Cracker of an expansion: Nayara's $8 bn petrochemical plan

Rosneft-backed Nayara Energy is looking to invest ₹68,000 crore ($8 billion) to set up a 1.5 million tonne per annum (mtpa) ethane cracker at its 20 mtpa refinery at Vadinar in Gujarat, according to people aware of the development.

This will be the first substantial investment by an overseas company in the Indian petrochemical segment. "Nayara has commenced work on front-end engineering for the petrochemicals project," said a senior industry executive.

Nayara Energy didn't respond to queries. The company said in its FY24 annual report that it had "adopted a phase-wise asset development strategy in 2018 to enter into the petrochemicals sector and is well-positioned to become a strong petrochemical player due to its unique advantages in terms of opportunity of integration with the refinery, proximity to the port, and location of the refinery in western India which is the largest petrochemical consumption region of the country".

In the past year, Gail India, Indian Oil Corp, Bharat Petroleum Corp and others have announced investments of over ₹1.5 lakh crore to expand petrochemical operations. Adani Enterprises subsidiary Adani Petrochemicals announced on Monday that it has formed an equal joint venture with Thailand's Indorama Resources to foray into the refinery, petrochemical, and chemical business.

India's petrochemical capacity is projected to rise to 46 million tonnes in 2030 from 29.62 million tonnes now, according to the ministry of petroleum and natural gas.

An ethane cracker breaks down the hydrocarbon, a component of natural gas, into ethylene-the key chemical used in making plastics, adhesives, synthetic rubber-and other petrochemicals. Traditionally, petrochemical companies have been using naphtha as primary feedstock, but demand for ethane has been picking up over the past few years. Cracking ethane can yield over 80% ethylene against 30% from naphtha.

Reliance Industries imports 1.6 mtpa of ethane for its ethane crackers in Dahej and Hazira in Gujarat and Nagothane in Maharashtra.

Last year, state-run Gail India announced plans to set up a 1.5 mtpa ethane cracker project at Ashta, Madhya Pradesh, with a product slate of various ethylene derivatives, at an investment of ₹60,000 crore. State-owned refiner Bharat Petroleum is investing close to $6 billion to develop an ethane-fed cracker at its 156,000 barrels a day Bina refinery in Madhya Pradesh.

Nayara Energy runs India's second-largest, single-location refinery in Vadinar with a capacity of 20 mtpa. A Rosneft-led consortium acquired Essar Oil in 2017 for $12.9 billion and renamed the company Nayara Energy. The company is expanding capacity to enhance its presence in the petrochemical and alternate energy sectors. Nayara has already set up a polypropylene unit at Vadinar.

"Like other refiners, Nayara is working on diversifying its product portfolio and becoming a prominent player in the high-growth petrochemical industry," said a person aware of the company's plans. "These expansions will help it meet the rising petrochemical demand in India as well as globally."

The government, alongside PSUs like ONGC and BPCL and non-state companies like Haldia Petrochemicals, is looking at investments of nearly $45 billion in petrochemicals. India is a net importer of chemicals and petrochemicals. It gets 45% of the petrochemical intermediates required from overseas. Demand for chemicals is predicted to nearly triple and India's petrochemicals industry may reach $1 trillion by 2040, according to the ministry.

The market size of the nation's chemicals and petrochemicals sector is expected to grow to around $300 billion in FY25, up from $220 billion in FY24. India's petrochemical sector is projected to attract investments exceeding $87 billion in the next decade, representing over 10% of global petrochemical growth.