Hindustan Petroleum Corporation and GAIL are likely to take an equal stake in a joint venture that will build a petrochemicals complex in Andhra Pradesh at an estimated cost of Rs 300 billion. There are no discussions at present to induct a third partner, but the two firms will scout for a foreign player in the future, a senior executive said on condition of anonymity.
The plan to set up a refinery-cum-petrochemicals complex in Andhra Pradesh could not take off for several years due to lack of interest from foreign players expected to fund it. Recently, the Indian firms junked the plan to build refinery and decided to go ahead with just the petrochemicals complex.
The capacity at HPCL's refinery in Vizag, Andhra Pradesh is being doubled, giving the firm little incentive to add one more refinery in the region. A refinery-cum-petrochemicals complex would have cost nearly triple the amount needed to build just the petrochemicals unit. Engineers India Ltd has undertaken a feasibility study of the project and is expected to submit its report in six months, the executive said. It is likely to be a gas-based petrochemicals manufacturing facility, something state-run gas marketer GAIL already has experience in operating. The facility may also become a big customer for GAIL.
Indian oil companies are expanding petrochemicals manufacturing capacity to cater to new demand and leverage low oil prices that have helped enhance margins in the business. Indian Oil Corporation, the nation's largest refiner, is setting up a petrochemicals facility at Paradip in Odisha. The company plans to spend about Rs 300 billion on setting up new petrochemicals facilities by 2022. India is also expanding its refining capacity to meet the future expansion in fuel consumption. Three state-owned refiners - Indian Oil Corporation, Bharat Petroleum Corporation and HPCL - have recently joined hands to build a new 'mega' refinery on the Maharashtra coast.
HPCL has an installed refining capacity of 24 million tons per annum, about one-tenth of India's total capacity of 215 million tons per annum. The sharp increase in the refining capacity helps the country export a sizeable amount of petroleum products across the globe, serving several markets.