Nayara Energy plans US$ 8-bn capital expenditure for 1.5 MMTPA ethane cracker

India’s second-largest crude oil refiner, Nayara Energy, plans to invest US$8 billion (Rs 68,000 crore) to set up a 1.5 million tonnes per annum (MMTPA) ethane cracker at its existing location, according to a media report citing sources. Nayara Energy, an oil refining and marketing company, owns and operates the Vadinar refinery in Gujarat, which has a capacity of 20 MMTPA, making it the second-largest refinery in India.

This proposed investment marks the first substantial capital expenditure (capex) by an overseas company in India’s petrochemical sector. According to the report, Nayara has commenced front-end engineering work for the petrochemical project. Rosneft and United Capital Partners hold a 49.13 percent stake each in Nayara Energy, while Kesani Enterprises owns the remaining share. The company currently operates 6,000 retail fuel outlets across India, the highest for any private oil company in the country.

The Vadinar refinery is supported by extensive infrastructure, including a crude oil tanker facility, water intake systems, a multi-fuel power plant, a product jetty, and dispatch facilities via rail, road, and sea. Previously known as Essar Oil Ltd, Nayara Energy was privatized in a leveraged buyout that closed on December 30, 2015. Essar Oil was delisted at a valuation of US$5.3 billion (Rs 380 billion).

In 2017, a Rosneft-led consortium acquired Essar Oil for US$12.9 billion and rebranded it as Nayara Energy. The company is now expanding its capacity to strengthen its presence in the petrochemical and alternative energy sectors. It has already set up a polypropylene unit at Vadinar.

An email sent to Nayara Energy seeking comments did not elicit a response. India presents immense opportunities in the petrochemical sector due to growing domestic demand. An ethane cracker breaks down hydrocarbons, a component of natural gas, into ethylene, a key chemical used in producing plastics, adhesives, synthetic rubber, and other petrochemicals. Traditionally, petrochemical companies have relied on naphtha as their primary feedstock, but demand for ethane has been rising in recent years. Ethane cracking offers significant advantages over naphtha, yielding over 80 percent ethylene compared to 30 percent from naphtha.

Phase-wise asset development strategy
Nayara Energy adopted a phased asset development strategy in 2018 to enter the petrochemical sector and is well-positioned to become a major player in this space, leveraging its unique advantages in integration opportunities with its refinery. The company's key strengths include its proximity to the port and the strategic location of its refinery in western India. Vadinar, near Dwarka, is situated in the largest petrochemical consumption region in India.

According to the company’s website, “Nayara Energy has adopted a phased asset development strategy to enter the petrochemicals sector. Under Phase 1 of its petrochemical expansion project, the company is setting up a 450,000 tonnes per annum (TPA) polypropylene plant within its Vadinar Refinery in Gujarat. This includes a Propylene Recovery Unit (PRU), upgrades to the existing FCC (Fluidized Catalytic Cracking) Unit, and a Polypropylene Unit (PPU).”

Nayara Energy aims to build one of the largest integrated petrochemical complexes in the country. With its strategically integrated refinery complex in western India, including captive port and power assets, the company is well-positioned to make a strong entry into this high-growth segment, the company stated on its website.

Growing with time
Last year, major oil and gas refiners, including Gail India, Indian Oil Corporation, Bharat Petroleum Corporation, and others, announced substantial investments totaling over Rs 1.5 lakh crore to expand their petrochemical operations. On Monday, Adani Petrochemicals, the petrochemical arm of the Adani Group, announced the formation of a joint venture with Thailand’s Indorama Resources to enter the refinery, petrochemical, and chemical business.

Billionaire Gautam Adani's group has partnered with Thailand's Indorama Resources Ltd to venture into the petrochemical sector as the ports-to-energy conglomerate seeks to expand into the value-added segment. Adani Petrochemicals Ltd, a subsidiary of the group’s flagship company Adani Enterprises Ltd, "has completed the incorporation process of a joint venture company, namely Valor Petrochemicals Ltd (VPL), with Indorama Resources Ltd, Thailand," Adani Enterprises stated in a stock exchange filing. Both partners will hold an equal 50 percent stake in the joint venture. VPL has been established with the objective of setting up operations in the refinery, petrochemical, and chemical sectors.

Synergies
Mukesh Ambani-led Reliance Industries currently imports 1.6 MMTPA of ethane for its existing ethane crackers in Dahej and Hazira in Gujarat, and Nagothane in Maharashtra. To address this import reliance, Nayara Energy’s proposed 1.5 MMTPA ethane cracker would play a significant role. Interestingly, government-owned GAIL India Ltd has also announced plans to establish a 1.5 MMTPA ethane cracker project at Ashta, Madhya Pradesh. The project, with a product slate of various ethylene derivatives, entails an investment of Rs 60,000 crore.

Additionally, state-owned Bharat Petroleum Corporation Ltd (BPCL) has announced a US$ 6 billion (Rs 49,000 crore) investment to develop an ethane-fed cracker at its 156,000 barrels per day Bina refinery in Madhya Pradesh. BPCL’s proposed investment aims to expand petrochemical and refining capacities, with its core project being an ethylene cracker and downstream petrochemical plants, which will drive the production of essential petrochemicals.

Private companies, such as Haldia Petrochemicals, along with government-owned Public Sector Undertakings (PSUs) like Oil and Natural Gas Corporation (ONGC) Ltd, are collectively planning investments totaling approximately US$ 45 billion to make India self-sufficient in petrochemicals. Currently, India imports around 45 percent of its petrochemical feedstocks from overseas.

DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com