BPCL set to commission acrylate unit at Rs 6,000-cr Kochi PDP complex shortly
Kochi Refinery, the largest asset of Bharat Petroleum, is set to complete a Rs 6,000-crore PDP complex by this month-end with the commissioning of the last unit that will manufacture niche petrochemical product acrylate, helping the nation save over Rs 4,000 crore in foreign exchange annually. The Rs 6,000-crore propylene derivatives petrochemical (PDP) complex got delayed by a year due to the pandemic as project engineers from Japanese giant Mitsubishi, the technology and engineering partner of the project, could not travel to the project site in Kochi, forcing BPCL to get most of the project monitoring work done virtually. The Kochi PDP complex marks the first major endeavour in the country, either in the public or private sector, to produce niche petrochemicals which are predominantly being imported now. The unit making acrylate – the key input used by the specialty chemicals, plasticisers and paints and adhesives industries – is the third and the final unit, planned to be commissioned last June, but got delayed and leading to a cost escalation to Rs 6,000 crore from a little over Rs 5,000 crore for the divestment-bound BPCL. The company is on course to complete the acrylate unit by the end of this month. With the commissioning of this unit, the Rs 6,000-crore PDP complex is complete and will help save at least Rs 4,000 crore in import bill annually, Sanjay Khanna, the executive director in-charge of refineries at BPCL, told . The first unit of the complex was commissioned in February, making it the first unit in the country producing acrylic acid, and the second unit producing oxo-alcohol was commissioned in April this year. The complex can produce 3.29 lakh kilo tonnes of niche petrochemicals such as butyl acrylate (1,80,000 metric tonnes per annum or mtpa), 10,000 mtpa of ethyl hexyl acrylate, 47,000 mtpa of acrylic acid, 47,000 mtpa of ethyl hexanol and 38,000 mtpa of normal butanol, S Jena, executive director (industrial and commercial) at BPCL told . These products are fully imported but now the end user industries in the specialty chemicals, plasticisers and paints and adhesives segments can save Rs 4,000 crore in foreign exchange annually, Jena said. With the commissioning of the PDP complex, BPCL joins the world leaders in this space such as Tasnee of Saudi Arabia, Dow Chemicals of the US, BASF of Germany and Sasol of South Africa, among others, which control the 22 million tonnes market globally. These six niche products will together replace almost 90 per cent of the imports in this segment, Khanna said. The unit making acrylic acid — used in hygienic medical products, detergents, wastewater treatment chemicals, plastics, coatings, adhesives, elastomers, paints and polishes — is the largest single train unit in the world with capacity of 1.6 lakh mtpa and also the first in the country. Most of the user industries are primarily in Gujarat and Maharashtra, Jena said. Normal butanol is second of the six major niche petrochemicals being produced for the first time in the country. Again, vast majority of the end-customers are in Gujarat and Maharashtra and around 10 per cent in Tamil Nadu, Jena said, adding normal butanol finds application in plasticisers, textiles, impact modifiers for rigid PVC, amino resins and butyl amines. Annual consumption of normal butanol, predominantly by plasticisers and automotive paint manufacturers, is 60-65 MT, which was mostly imported till now. Kochi Refinery is equipped to produce 38 MT annually. Over the next few weeks, commercial production of oxo-alcohols and acrylates will also commence, Jena added. Jena said with the commissioning of the PDP complex, the domestic industry will also gain from price stability and assured supplies in shorter time as imports involve considerable transit time, supply uncertainty and price unpredictability. On average, the prices will come down by USD 200 from USD 18,000 a tonne. Khanna said the complex took 35 million man days for construction, and will open up more job opportunities with allied industries in the upcoming petrochemical park in Kochi. BPCL had earlier this month said it had indigenously developed the country’s maiden superabsorbent polymer technology, a project which will also come up adjacent to the PDP complex, and which will save Rs 1,000 crore in forex. The PDP complex will be the feedstock for this complex that will manufacture superabsorbent polymers used in various hygiene products like diapers. In the first phase, BPCL will set up a small unit with 200 metric tonne capacity to produce superabsorbent polymer at Kochi Refinery, which in the second phase will go up to 50,000 metric tonnes per annum.
Gujarat State Petronet Ltd’s cross-country pipeline project delayed
The commissioning of the ambitious cross-country pipeline of Gujarat State Petronet Ltd (GSPL) from Mehsana to Bhatinda has been delayed by three to four months due to the second wave of Covid-19. The 1,670km pipeline linking Mehsana in Gujarat to Bhatinda in Punjab was earlier scheduled to be commissioned in June. The natural gas trunk pipeline project, which passes through Jaipur in Rajasthan, is estimated to cost Rs 5,500 crore. “This project is now expected to be up and running by September or October,” according to a senior company official aware of the development. “The delay has been due to Covid-related restrictions including in the neighboring state of Rajasthan,” the official said. “Also, the shortage of labourers during the second Covid wave contributed to the delay.” Earlier, GSPL, a Gujarat State Petroleum Corp (GSPC) group company, had proposed to take the pipeline project all the way to Srinagar, covering a distance of another 750-odd kilometres in the process. However, GSPL abandoned its plans last year due to financial viability issues, the official said. Contracts for laying the pipeline infrastructure have been awarded to companies such as Kalpataru Power Transmission Ltd and Hyderabad-based Megha Engineering and Infrastructure Ltd. More than 93% of the project is complete, said a GSPC official. The pipeline project is a part of Prime Minister Narendra Modi’s plan for the National Gas Grid. A consortium led by GSPL has formed a special purpose vehicle called GSPL India Gasnet Ltd to implement the project. GSPL has a 52% stake in the SPV, with Indian Oil Corp Ltd holding 26%, and Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd having 11% each. In 2011, Petroleum and Natural Gas Regulatory Board had authorized GSPL, a subsidiary of the Gujarat government, to lay the Bhatinda-Jammu-Srinagar gas pipeline. The project comprises 840km main line of 36 inch diameter and 785km spur line. GSPL has already put in place a pipeline network of about 2,696km, covering 25 districts in Gujarat. It is developing cross-country pipeline projects of over 4,800km covering nine states through its two subsidiaries, GSPL India Gasnet Ltd and GSPL India Transco Ltd. The company recently announced its financial results for the fourth quarter of 2021. Results showed its consolidated net profit had risen 8.82% to Rs 416.68 crore from Rs 382.89 crore. In the fourth quarter of 2021, the total gas transmission volumes stood at 33.84 mmsmcd compared to 39.36 mmsmcd in the corresponding quarter of the previous year.
Retail to be next growth engine for Reliance, says a Goldman Sachs report
With a potential for a 10x growth in pre-tax profit from the business over the next decade, retail including e-commerce will be the next growth engine for Reliance Industries Ltd, Goldman Sachs said in a report. After growing 5x over FY16-FY20, RIL’s core retail revenue growth has taken a pause in FY21 (April 2020 to March 2021) due to Covid related macro headwinds including lower footfalls. The oil-to-telecom conglomerate run by billionaire Mukesh Ambani used the period to build strong digital capabilities of the retail business while continuing to expand its physical reach. “We believe retail business (including e-commerce) is set to be the next growth engine for RIL, with potential for retail EBITDA to grow 10x over the next 10 years,” the brokerage said. During the macro downturn, RIL has focused on building strong digital capabilities and the scale-up in omnichannel offering is driving sizeable market share wins. “We see a six-fold increase in grocery organised retail penetration in India by FY30, coupled with 15 per cent market share gain for RIL. “We expect RIL core retail revenue to grow at a 36 per cent CAGR over the next four years to USD 44 billion and e-commerce revenues to be 35 per cent of total retail revenues in FY25, at USD 15 billion,” it said. It forecast a 50 per cent market share for RIL in online grocery by FY25, with a 30 per cent market share in overall e-commerce. This translates into USD 35 billion e-commerce GMV (gross merchandise value) for RIL by FY25, with USD 19 billion in grocery. “Overall, we expect retail EBITDA to grow 10x from current levels by FY30,” it said. Goldman Sachs valued RIL’s retail business at USD 88 billion in the base case and at USD 120 billion bull case valuation based on stronger than expected macro growth and market share wins. It valued RIL’s retail business using discounted cash flow (DCF) at USD 57 billion for offline business and USD 32 billion for e-commerce. “We see a multi-year runway of growth driven by our expectation of growing organised retailing in India from a 2.6 per cent share today to a 13.2 per cent share in FY30 and rising market share for RIL in organised retailing due to its omnichannel strategy with a market share going from 41.5 per cent now to 54.7 per cent in FY30,” it said. With a USD 400 billion GMV, grocery is the largest retail category in India, accounting for 60 per cent of the total retail market. “We expect RIL core EBITDA growth of 59 per cent year-on-year in FY22E based on cyclical growth in the oil-to-chemical (O2C) business, and structural growth in the consumer businesses,” it said. Over the next 12 months, continued sequential earnings recovery is expected along with catalysts around telecom tariff hikes, new product launches with Google, Facebook and Microsoft, and potential value unlocking from a proposed energy business stake sale.
Oil giants see crude at $100/barrel on supply side constraints
The bosses of some of the world’s biggest oil companies said crude prices are likely to keep rising because a lack of investment will curtail future supply. The chief executive officers of Royal Dutch Shell Plc and TotalEnergies SE joined major commodity traders and banks in predicting that oil could go as high as $100 a barrel, although they also said volatile markets could drive prices back down again. Low investment is “going to exacerbate supply and demand tightness as the economies pick back up again, and then in time we’ll see supply pick up and rebalance,” Exxon Mobil Corp. CEO Darren Woods said at the Qatar Economic Forum Tuesday. “In the shorter term, probably, higher prices” are more likely. Trading house Trafigura Group said oil could top $100 a barrel over the next year. Bank of America Corp. also forecast this week that prices could jump to that level and Goldman Sachs Group Inc. said it doesn’t rule it out. West Texas Intermediate crude has climbed more than 50 per cent this year as widespread vaccinations increase mobility and boost demand. Benchmark Brent crude is up 46 per cent to more than $75 a barrel, the highest in around 2-1/2 years. Global oil markets had one of the most turbulent years in history last year with the coronavirus pandemic sending prices crashing. But economies in the West are growing again, roads in Europe and the U.S. are more congested, and greater numbers of Americans are flying. While that could drive prices higher in the near term, the energy transition means oil consumption could start to plateau and eventually decline. The energy shift means there hasn’t been enough investment in oil and gas projects and that could push prices higher, Qatari Energy Minister Saad al-Kaabi said at the same event. BP Plc CEO Bernard Looney said earlier Tuesday that rising crude is helping the company’s energy transition plans and generating better cash flow and returns for shareholders. There’s “quite a chance” of reaching $100 a barrel, “but we could see again in coming years some low prices,” TotalEnergies CEO Patrick Pouyanne said. “We’ve been accustomed to volatility.”