INDIAN PETROCHEMICAL INDUSTRY

CHALLENGES AND OPPORTUNITIES

Presented By

A K Purwaha, Director (Business Development)

GAIL (India) Limited

9th International Conference

Indian Petrochem - 2007

Mumbai
November 19-20, 2007
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PRESENTATION OUTLINE

Petrochemical Scenario
India Outlook
Challenges
Enablers
Conclusion

Petrochemical Scenario

WORLD ETHYLENE CAPACITY

Ethylene Expansions, 2007-11

35.7
24.4

8.5
31.6

12.4
5.0

India
Current - 2.5 MMTPA (2%)
Future - 4.62 MMTPA (3%)

THE GLOBAL PETROCHEMICAL INDUSTRY IS SET TO

UNDERGO A STRUCTURAL CHANGE THE BALANCE OF
POWER IS EXPECTED TO SHIFT FROM WEST (NORTH
AMERICA & WESTERN EUROPE) TO EAST (ME & CHINA)
Source : Oil & Gas Journal July 2007 (as on Jan 1, 2007)

Belgium

0.56

Germany

0.34

Brazil

0.20

Venezuela

1.05

Trinidad &
Tobago

0.57

Singapore

0.80

Taiwan

1.00

Thailand

1.90

China

6.23

India

2.12

Iran

8.438

Kuwait

0.85

UAE

1.50

Saudi
Arabia

6.308

Qatar

3.80

Oman

0.850

Total

36.236

PETROCHEMICALS GLOBAL SCENARIO

(MMTPA)

Product

Capacity
Projection
2007
Global

Asia

Demand
Projection
2015
Global

Asia

ETHYLENE

127

39

163

52

PROPYLENE

82

34

101

43

STYRENE

30

13

33

17

PARA
XYLENE

29

19

38

26

ETHYLENE
OXIDE

22

27

Capacity 2007

Demand
Projection 2015

Global

Asia

Global

Asia

LLDPE

21

32

14

LDPE

21

23

HDPE

35

11

47

19

PVC

40

21

46

22

PP

49

21

69

33

PS

15

15

MEG

20

26

18

DMT

SBR

Product

Source: Nexant

WIDE APPLICATION WITH NEW USAGE HAS ACCELERATED DEMAND

5

EXISTING PLANTS AND FUTURE EXPANSION

PETROCHEMICAL COMPLEXES IN INDIA

PETROCHEMICAL CAPACITY - INDIA

(KT/YR)
Company/Location
RIL (IPCL) /
Nagothane
/Maharashtra
RIL (IPCL) /
Baroda/Gujarat
RIL / Hazira /
Gujarat
RIL (IPCL)
/ Gandhar/ Gujarat

Feed
Stock

LDPE

HDPELLDPE

PP

Gas

110

240

100

Naphtha

95

150

Naphtha

450

400

160

RIL (Nocil)
/Thane/
Maharashtra

Naphtha

60

RIL / Jamnagar /
Gujarat

Naphtha

750

205

910

1400

Naphtha

550

300

Gas

310

205

1770

1700

Sub Total RIL

GAIL / Pata / UP
TOTAL

Jamnagar
Gandhar

Gas

HPL / Haldia / WB

Pata

Thane

Baroda
Hazira

Haldia

Nagothane

Petrochemical
Complex

Indian
Petrochem
Market
is
dominated by RIL. HPL and GAIL
are the other major players
Source: Industry Estimate 7

PETROCHEMICAL CAPACITY ADDITION IN INDIA

(KT/YR)
PE

PP

Expected
Timeline

900

2010-11

GAIL, Pata

100

2007-08

HPL, Haldia

80

150

2008-09

GAIL, Assam

220

60

2011-12

IOCL, Panipat

650

600

2009-10

RIL

600

2010-11

ONGC, Dahej

1020

340

(Also SBR-140)

IOCL, Paradeep

650

2011-12
(Also PX 1067
Styrene 469)

HPCL, Bhatinda

350

2011-12

Total

2670

3050

RIL, Jamnagar
GAIL, Assam

HPCL, Bhatinda
GAIL, Pata
RIL, Jamnagar

HPL, Haldia
ONGC, Dahej

IOCL, Paradeep

Proposed Capacity
Augmentation / New
complex

Source: Industry Estimate

Substantial Capacity Enhancement in

India in next 5 8 years

INDIAN DEMAND PROJECTION & CAPACITY

FOR PE AND PP
Product

Projected*
Demand in
2006-07
(KT)

LDPE
CAGR
DEMAND

Demand Projection by 2011-12* (KT)

Capacity BuildUp by 2012-13

(KT)#

Option I

Option II

Average

4%

8%

6%

234

285

344

313

205

8%

20%

14%

1755

2579

4367

3379

4440

9%

22%

15%

1712

2634

4627

3443

4750

LLD /HD
CAGR
DEMAND
PP
CAGR
DEMAND

*Source : 11th Five Year Plan

FUTURE CAPACITIES TO LOOK FOR EXPORT ALONG WITH

DOMESTIC SALES CHINA ALONE IS PROJECTED TO IMPORT ABOUT
7.7 MMT OF PE AND ABOUT 3.7 MMT OF PP IN 2012

INDIAN DEMAND SCENARIO FOR

OTHER PRODUCTS
Product

Demand in
2006-07

Demand Projection by 2011-12* (KT)

Option I

Option II

PVC

1320

2031

2772

Polystyrene

241

351

481

Synthetic Fibres

2438

4018

PTA / DMT

2661

3879

MEG

920

1499

Para Xylene

2180

2560

PBR

89

149

SBR

80

129

EVA

121

255

*Source : 11th Five Year Plan

ONGCS DAHEJ COMPLEX WILL HAVE 140 KT SBR, IOCS PANIPAT
COMPLEX WILL HAVE 300 KTA MEG AND IOCS PARADEEP COMPLEX
HAS PLAN TO HAVE 1067 KT PARAXYLENE AND 469 KT STYRENE
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India Outlook

11

INDIAN ECONOMY THE JOURNEY SO FAR

AND THE ROAD AHEAD
Parameters

2003
Actual

2005
Actual

2007
Est.

2009
Est.

Real GDP Growth Rate (%)

8.4

9.2

8.0

7.5

Population (million)

1049.7

1080.3

1110.4

1140.2

GDP per head (US$ at

PPP)

2936

3538

4302

5128

Recorded unemployment
(Av; %)

8.4

8.1

7.2

6.4

Consumer Price (endperiod, %)

3.8

4.2

5.9

5.0

Exchange Rate Rs:US$

(Av)

46.58

44.10

41.49

39.0

International Reserves
(US$ billion)

102.26

136.03

239.36

289.07

INDIAN ECONOMY IS UNDER FAST TRACK GROWTH

WITH INCREASING HOUSEHOLD INCOME,
INCREASING EMPLOYMENT RATE, STEADY ECONOMY
AND GROWING FOREX RESERVE

Source: EIU Report, Oct 2007

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POLYMERS-GROWTH DRIVERS
Per capita polymer usage is growing across various regional markets, driven by
following drivers :
Growing active population Young India: Assured workforce for next 50 years
Strong emergence of middle class and increase in consumption expenditure
Growing urbanisation

20

Product introduction and substitution

15

Investment in infrastructure

10
5
0
India

Source: Dept of Chemicals & Petrochemicals, GOI

Elastomers

China
Surfactants

World
Syn. Fibers

GROWTH RATE IN INDIA (12.7%) FOR POLYMER CONSUMPTION

HIGHER THAN CHINA (11.7%)

Plastic

13

EXPENDITURE IN INFRASTRUCTURE BY GOVERNMENT

(in Billion US$)

26
45
128

14
25
10th

5-year plan
(US$ 168 Billion)

62

56

11th 5-year plan

(US$ 442 Billion)

20
31

2
45
156
Source: Planning Commission, GoI

Power

Road & Railways

Ports & Airports

Telecom

Irrigation

Water supply

GOVERNMENTS EXPENDITURE IN 11TH PLAN TO GROW BY 163% MAJOR INCREASE IN EXPENDITURE ACROSS ALL SECTORS

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INDIAN PETROCHEMICAL INDUSTRY

Petrochemicals contribute over 20% of total chemical
sector output
Petrochemicals annual consumption growth > 10%
Polymer (63%) & synthetic fiber (29%) are major
Petrochemicals
Polymer growth rate more than 2 times GDP growth
rate in past five years
High Growth observed in the Polymers end-use segments in past 5 years
Consumer Electronics
Consumer Durables
Automobiles
Construction
Infrastructure
Packaging
Source: Department of Chemicals & Petrochemicals, GOI

POLYMER USAGE IS INCREASINGLY FINDING NEW APPLICATIONS GROWTH DRIVEN BY END USE SECTORS

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CHALLENGES

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CHALLENGES INDIAN PETROCHEMICAL

INDUSTRY
Feed stock security to compete with low cost producers
and maintain profitability during down cycle - Major
differentiator as it accounts for 60-75% in Ethylene
production cost depending on procurement source &
price - Currently Advantaged In The Middle East
Infrastructure with close proximity to major port
facility, Excellent logistics in transportation, tank
terminal, container etc and support services like
specialized utilities
High market demand in domestic market with
development of downstream processing industries
for export to enable large scale investment,
employment generation and margin on processing.

17

ENABLERS - INDIAN PETROCHEMICAL

INDUSTRY
FEEDSTOCKS:
Crude Oil Based Raw Materials (i.e. Naphtha) available from refinery

India is net exporter of Naphtha More naphtha expected from debottlenecking / upgradation of exiting refinery projects and new green field
complexes - Possibility of setting up refinery linked complex for additional
availability.
Large volume of gas reserve in country Major Govt. initiatives in place
through New Exploration Licensing Policy (NELP) for discovery and
monetization; it could be a major feedstock booster for petrochemical
industry

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ENABLERS - INDIAN PETROCHEMICAL

INDUSTRY
INDUSTRY SPECIFIC:
Economies of Scale through creation of Mega Complexes Integrated complex for refinery and petrochemicals
Low cost brown field expansion or de-bottling
Higher Plant Operating Rate This reduces fixed cost per
unit of production and compensate high interest and
depreciation cost of such capital intensive projects
Participation of world majors in Indian petrochemical
business bring technology of new generation and marketing
ease.
R&D set up for development, innovation and differentiation
- testing and technology adoption of new products
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ENABLERS - INDIAN PETROCHEMICAL

INDUSTRY
GOVERNMENT POLICY SUPPORT:
Creation of Mega Integrated Complexes
Petroleum, Chemical & Petrochemical
Investment Regions (PCPIR)
Promotion of Dedicated Polyparks &
Clusters for processing industries
Creation of SEZ for Exports promotion
GOVERNMENT OF INDIA HAS RECENTLY LAUNCHED A NATIONAL
PETROCHEMICAL POLICY TO BOOST INVESTMENT IN THE SECTOR,
INCREASE USAGE OF PETROCHEMICALS IN THRUST AREAS, ADD VALUE IN
DOWNSTREAM PROCESSING INDUSTRY AND PROMOTE R&D IN THE FIELD
AND EMPHASISE HR DEVELOPMENT.
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PCPIR- POLICY FRAMEWORK

NEED FOR PCPIR

Provide state of the art infrastructure in

specific
locations
to
boost
manufacturing, augment exports and
generate employment.
Provide a sustained, transparent,
consistent and investment friendly
policy and facilitation regime that
would encourage production for both
domestic and world market.
Memorandum of Agreement with State
Govt. on respective commitments with
timelines of both Centre & State
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LIKELY PCPIR LOCATIONS

Dahej in Gujarat, Mangalore in
Karnataka, Visakhapatnam in
Andhra Pradesh and Haldia in
West Bengal and Paradeep in
Orissa have been identified.
Each P.C.P.I.R.;
Specially delineated
investment region.
Investment of US$ 2.2 bln.
Spread over area of ~ 250
sq. km
Infrastructure through PPP
(Public-Private Partnership)

Dahej

MASSIVE OPPORTUNITIES
FOR INVESTMENT
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SPECIAL ECONOMIC ZONE

A specifically delineated duty free enclave deemed to be a

foreign territory for the purposes of trade operations, duties
and tariffs and introduced for Promotion of export-led growth
of the economy supported by integrated infrastructure and
package of incentives to attract investment, bringing about
increase in employment opportunities, technical knowledge
and future tax revenues in return for significant tax
concessions offered during start up.
Exemption from central and state Government duties & levies
(customs, stamp duty, sales tax, capital gains tax etc) to SEZ
developer and Units in SEZ.
Both foreign and domestic investment up to 100% permitted.
COMPREHENSIVE LEGISLATION ON SEZ INTRODUCED BY GOVERNMENT
THROUGH SEZ ACT, 2005 AND SEZ RULES, 2006
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HIGH GROWTH END USE SECTORS

DOWNSTREAM MARKET
Market Size
2006
(KTA)

Demand
Projection 2011
(KTA)

CAGR
( 2006-11)
(%)

59

117

14.7

Film & Sheet

1269

2333

13.1

Woven Sacks

860

1570

12.8

Pipe

161

277

11.4

Roto Molding

69

110

10.0

Blow Molding

273

439

10.0

Injection Molding

628

985

9.4

Sector
Fibre & Filament

11 FIVE YEAR PLAN ESTIMATES AN ADDITIONAL INVESTMENT OF

USD 6 BILLION IN PROCESSING SECTOR - INDIA CAN BE THE
LARGEST POLYMER PROCESSING HUB & COMPETITIVE GLOBAL
EXPORT BASE BY 2012
Source: Industry Estimate

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CONCLUSION

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SUMMING UP - ADVANTAGES INDIA

High GDP growth &
India is global 4th in
PPP Economy to
support consumption

Largest democracy
political stability
& consensus on
reforms

Well developed
downstream
industry with
opportunities for
future investments

Strong
entrepreneurship,
technical/managerial
skills / cost
leadership

Retail boom Changing

lifestyle, Future auto hub,
Home appliances becoming
necessity, growth in
infrastructure strong
market place

Liberal &
transparent
investment
policies

Central and state

governments are
supportive to
industry

Logistic advantage
to sell into Asia
pacific, European
Union, Africa, US
east coast

POTENTIAL TO BECOME GLOBAL QUALITY LEADER AND LOW COST

MANUFACTURING HUB

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THANK YOU

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