Livemint: December 04, 2014
Mumbai: Indian Oil Corporation Ltd (IOCL) is exploring the possibility of setting up niche and speciality petrochemical plants across its refineries to enhance value addition.
This will help the firm to use the by-products from the refinery to further process them and produce high-value high-margin products.
Niche and speciality petrochemical products are high-margin high-value products such as derivatives of polymers, various grades of synthetic rubber, synthetic detergent intermediates, performance plastics that have better chemical stability, olefins such as ethylene and propylene, and aromatics such as benzene-derivatives.
Indian Oil believes the move will help the company increase profit after ending the September quarter in the red.
"We are considering a lot of petrochemical opportunities across all our refineries in the next few years as this will... help us in posting a healthy bottomline in future and give us an entry into the value added business," said B. Ashok, chairman and managing director of IOCL.
He, however, refused to specify the capacity the company is looking to set up and the market share that it will be targeting.
"We are currently the second biggest petrochemical player in India with 19% market share and would like to increase this further." he said. "Apart from our existing petrochemical operations, we have seen that several of our smaller refineries has immense potential to support niche or speciality downstream petrochemical project and we are looking at doing a feasibility study for all of them."
IOCL increased its petrochemical capacity from 120,000 tonnes per annum (tpa) in fiscal 2004 to 2.66 million tpa in fiscal 2014. However, its contribution to the overall operating profit of the company still lingers at 10% as of 31 March, according to an October presentation made by the company to its bankers.
It has 10 crude oil refineries in India with a total refining capacity of 65 million tpa. As against this, its petrochemical capacity stands at just over 4% of its refining capacity.
IOCL has already announced a Rs.3,150 crore polypropylene unit at its upcoming Paradip refinery which will be operational by fiscal 2017, Ashok said.
However, he clarified that plans to augment petrochemical capacity at various refineries are long-term projects and investment decisions will be finalized in the next two-three years.
He said the company is also actively scouting for global partners for setting up India's biggest acetic acid plant after talks with British oil and gas company BP Plc. were called off in June.
"The plan with BP is not on. The initial study did not meet the viability norms of BP so it was called off. But we are still firm to go ahead with an acetic acid plant and are talking to a few players as we are keen to expand our petrochemicals presence," he said.
Analysts said while diversification into value-added petrochemical products is a logical move, it is not a major market mover for the company and will have a long gestation period.
"In any case, considering its massive refining capacity of 65 million tonnes, petrochemicals will continue to contribute below 10% to the overall bottom line of the company..,"said an analyst with an international brokerage who did not wish to be named.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.