrochemical sector as part of its transformation strategy to balance current strategy needs on its journey to a lower-carbon future in line with the global energy transition. Earlier, ONGC had said that it was exploring opportunities for setting up two oil-to-chemical (O2C) grassroots plants within India that would use O2C technology to enable transforming 40-60 percent of crude oil feedstock directly into chemicals.
The O2C plans are intended to complement the planned petrochemical projects. Presently, ONGC produces petrochemicals through subsidiaries Mangalore Refinery & Petrochemicals Ltd (MRPL) and ONGC Petro additions Ltd (OPaL). Further, at its 15-million tpa integrated refining and petrochemical complex in Karnataka, Mangalore, MRPL houses a gas-based polypropylene plant capable of producing a complete range of homopolymer grades.
A slowdown after initial growthA significant increase in the fund allocation for the construction of greenfield infrastructure projects and the renovation of brownfield ventures is likely to drive India’s petrochemical demand into high single digits over the next two years, as stated in the latest report released by the Chemicals & Petrochemicals Manufacturers’ Association (CPMA). The report, titled ‘An Overview – India Petrochemical Industry 2023’ forecasts India’s petrochemical demand to reach 7 percent for the current and the next financial years, aiming to reach a staggering 61 million tonnes by the end of 2024-25.
However, this growth represents a substantial moderation from the 13 percent expansion to 49 million tonnes recorded in the financial year 2021-22, followed by an 8 percent jump to 53 million tonnes, witnessed in the financial year 2022-23. The report added that the dwindling economy due to the pandemic’s spread caused India’s petrochemical demand to decrease by 6 percent to 43 million tonnes in the financial year 2020-21.
In fact, the level of petrochemical penetration in India is much lower than the global average, with the country’s per capita consumption standing at 12 kgs compared to the world average of 35 kgs. Presently, at a third of the global average, India’s per capita petrochemical consumption offers significant room for growth in the future. The pandemic outbreak in the financial year 2019 and its devastating worldwide spread in the next two years brought about various changes in the Indian petrochemical market, including digitization, increased consolidation activities, and a focus on scenario-based planning.
Growth driversSeveral Indian state-owned energy companies are making major investments to boost their petrochemical activities and are expected to become significant players in the sector. Despite the factor cost disadvantages, domestic manufacturers have committed thousands of crosses of rupees to create new capacities in petrochemical products. The Indian petrochemical industry could see around US$ 144 billion (over Rs 10 lakh crore) worth of new projects as the country moves to bridge the gap between the shortage of domestic supply and increasing consumer demand.
Moving forward, the planned investments on the drawing board would require some government support and benefits so that they can come to fruition and generate more job opportunities in the country. CPMA estimates that the outlook for the petrochemical industry in India is more positive than ever before, as state-owned energy corporations have made investments to boost petrochemical feedstock availability and extend their presence in the downstream derivatives market.
Petrochemicals are the key raw materials for manufacturing polymers, which are further processed to make plastic. Due to their chemical flexibility and a shelf life of around 450 years, plastic has acquired a significant position in day-to-day life. Unfortunately, only a small portion of used plastic is transported today for recycling, while a substantial volume of it is used as landfill.
A large quantity of used plastic remains unattended in the open air, which is gradually incinerated into water bodies including ponds, rivers, and seas. Mismanaged plastic in any form adds to soil, air, and water pollution. Consequently, several countries, including India, have banned single-use plastic (SUP) products and have implemented regulations to discourage the use of plastic products and promote alternatives to protect the environment.
DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com
