India's petrochemical and polymer sectors are set for a major boost under the country's 12th five-year plan, which runs through until March 2017. India, with a population exceeding 1.2 billion, and a large and steadily growing middle class with rising disposable income, is forecast to be among the world's five largest consumer markets by 2025.

Polymer consumption is closely linked to GDP growth and India is the major economy with the second-fastest growth rate after China. Recently released government estimates put GDP growth in the year ending next month at 6.9%. This would be the lowest growth in the past three years but the Indian economy, despite recent setbacks, is expected to bounce back to traditional growth rates of 8.5%-9%/year, says Rajiv Kumar, secretary general at the Federation of Indian Chambers of Commerce (FICCI; New Delhi). FICCI forecasts GDP growth of 7%-7.5% in 2013.

Government initiatives, including major injections of investment capital into infrastructure projects such as water management and rural infrastructure, will generate significant demand for polymers. Investment in infrastructure during the 12th five-year plan is expected to double, to $1 trillion compared with the $500 billion spent on infrastructure in the previous plan. These targets will require huge investments in India's petrochemical and polymer sectors.

India's current plastics consumption is 6 kg per capita, far below China's 22.8-kg per capita plastics consumption and the world average of 24.6 kg, says S. Mitra, executive director/petrochemicals at Indian Oil (New Delhi). Consumption in India is expected to double by 2015 but planned projects are not being implemented quickly enough to meet the additional demand, he says. S. Gopal, managing director of Chemplast Sanmar (Chennai), a producer of polyvinyl chloride (PVC), says consumption has already reached 7 kg per capita and expects it to grow to 11 kg per capita by the end of the 12th five-year plan. "Polymers play a pivotal role in India's GDP growth," Gopal says.

The Indian chemical and petrochemical industry is growing at above GDP rates and, by volume, it is the sixth-largest globally and third-biggest in Asia, K. Jose Cyriac, the Indian government's secretary for chemicals and petrochemicals, says. The country lacks feedstocks but it has a huge domestic market, he says.

Polyolefins account for about 5 kg of India's per capita polymers consumption, including 2.8 kg of polypropylene (PP) and 2.1 kg of polyethylene (PE), Mitra says. India also consumes about 1.7 kg per capita of PVC, among the lowest levels of PVC consumption in the world.

PE production in India will rise from 2.8 million m.t./year this year, to 4.71 million m.t./year in 2015 with demand growing from 3.425 million m.t./year in 2012, to 4.558 million m.t./year in 2015, Mitra says. He foresees PP output rising from 4.14 million m.t./year in 2012, to 4.98 million m.t./year in 2015 and demand growing from 3.765 million m.t./year this year, to 5.063 million m.t./year in 2015 (table). India will have regular imports of about 850,000 m.t./year of PE and about 250,000 m.t./year of PP, he says.

India's consumption of PVC reached 1.9 million m.t. in 2010-11 with domestic supply accounting for 1.3 million m.t., Gopal says. The country imported 600,000 m.t. of PVC during that period, he says. PVC demand is growing in India at an average annual rate of 10.2%, twice the global average, Gopal says. Suspension PVC is by far the most important grade consumed in India with emulsion PVC accounting for just 100,000 m.t./year.

Reliance Industries, which accounts for about half of India's PVC capacity, is expanding its Dahej plant by 100,000 m.t./year. This will give Reliance 750,000 m.t./year of PVC capacity by 2013. The company has 360,000 m.t./year of PVC capacity at Hazira; 230,000 m.t./year at Dahej; and 60,000 m.t./year at Baroda. Reliance would like to expand PVC capacity further but it is restricted by chlorine availability. Other PVC players include Chemplast, which operates a 285,000-m.t./year plant at Mettur; Finolex with a 260,000-m.t./year unit at Ratnagiri; DCW with a 90,000-m.t./year unit at Tuticorin; and DSCL, which operates a carbide-process, 70,000-m.t./year PVC unit at Kota.

India needs major investments in its basic petrochemicals industry if the polymer sector is to help the government meet its infrastructure targets. Indian producers including Reliance, the country's largest petchems player; Gail India; HPCL-Mittal Energy Ltd. (HMEL; Noida); Indian Oil; Mangalore Refinery and Petrochemicals Ltd. (MRPL; Mangalore); ONGC Petro Additions Ltd. (Opal; Vadodara) and Brahmaputra Cracker and Polymer Ltd. (BCPL; Lepetkata) are all expanding and/or establishing new capacity to meet demand growth.

Reliance will build an ethylene plant that will crack refinery offgases and construct downstream units at Jamnagar by 2015. The cracker will be designed to produce 1.4 million m.t./year of ethylene and 200,000 m.t./year of propylene, senior Reliance officials tell CW. Downstream units will include two new PE lines and an ethylene glycol (EG) plant. The PE lines will be designed to produce 400,000 m.t./year of low-density polyethylene (LDPE) and 500,000-m.t.-600,000 m.t./year of linear low- or high-density polyethylene (LLDPE-HDPE). The EG plant will have capacity for 700,000 m.t./year.

Reliance was in separate discussions with two bidders--Bechtel and Fluor--at CW press time for a project management contract. Competing bids from Technip and Lummus have also been shortlisted to provide technology and engineering services for the planned cracker, CW has learned.

The Jamnagar project is expected to raise Reliance's ethylene capacity to 3.3 million m.t./year and propylene capacity to 2.95 million m.t./year. Reliance produces a combined 750,000 m.t./year of propylene at its crackers and about 2 million m.t./year of propylene at the Jamnagar refinery. The company's ethylene plants are spread across several locations (table). Reliance's overall PE capacity will rise from 1.1 million m.t./year, to 2.1 million m.t./year on completion of the Jamnagar investment.

Meanwhile, Opal, a joint venture ONGC, Gail, and Gujarat State Petroleum, is expected to complete its project at Dahej by the beginning of 2014. Opal's cracker, with 1.1 million m.t./year of ethylene and 400,000 m.t./year of propylene capacity, will be the largest olefins unit in India until Reliance brings its plant onstream the following year. Opal's downstream units will be designed to produce 350,000 m.t./year of PP, using the Ineos process and 350,000 m.t./year of HDPE, based on the Mitsui process. Two LLDPE lines, each designed to produce 360,000 m.t./year using Ineos technology, are being built as part of the Dahej investment. Opal's complex is being established in a special economic zone (SEZ), which means that only 50% of the output is likely to be sold on the domestic market. The rest will need to be exported to comply with SEZ regulations.

Gail is more than doubling capacity at its ethylene plant at Pata, to 900,000 m.t./year and building a 450,000-m.t./year Univation Technology-process, LLDPE-HDPE swing plant. The ethylene expansion and PE plant are each due onstream by 2014. The PE unit will add to Gail's existing facilities at Pata, where it operates two Mitsui-process slurry HDPE plants, each with capacity for 125,000 m.t./year, and a Nova-process LLDPE-HDPE swing plant designed to produce 250,000 m.t./year. Gail was considering construction of a 1-million m.t./year ethylene plant at Visakhapatnam but those plans have been put on hold due to lack of feedstocks.

BCPL's project to build a small cracker at Lepetkata in the state of Assam has been delayed and its construction costs have soared. The project is considered to be a political investment designed to create jobs in the state. BCPL is a jv among Gail, Oil India, Numaligarh Refinery, and the state government of Assam. Gail holds a 70% stake in the project, which will include plants with capacity for 220,000 m.t./year of ethylene; 60,000 m.t./year of propylene; 220,000 m.t./year of PE; and 60,000 m.t./year of PP. Commissioning of the complex, which was approved in 2006, is expected at the end of 2013. The project's estimated costs have escalated since its launch by more than 60%, to about $1.75 billion.

Indian Oil has several petchem projects at an early stage of development. The company is mulling a 1.1-million m.t./year ethylene plant at Paradip on the east coast of India, adjacent to a 15-million m.t./year oil refinery, for completion by 2017-18, Mitra says. The cracker, currently in the feasibility study phase, would use naphtha and FCC offgases as feedstocks. Indian Oil has not yet configured the downstream slate of products but Mitra says they are likely to include polyolefins, glycols, and specialties such as ethylene propylene diene-monomer (EPDM) rubber. Indian Oil also building a styrene butadiene rubber (SBR) at Panipat. Capacity of the SBR unit will be raised from 120,000 m.t./year, to 200,000 m.t./year.

The Paradip cracker would form the second phase of petchems development at that site. Indian Oil has received board approval for a previously announced PP complex there and it is moving into the detailed feasibility study phase. The first phase will include two PP lines, each designed to produce 350,000 m.t./year using Spheripol technology. Completion is expected in 2015. However, a previously announced para-xylene project at Paradip has been put on hold. The company is also considering plans to invest in cumene, phenol, and bisphenol A plants at Barauni, Mitra says.

The cracker project at Paradip could double Indian Oil's olefins capacity. The company's existing petrochemical complex at Panipat has capacity to produce 800,000 m.t./year of ethylene and can be expanded to 1.1 million m.t./year, Mitra says. The plant, however, is currently experiencing technical difficulties and is working at only 75% of capacity, which is causing downstream PE and PP production also to run at 75% of capacity. "We are going to 100% capacity in June," Mitra says.

The projects are expected to double Indian Oil's investments in the petrochemicals business. The company has so far spent about $4 billion on petchem investments and the new projects would require an additional $5 billion over the next few years, he says.

Meanwhile MRPL, majority owned by ONGC, is venturing into petrochemicals using refinery feedstocks at Mangalore. The Mangalore refinery, with throughput capacity of about 12 million m.t./year, is being expanded to 15 million m.t./year next month. MRPL, as part of the expansion, is entering the PP business with a 440,000-m.t./year, Novolen-process plant that is due onstream in November 2012, says M.P. Selvaakumar, manager/petrochemicals. The company already produces mixed xylenes at a rate of about 850,000 m.t./year and it is completing construction of a large aromatics complex in the Mangalore SEZ. The aromatics complex is being built by ONGC MRPL Private Ltd. It will be designed to produce 900,000 m.t./year of p-xylene and 270,000 m.t./year of benzene. Completion is expected next year. "We will be the first polymer producers in southern India, where the market is huge," Selvaakumar says. Indorama Ventures (Bangkok), which recently announced plans to build a polyester complex in India, is expected to select Mangalore as the project's location and source p-xylene feedstock from the new aromatics complex.

Separately, HMEL, a jv between Hindustan Petroleum; and Mittal Energy Investment Singapore, a Lakshmi Mittal Group company, is close to completing construction of a 440,000-m.t./year PP plant at Bathinda. The plant, also based on the Novolen process, is scheduled to be onstream by next month, says Partha Mukherjee, regional manager/east at HMEL. It is being built next to HMEL's 9-million m.t./year refinery.

Existing and Planned Ethylene Plants

(in thousands of m.t./year)

Source: CW research.

Polyolefin Projects

(in thousands of m.t./year)

Source: Indian Oil and CW research.

Polyolefins Supply and Demand *

(in thousands of m.t./year)

*

Annual supply and consumption of PE and PP in the Indian subcontinent.

Source: Indian Oil.

Copyright 2012 Chemical Week. All Rights Reserved.

(Originally published February 20, 2012, in Chemical Week.)