Sector News

Shell to acquire 50% stake in Nayara Energy’s $9-billion petchem project in India

August 17, 2020
Chemical Value Chain

Shell plans to acquire a 50% stake in a petrochemical project planned by Nayara Energy (Mumbai, India) and involving an investment of up to $9 billion, according to reports by Reuters and local media. Reuters, quoting sources familiar with the matter, says that the two companies signed a memorandum of understanding (MOU) in June to establish a joint venture (JV) for the project. “The petchem JV was discussed at board of directors meetings of Nayara in November and December last year,” Reuters quoted a source as saying. Rosneft (Moscow, Russia) owns 49% of Nayara.

Reuters, quoting another source acquainted with the matter, says that the planned complex, based on a 1.8-million metric tons/year (MMt/y) steam cracker and downstream units, will be built at Vadinar, Gujarat State, India, where Nayara operates a refinery. The cost of the project is reported to be $8–9 billion and it would be completed in five years. The project also includes an aromatics complex and will have overall capacity to produce 10.75 MMt/y of petchems, says Reuters.

Nayara tells CW “no comments from our side”.  Shell tells CW it is “not commenting on the Nayara story.”

Utpal Sheth, executive director/plastics research and analysis at IHS Markit, says that the reported investment decision by Shell is a positive development for the proposed petchem project. Nayara, which has been predominantly in the refining business until now—formerly known as Essar Oil—is already investing $850 million to build a 450,000-metric tons/year propylene-recovery unit, a polypropylene (PP) plant with a production capacity of 450,000 metric tons/year, and a 200,000-metric tons/year methyl tert-butyl ether plant at the Vadinar refinery that should be ready within two to two-and-a-half years, says Sheth.

The newly announced cracker complex will increase the Vadinar refinery’s integration with petrochemicals. This move toward downstream integration is in line with recent global trends, according to Sheth. Expectations of peak crude oil demand sometime next decade are driving refiners to build downstream integration. Worldwide crude oil demand is growing at just 1%/year, but chemical demand is expected to grow 3–4%/year in the medium to long term, adds Sheth. As a result, major standalone refineries are integrating downstream to convert more products to chemicals rather than depend heavily on transportation fuels. “This strategy adds value and also provides them an opportunity to widen their product mix,” Sheth says.

According to IHS Markit, economic growth in the Indian Subcontinent will help to drive worldwide demand for PP and its applications. The region will have the largest average annual growth rates, about 9%, between 2017 and 2022. IHS Markit says that the subcontinent in the next five years plans to add 1.2 MMt of PP capacity and says that the region’s consumption will continue to grow faster than its capacity.

Sheth says that until recently, all the petchem plants in India have been promoted and owned by local companies despite significant efforts by the government to invite foreign investors. Rosneft and its partners were the first overseas firms to invest in a refinery and subsequently downstream plants in India.

Meanwhile, Abu Dhabi National Oil Co. (Adnoc) and Borealis have joined an expanded propylene-based project in India that was announced in 2019 by BASF and the Adani Group. The four partners have signed an MOU to carry out a joint feasibility study to evaluate the establishment of the complex at Mundra, Gujarat. The total investment is estimated to reach $4 billion.

Sheth says that if Nayara’s new petchem project progresses and Shell takes a 50% stake, it will be the largest investment in India by a multinational company in the petchem business. Many multinationals have been evaluating investments in India for the past several years but were skeptical and did not take a final investment decision. Sheth says that these recent announcements should encourage other multinationals to invest in the petchem business in India because of its high potential.

According to Sheth, relatively low per-capita consumption of chemical products, a growing middle-class population with higher purchasing power, favorable demographics, and healthy economic growth are some of the parameters that will support rapid demand growth for petchem products in India during the next 2-3 decades. Since India is currently heavily dependent on imports of several base and specialty chemicals, there is a huge opportunity to increase domestic production capacity, adds Sheth.

The Indian government has announced a significant reduction in corporate taxes and simplified rules for foreign investments. All these factors should support massive investments in the Indian petchem industry, according to Sheth.

By: Kartik Kohli

Source: Chemical Week

comments closed

Related News

October 17, 2021

Sidel overcomes COVID-19 travel restrictions with remote bottle line tuning in Guinea

Chemical Value Chain

Sidel has remotely assisted Nouvelle Brasserie de Guinée (Braguinée) with the tuning of a 1 L bottle line in Guinea. Braguinée is expanding its carbonated soft drink large format production to meet the growing demand for home consumption

October 17, 2021

Dutch PPE Solutions reduces climate impact of meltblown fibres production by using Borealis Bornewables™

Chemical Value Chain

Dutch PPE Solutions, a joint venture of VDL Groep and Royal DSM, has been able to produce carbon neutral meltblown fabric. Bornewables PP is made from bio-based feedstock derived entirely from waste and residue streams and has ISCC PLUS certification. Borealis is providing Dutch PPE Solutions with renewable PP from its , supporting them in reducing the climate impact of meltblown production.

October 17, 2021

Contract of Covestro CCO Sucheta Govil extended ahead of schedule

Chemical Value Chain

The Supervisory Board of Covestro AG has prematurely extended the contract of Board of Management member Sucheta Govil, which runs until July 2022, by three years from August 1, 2022, to July 31, 2025. Govil has been a member of the Management Board of Covestro since August 2019.

Send this to a friend