Reliance revives plan to build chemical plant

MUMBAI: Billionaire Mukesh Ambani’s Reliance Industries (RIL) may start work on a multibillion-dollar chemical plant this year, reviving a project to meet India’s surging demand for the raw materials for plastics, drugs and textiles. RIL is close to deciding the final configuration of the plant, which will be capable of producing 1.6 million metric tonne a year of chemicals such as ethylene and propylene, said a person familiar with the project, who declined to be identified because the information isn’t public.

The plant will get its feedstock from gases and other byproducts produced at RIL’s Jamnagar facility, the world’s largest oil-refining complex, and will take about four years to build, the person said.

RIL is restoring a project originally slated to start in 2011 as refiners, including Exxon Mobil, Royal Dutch Shell and Saudi Basic Industries, add petrochemical capacity to meet demand from Asia’s fast-growing economies. Cracking margins for ethylene, which fell to about $100 a tonne in 2008, recovered to more than $400 in the first quarter. “This will come at a good time. We are oversupplied right now but beyond 2011, there’s a sharp drop-off in terms of new capacity,” said Sriharsha Pappu, a Dubai-based analyst with HSBC Bank Middle East “In the next 3 to 4 years, we could very easily be undersupplied.”

Manoj Warrier, an RIL spokesperson, didn’t respond to emails and phone calls requesting comment. Mr Ambani, Asia’s richest man, predicted last month that rising crude prices will force the petrochemical industry to become more competitive by building “super-size” plants that integrate oil refining and petrochemical manufacturing.



“Everyone is worried about excess capacity in our industry,” Mr Ambani said at a conference in Mumbai on May 14. “China and India are driving a tectonic shift in centers of growth.” New projects “must migrate to new petrochemical super sites and new assets must factor the shift in demand to Asia,” he said.

Producers in the Middle East, China and Singapore are adding as much as 26 mt of chemical cracking capacity by 2013, boosting global capacity by 13% to 144 mt from 2008, according to Jagdish Meghnani, an analyst with Mumbai-based Alchemy Share & Stock Brokers.

Demand for petrochemicals, which are used in everything from plastics to packaging to tires, tend to grow in line with gross domestic product, said HSBC’s Pappu. Assuming global economic growth of up to 4%, the industry needs to be adding about 20 plants globally over a five year period on average to keep pace with demand, he said. Other companies are expanding petrochemical capacity in India, which grew 8.6% in the quarter ending March 31.