INTERVIEW: Haldia Petrochemicals eyes LPG, new supply sources to reduce Middle East dependence

India's Haldia Petrochemicals Ltd. will increasingly diversify its feedstock sources by using more LPG and sourcing supplies from a wider range of global suppliers, as the conflict involving Iran has disrupted Middle Eastern supplies and intensified cost and logistical pressures, CEO Navanit Narayan told Platts in an exclusive interview.

"India has historically been highly dependent on the Middle East. Almost overnight, supplies from the region were disrupted when the Iran war started, creating a major setback for the industry," he told Platts, part of S&P Global Energy.

Before the conflict began, Haldia Petrochemicals sourced approximately 50% of its feedstock -- mainly naphtha -- from the Middle East, with the balance coming from domestic sources, Narayan said.

"The Middle East was an important source because of its proximity and the quality of its supplies, and both factors have now been affected. The disruption has put pressure on margins, while higher freight, insurance, and vessel costs have made it more difficult for companies to secure supplies. It has affected our margins, and it is difficult to predict how long it will continue," he said.

Haldia's naphtha cracker complex started production in the year 2000, and its capacity since then has risen to 700,000 metric tons/year from 420,000 mt/year, he added.

The company is examining alternative sources of both supply and feedstock, including imported LPG. The company is also assessing whether some of its crackers and heaters can consume larger volumes of LPG, in consultation with its technology partners, Narayan said.

According to S&P Global Energy CERA, Asia is facing a shortage of petrochemical feedstocks. Reduced availability of LPG and naphtha from the Middle East is weighing on petrochemical production, while lower crude imports are forcing refiners to cut operating rates.

Haldia does not purchase LPG directly but sources it through companies that import and distribute the product, he said. The company is also evaluating alternative suppliers and feedstock sources as geopolitical tensions and trade disruptions create greater uncertainty in global energy markets. LPG supplies from the US are increasingly entering the market, he added.

"The current environment has forced us to diversify our feedstock sources and consider how to manage the business in a changing environment. We therefore need to become more self-sufficient and maintain more options," Narayan said.

He said the disruption had provided a broader lesson for India's oil and petrochemical industries.

"The most important lesson is the need to diversify sources of supply. India also needs to maintain adequate strategic reserves. Our dependence on the Middle East has affected us, and this should be viewed as a wake-up call for the industry," he said.

Haldia also expects demand to recover after a period of weakness. Petrochemical consumption declined during March and April but has since recovered to approximately 80% of previous levels, Narayan said.

Robust growth outlook

India's petrochemical consumption is set to grow by approximately one percentage point faster than GDP over the next five to 10 years, supported by economic expansion, industrialization, and urbanization, Narayan said.

"If India continues to grow at an annual GDP rate of 6% to 7%, the chemical and petrochemical sectors will need to support that growth. India's petrochemicals consumption growth rate currently is about 3-4 percentage points higher than the global growth rate," he said.

But India's per-capita petrochemical consumption, at approximately 15-16 kg per person per year, remains low compared with other Asian markets. This provides room for further expansion as incomes rise and urbanization accelerates.

There is also a significant regional disparity within India. Consumption in eastern India is approximately 8-9 kg per person per year, compared with more than 20 kg per person per year in western India, Narayan said.

"Since the base is lower in the east, the potential for growth is correspondingly higher," he said.

Narayan expects stronger growth in eastern India as government efforts to promote regional industrialization gather pace. He said the central challenge would be ensuring sufficient investment in local production and operations to meet the expected increase in demand.

Haldia has a long-term strategy to move beyond traditional petrochemical products and develop a larger downstream and specialty chemicals business.

"Our strategy is simple: we want to add more value to every molecule we produce and move closer to the end customer," Narayan said.

The company's first major project in this direction is an integrated phenol-acetone facility at Haldia. The plant is designed to produce approximately 345,000 mt/year of phenol and 215,000 mt/year of acetone. Haldia expects to begin supplying customers in November following a staged commissioning process.

"The immediate priority is the safe commissioning of the phenol-acetone plant, followed by efforts to establish market share in phenol and acetone before expanding further downstream," Narayan said.

The company plans to evaluate additional opportunities across the phenol value chain, either independently or with partners, and apply a similar strategy to other product streams.

Haldia has invested close to $600 million in recent projects and is working on multiple projects to implement over the next five years, Narayan said.

"We will need to determine the appropriate financing structure and ensure that the investments are sustainable. However, the clear objective is to become stronger and larger over the next five or more years," he added.

Global trading footprint

Haldia's Singapore-based trading company, HPL Global, currently handles chemical purchases and sales and conducts third-party chemicals trading. The company is evaluating whether to broaden the unit's activities to include polymers, including third-party polymer trading, Narayan said.

Haldia does not produce every polymer required by the market, creating an opportunity for the trading arm to participate in those flows.

The Singapore unit could therefore provide Haldia with a platform to expand its trading activities beyond the company's own production and into additional chemical and polymer markets, Narayan said.

He added that Haldia does not currently have a specific overseas expansion plan but continues to evaluate potential opportunities.

Haldia is also benefiting from the integration of Lummus Technology into the group, gaining access to advanced process technology, research capabilities, and technical expertise. The partnership is supporting Haldia's efforts to improve operational efficiency and accelerate digitalization across its businesses, Narayan said.

"The key advantage is that we now have access to this technology and know-how," he said.

The collaboration with Lummus and the group's digital capabilities could help Haldia remain more agile than larger competitors, while supporting its development of artificial intelligence applications to automate plant operations and improve decision-making, Narayan added.