India to prioritize naphtha as petrochemical feedstock

In order to meet the growing demand for feedstock from the crucial petrochemical industry in India, the Indian government is contemplating a re-look at the allocation process for feedstock raw materials like naphtha which in turn is used to produce ethylene and propylene.

The Draft National Chemical Policy released by the government reveals that the government in consultation with industry is mulling a policy for allocation of feedstock to best-suited products, rather than based on priority sectors.

Accordingly, natural gas would be a priority for fertilizers, coal for power and naphtha for petrochemicals, rather than the current approach of treating a sector as the priority and all available feedstock distributed as priority to it.

Revealing details to fibre2fashion, a top source in the Indian Ministry of Chemicals and Fertilisers said, “The objective of the policy is to ensure value-addition of naphtha, which is being exported in large volumes currently. It would bring in more foreign exchange by adding value, rather than just exporting naphtha”.

He explained, “To ensure supply of critical stock for the petrochemical sector, the ministry has suggested adoption of a consortium naphtha cracker approach for developing capacities. Under this, each Petroleum, Chemical and Petrochemical Investment Region (PCPIR) would have a naphtha cracker, set up by anchor investors.

“Roughly a refinery of 15 million tons needs an investment in the region of Rs 250-300 billion with a built-in naphtha cracker. To put up plants to process the hydrocarbons would mean an additional investment of another Rs 100 billion which may not be financially feasible for the refinery management.

“Once a refinery is set up, roughly around 40-50 percent of products are hydrocarbons. The policy envisages setting up of a cluster of downstream units around the refinery which will consume the hydrocarbons produced by the refinery. These downstream units will be set up by individual investors and fed from streams of the refinery.

“This approach has been adopted in Germany, China, Belgium, etc. Private downstream companies would be encouraged to hold equity in the main plant, Private companies could enter into long-term contracts to ensure supply and the unit could have an independent economic viability”, he wound up by saying.

Naphtha is feedstock for a host of raw materials in the textile value chain like paraxylene, ethylene, propylene, benzene, etc. But at the same time, ethylene and propylene too, can be produced from natural gas which has sufficient ethane and propane.

Installed crude oil refining capacity in India is around 193 million tons per annum. Assuming that around 10 percent of the products derived, are naphtha, this translates in to 19 million tons of naphtha production per annum. Naphtha is exported in huge volumes of around 700,000-800,000 tons per month from India.

The policy aims to add value to the naphtha produced in the country in to other petrochemical products like ethylene, propylene, benzene, which if exported can realize more foreign exchange and value, rather than just exporting naphtha. 

Fibre2fashion News Desk - India