ONGC may invest $20 bn to set up 2 petchem plants

Oil & Natural Gas Corp. Ltd (ONGC) is considering investing around $20 billion to set up two petrochemical projects in India, either independently or in partnerships with other companies, chairman and chief executive officer Arun Kumar Singh said.

Establishing a large petrochemical plant is likely to cost around $10 billion, Singh said. “We may do it on our own or in a JV (joint venture). It depends on economics and what happens in respective states,” he said in an interview on 25 August.

Noting that the company is looking at sites to set up the planned projects, Singh said the new plants will likely be announced in the current financial year.

Demand for petrochemicals, the building blocks for plastics, fertilizers and pharmaceuticals, is expected to remain robust due to their wide range of uses across large industries, including construction, automotive and electronics. Strengthening its chemicals business will also help the state-run oil explorer cut its reliance on the volatile oil market and improve profitability in the long run.

“We want to prepare ONGC for a new world. In the new world, we feel that our petrochemical footprint has to go up to accommodate our product in India,” Singh said, adding that the demand for oil and its derivatives is likely to grow in India till 2040-45.

“Right now, for the next 10-15 years, we see commodity petchem picking up very strong. So, you have both sides: you have polypropylene side, then you have ethylene side,” he said, adding that the focus is on achieving increased recovery chemicals from crude compared to conventional refining, in the range of 50-70%.

In its annual report for FY23, ONGC observed that petrochemicals demand is expected to remain strong and will continue to be a key driver of oil and gas demand in the future. With this objective, the company is collaborating with other entities to explore opportunities in the oil-to-chemical (O2C) business, refining and petrochemicals, it said.

“We are also planning to set up two greenfield O2C plants in India,” said the annual report. ONGC aims to capitalize on the trend of growing demand for chemicals with plans to substantially expand its chemical and petrochemical portfolio from the current 4.2 million tonnes per annum (mtpa) to 8 mtpa by 2030.

The company already has a presence in the petrochemical sector through its unit Mangalore Refinery and Petrochemicals Ltd (MRPL) and ONGC Petro Additions Ltd, a JV with GAIL (India) Ltd and Gujarat State Petroleum Corp. Ltd.

According to ONGC’s annual report, the petrochemical sector will remain the key driver of global oil demand growth, with liquified petroleum gas (LPG), ethane and naphtha accounting for more than 50% of the rise between 2022 and 2028, and nearly 90% of the increase compared with pre-pandemic levels.

“Oil demand in the petrochemical sector is set to grow in the short and medium term before stabilizing and plateauing at around 18 million bpd (barrels per day) in mean (1.9°C) scenario,” it said.

This plan for a major investment in the petrochemical space comes at a time when the government is considering making India a refining and chemicals hub.

In May, union minister for petroleum and natural gas Hardeep Singh Puri said that 25% of the global energy demand growth in the next two decades is going to emanate out of India.

“The market size of the Indian chemicals and petrochemicals sector is currently $190 billion. India is not only the sixth largest chemicals producer globally and the fourth in Asia, but also exports chemicals to more than 175 countries. It accounts for 13% of India’s total exports,” added Puri.

On 30 August, Mint reported that the union finance ministry is considering a production-linked incentive scheme for chemicals.

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