Page 132 - CW E-Magazine (14-5-2024)

Point of View

today ramping up fluid catalytic cracking (FCC) operations to enhance its output. Newer technologies are enabling propylene recoveries
at far higher levels than hitherto and are seen as an important tool in the transition of refineries from their traditional focus on fuels
to petrochemicals. FCC propylene is now being used in India to make polypropylene, phenol (and acetone), acrylic acid & esters, as
well as oxo-alcohols, and its role will expand in the years to come.

Propane dehydrogenation (PDH) has also come of age as a major propylene source, particularly in China where nearly two dozen
units are operational. This is a simpler, lower capital cost route to the olefin (compared to a naphtha cracker) and the markets for the
feedstock (propane) are sizeable, transparent and close to India (e.g., the Middle East). The gas major, GAIL India Ltd., is building
India’s country’s first PDH plant at Usar (Maharashtra) at a cost of $1.2-bn. This unit will have a nameplate capacity of 500-ktpa, and
matching capacity for PP. GAIL has selected US engineering company Lummus Technology and Switzerland-based specialty chemical
firm Clariant for catalyst supply, and the project is expected to come onstream this year. Indian Oil Corporation (IOC), India’s largest
refiner, is also eyeing a PDH project, though it is in an early stage.

The timing is also right for a consortia of propylene users to come together to co-invest in a PDH unit that can serve the propylene
needs of the individual companies. Such an effort was unsuccessfully made in the past, but lots has changed since then and this is a good
time to revisit the option. The unit can be built at a coastal location, based on imported propane or LPG. The offtake can be in the ratio of
the investments made by each investor and at market-determined pricing. Even allowing for the complexity of the business structuring,
the consortium-approach is an idea whose time has come. Under both high and low oil price scenarios an Indian PDH plant integrated to
downstream PP production is estimated by some analysts to have higher margins than a similar one in China. This is on account of several
factors: closer proximity to propane suppliers in the Middle East; lower fixed costs for projects; and higher prices for PP.

Haldia Petrochemicals Ltd., which has recently announced a phenol/acetone project is taking another route to enhance propylene
production, viz. metathesis technology, offered by Lummus Technologies (both are now part of the Chatterjee Group). This reaction
combines one mole each of ethylene and 2-butene – both available from naphtha cracking – to produce two moles of propylene,
which can then feed a cumene production unit. The propylene produced is polymer grade (>99 mol%) and offers a way of valorising
C4 streams that poor utilisation in India currently.

Forward integration
Integration comes with several benefits, the most important is the ability to capture value all along a value chain. This can come
in handy when margins in some parts are compromised, for example due to various market-related factors. Take the business of
phenol and acetone. The two are co-produced in a ratio which is unalterable, but each comes with its own dynamics. Balancing
the two is a challenge in the best of times and even more due exigencies. When acetone demand is weak – as is often the case
given its sizeable use as a solvent, which is not a growth market from the viewpoint of sustainability – it makes eminent sense
to derivatise it further to produce a range of chemicals. The options include bisphenol-A (which is interesting as it needs both
phenol and acetone to make), methyl isobutyl ketone, methyl isobutyl carbinol, isophorone, etc. Some producers even have routes
to recycle acetone back to propylene via the production of isopropyl alcohol (which saw a surge in demand during the pandemic
due its use for making sanitisers).

There are no easy answers as to how far one should go in forward integration. Each step brings its own challenges, adds complexity
especially when it comes to operations & marketing, and needs additional capex. In several instances, commodity chemical companies
end up competing with their customers when venturing downstream, and a balanced call factoring all this needs to be made. The business
of speciality chemicals is also very different from that of commodities and the history of the chemical industry shows that companies
focussed on one or the other tend to do better than ones that try to straddle both spaces.

Long way to go
India’s petrochemicals industry still has a long way to go before it reaches a size commensurate with the market it aims to serve.
There are still several products for which no capacities exist, and none are forthcoming. One reason is that the markets here are still
small to justify in world-scale plants (e.g., the isocyanate, MDI). In other instances, investments are hindered due to lack of access
to technology, even when the markets are substantial (e.g., acetic acid, alpha-olefins). The first may correct in time. The second is a
weakness that will likely endure for more time.
Ravi Raghavan

132 Chemical Weekly May 14, 2024

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