Page 124 - CW E-Magazine (29-10-2024)

Point of View

of methanol, which is the single largest chemical imported into India (>3.0-mt in FY24). The economics of methanol manufacturing hinges on
the availability of cheap natural gas, and it is for this reason that the world’s leading producers are located in regions where this is so. There
is simply no way for an Indian producer to participate profitably and consistently in this market, given the paucity of gas in the country and
the high price of the alternative – imported liquefied natural gas (LNG). Building C1 value chains based on imported methanol is a daunting,
but doable task, and a few companies are evaluating such projects.

Sustainability as an opportunity
The issue of sustainability in the chemical industry is throwing up several challenge, but also posing opportunities. Staying with methanol
for a moment, ‘green’ methanol, using carbon derived from biomass or even municipal solid waste (MSW), is an option. There are no feedstock
issues here, but the technological challenges are daunting. India’s research institutions will do well to focus here. Instead, the emphasis
seems to be on developing technologies for using coal (via gasification), which has a hefty carbon footprint in the absence of linked carbon
capture and sequestration.

Likewise, the use of ethanol as chemical feedstock has fallen in India, even as its use as fuel blend is rising. Several chemicals that can be
made from ethanol are currently imported in sizeable volumes and can (and were) made from bioethanol. Today’s world is far more receptive to
these ‘green’ alternatives to petroleum-based ones, and investing in this space has merits that must be carefully evaluated on a case-to-case
basis. It is noteworthy that just a couple of months ago a world-scale project to make bio-based ethylene with 500-ktpa capacity was announced
by a gas & petrochemicals major.

Integrated plays
By exploring integrated petrochemical-refinery projects, based on novel feedstock and technologies, and by leveraging its competitive capex
position, a sizeable chunk of India’s petrochemical needs, now met by imports, could be indigenously met – competitively and sustainably.
Notwithstanding current global uncertainties and an oversupply in most petrochemical value chains, it is expected that more and more
refineries will look to petrochemicals for sustainable growth. Projects being conceived today will still be in operation in 2-3 decades down
the line when the landscape for fuels and petrochemicals will look very different. Investors will hence need to make hard calls on product
slate, capacity, technology and sustainability-related matters. While different levels of integration of refining and petrochemicals are possible,
achieving the right one requires a holistic approach to determining market opportunities, technology options and capital asset management
strategies. In all likelihood, the ‘tightness’ of refinery-petrochemical integration will rise. While a typical naphtha cracker operating downstream
of a refinery, processes about 8-10% of crude oil for chemicals, tighter integrated schemes take the chemical conversion potential to about
17-20%. In contrast, newer crude-to-chemicals projects being conceptualised can valorise up to 40-60% for chemicals.

As in all things, there are trade-offs that must be examined. Increasing complexity of integrated operations, for one, implies greater
potential for being bogged down, while conflicting objectives pose challenges as well. There could be limitations imposed on flexibility as
closely coupled operations can actually decrease performance if the freedom to adjust conditions or operating rates is not designed into
process units. Organisations will also have to develop systems to handle disparate cultures and learn to assimilate diverse technological skills.
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 markets are still too small to justify
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.

India is unlikely to be a major player in global markets for commodity chemicals and investments made here will be largely for meeting
domestic needs, and exports will be, at best, a fly-wheel to keep operating rates high. From the perspective of contributions to earnings too,
domestic sales are expected to weigh in better than exports – especially as the latter is often done at marginal costing due to competitive
pressures, which have risen sharply of late.

In commodity chemicals, investments gravitate either to where the feedstock are abundant or where the market opportunity is sizeable
and growing. More often than not, the latter is the factor in India’s favour and will drive investment decisions.

Never mind the $1 trillion mirage – there is a lot to do here even to get three-quarters of the way!
Ravi Raghavan

124 Chemical Weekly October 29, 2024

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