MUMBAI - India's Bharat Petroleum Corporation Ltd (BPCL) plans to build a $3 billion petrochemical unit to serve the Mumbai region, a company official said, to profit from the country's expected surge in demand for petrochemicals as its economy expands.
BPCL's expansion is part of a national plan to spend $35 billion on petrochemical production in order to meet the expected increase in consumption of the chemicals for products including plastics, paints and adhesives. India currently only produces about 20 million tonnes a year of petrochemicals, less than the 40 million tonnes of demand expected for the 2017/18 financial year.
Demand is expected to almost double again within a decade, according to a report from the Ministry of Petroleum and Natural Gas.
BPCL earlier this month bought 500 acres (202 hectares) of land from a fertiliser unit of Hindustan Organic Chemicals Ltd <HOCL.BO>, Hindustan Organic said in a notice to the Bombay Stock Exchange on March 17.
The land will allow BPCL to build a petrochemical complex that will use feedstocks from its Mumbai refinery, which processes 240,000 barrels per day (bpd) of crude, R. Ramachandran, head of refineries at BPCL <BPCL.NS> told Reuters this week. The site is about 60 km (37 miles) from the refinery.
"This (land deal) is fundamental to enhancing our petrochemical portfolio," said Ramachandran. "Going forward, petchem consumption is likely to be higher than the conventional fuels so it is better if we start thinking in that direction now."
To transport feedstock to the new petrochemical complex, Ramachandran said there was a plan to build a pipeline from the refinery to a nearby port and tankers would then deliver the feedstock to the facility.
Alternatively, he said a direct pipeline between the Mumbai refinery and the petrochemical facility could be built.
He said the facility would focus on producing propylene, but also produce polyethylene at lower quantities.
Ramachandran told Reuters the company had not been able to expand the Mumbai refinery for the petrochemical site because of limited land availability in the city.
The petrochemical complex will be ready by 2023, he said.
BPCL plans to pump feedstocks from the Mumbai refinery by pipeline to a nearby port to load onto tankers that will then carry it to the petrochemical complex, said a source familiar with the matter.
BPCL already produces petrochemicals at its 310,000 bpd Kochi refinery in southern India.
BPCL is also constructing a 52 billion rupees ($799.26 million) project at Kochi to produce chemicals like acryl, oxo-alcohols, and acrylic acid used in products like paints, adhesives or textiles, which Ramachandran said would be commissioned next year.
BPCL also plans to build a petrochemical plant at its 120,000 bpd Bina refinery in central India.
"We are targeting petrochemical production equivalent to 10 to 15 percent of our crude processing in the long run," he said.