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Interview: India's petrochemical sector gears up for expansion, sustainable change: CPMA


$100 bil investment will reduce intermediates' deficit

'Alarming' PVC shortfall raises government concerns

Coherent policy directives needed to decarbonize sector

  • Author
  • Abache Abreu
  • Editor
  • Shashwat Pradhan
  • Commodity
  • Coal Electric Power Oil Petrochemicals
  • Topic
  • Energy Transition Environment and Sustainability Hydrogen: Beyond the Hype

India's petrochemical industry is gearing up for a sweeping transformation through 2030, propelled by a significant expansion of its intermediates' production capacity, and moves by the industry and policy makers to reduce the sector's carbon and environmental footprint.

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"The next 10 years will be the most exciting decade India's petrochemical industry will ever see," said Kamal Nanavaty, president of India's Chemical and Petrochemicals Manufacturers' Association, in an interview with S&P Global Platts.

About $100 billion worth of investment will boost domestic production by 2030 and help bridge India's supply deficit in petrochemical intermediates, he said. These are the primary feedstocks for higher value-added specialty chemicals, which are essential for the manufacturing of end-consumer goods and central to New Delhi's economic self-sufficiency objectives.

Capacity expansions are expected for PVC, polyethylene, polypropylene, PTA, monoethylene glycol, elastomers and styrene, among others.

"India's PVC shortfall is alarming," Nanavaty said, adding that the current PVC supply shortfall stands at more than 2 million mt/year.

Based on projected demand and approved capacity expansions to date, S&P Global Platts Analytics estimates India's PVC deficit will increase to nearly 3.4 million mt/year by 2030.

"That needs to be addressed and the government of India is deeply concerned," Nanavaty said, while highlighting the key role this polymer plays across key economic sectors. "Soon, we will see some announcements."

Pandemic, infrastructure and policy

India's long-planned petrochemical expansion, which New Delhi places at the center of its target of building a $5 trillion economy by 2025, continues to face challenges, including ongoing pandemic-related delays, India's inherent infrastructure deficit and a policy framework often criticized as unpredictable by international investors.

The difficulties of developing India's infrastructure, partly due to foreign exchange disadvantages, coupled with insufficient support from policy makers, are key challenges India needs to navigate in order to build a global petrochemical hub, Nanavaty said.

"Projects like HMEL in Bhatinda and HPCL in Barmer are expected to be completed by 2021-22 and 2022-23, respectively. Nayara's mega petrochemical project in Vadinar is expected to be completed by 2024-25. And several other projects are likely to be commissioned beyond that," he said.

These investments, which include public and private projects in various stages of implementation and pipeline, will make petrochemicals the biggest driver of India's crude oil demand growth, Nanavaty said.

"As petrochemical production displaces transport fuels as the main consumer of crude oil, refinery assets will be converted into chemical and petrochemical hubs," Nanavaty said. "This is the most logical thing to do, and we will see that happening."

Petrochemicals key driver of India oil demand

Navigating sustainability roadblocks

While India's success in expanding renewables and managing waste could significantly reduce the environmental footprint of its fast-growing petrochemical sector, government signals have been mixed and a more coherent policy framework will be needed to drive decarbonization.

Nanavaty said the two most important policies to effectively drive Indian petrochemicals' transition to a more sustainable future are coherent single-use plastic directives and extended producer responsibility policies "to ensure everyone is held accountable."

New Delhi's recently announced proposal to phase out single-use plastics from 2022 is a boost for the development of a domestic recycled plastics market, while the use of India's expanding renewable energy sources to power the petrochemical sector could significantly decarbonize the sector by shifting away from fossil fuels in cogeneration power plants.

Related blog: Recycled plastics market becoming more liquid and globalized as demand soars

However, without strong policies aimed at upstream decarbonization, petrochemical producers may lack the cost incentives to shift from fossil fuel-based feedstocks to lower-carbon alternatives like hydrogen.

With refiners integrating operations and diversifying downstream portfolios, petrochemical production could become a sink for crude oil displaced by decarbonization efforts in the transportation and energy sectors, and be destined to become a growing source of India's greenhouse gas emissions.

"For every challenge there are opportunities, and Indian scientists and engineers are really waking up to this challenge," Nanavaty added.

Platts Atlas of Energy Transition