Petrochemical

India's Reliance in crude-for-naphtha swap deal with Venezuela, sources say

Date: 09th August, 2024

Source: ET Energy World

India's Reliance Industries plans to use naptha supplies as partial payment for crude purchases from Venezuela after the refiner obtained a U.S. approval last month to resume oil trade with the sanctioned producer, three sources aware of the contract terms said. 

NEW DELHI/HOUSTON: India's Reliance Industries plans to use naptha supplies as partial payment for crude purchases from Venezuela after the refiner obtained a U.S. approval last month to resume oil trade with the sanctioned producer, three sources aware of the contract terms said.

One source said Reliance will pay dollars for the balance of the crude purchase. The company was forced to stop direct purchase from Venezuela in April due to a re-imposition of sanctions but in July, Washington authorized Reliance to import crude from Venezuela. Reliance had re-submitted a request to the U.S. in May.

Reliance, which operates the world's biggest refining complex, plans to supply naphtha, a refined product, from the U.S. to partly pay for its Venezuelan oil purchases, the sources said. The arrangement is similar to past Reliance trades with Venezuela's state company PDVSA, according to PDVSA's exports and imports records. Venezuela needs naphtha as a diluent for its heavy crude.

Reliance's two refineries in western Gujarat state can process about 1.4 million barrels per day (bpd) of crude oil. The complexity of these plants allows the refiner to process cheaper and heavier crudes such as Merey from Venezuela.

The sources declined to provide details regarding volumes and duration of the authorization given by the U.S. for Reliance's Venezuelan oil purchase. Washington could impose fresh sanctions on the South American country following a disputed election, but U.S. officials have said individual oil licenses are not expected to be modified or withdrawn for now.

Reliance did not respond to a Reuters email seeking comments.

The U.S. last year granted a broad license to Venezuela's oil industry allowing state-run PDVSA to freely export to its chosen markets, which boosted demand for Venezuela's oil and pushed up the country's fuel imports through swaps.

But Washington in April re-imposed sanctions on Venezuela's oil sector in response to President Nicolas Maduro's failure to meet election commitments, granting instead some individual licenses to trade and operate in Venezuela's energy sector.

Loading schedules at Venezuelan ports have been overbooked, one of the sources said, which has caused delays in Reliance's resumption in taking the oil. Several sources cited similar problem for other Asian buyers.

Venezuelan production did not increase quickly enough to meet contracts negotiated with existing as well as new customers, leading to more delays to deliver cargoes since early this year. Delays reached up to 60 days in some cases, affecting importers of Venezuelan oil in Asia.

The Indian refiner had limited direct loadings of Venezuelan crude earlier this year over worries that the license could be pulled at anytime, one of the sources said. That could impact vessels in transit or at Venezuelan ports, the person added.

Reliance's refinery last received 2 million barrels of Venezuelan oil in June, Kpler data showed. It was not immediately clear who the supplier was.

Petrochemical Products Quality Control Orders 2023

Date: 20th May, 2024

Source: Notice from Department of Chemicals and Petrochemicals

Making standards mandatory for Packaging of Cement, Fertilizers, Polymers and Postal Bags of Petrochemical Products Quality Control Orders 2023.

It is to inform that Department of Chemicals and Petrochemicals has decided to make the following QCOs mandatory & due for implementation on 6^th June, 2024. The Gazette Notification in this context had already been issued (copy dated 6^th December, 2023 attached).

Request to please use the 2 links to download the information

https://cpmaindia.com/pdf/1716794002-1.pdf

https://cpmaindia.com/pdf/1716794002-3.pdf 

India imposes BIS quality norms for import-dependent polypropylene

Date: 17th August, 2023

Source: Polymer Update

The Bureau of Indian Standards, a quality monitoring body under India’s Ministry of Chemicals and Fertilizers, has introduced minimum quality standards for the manufacturing and import of polypropylene (PP), a valuable raw material used in plastic product manufacturing. PP stands as one of the most frequently utilized thermoplastics globally, serving as the basis for a diverse array of plastic packaging, lightweight machinery, and equipment components, as well as fibers and textiles.

A global notification issued on Tuesday by the World Trade Organization (WTO) on behalf of the Indian government states, “The order aims to ensure the compliance of PP with Indian Standards. Locally produced or imported goods (PP in this context) are required to adhere to Indian standards and bear the standard mark, granted under a license from the Bureau of Indian Standard (BIS), which will serve as the certifying and enforcing authority.”

Scheduled for implementation after a six-month period, starting from February 15, 2024, the BIS quality standard is anticipated to impact both PP production and imports in India. As a member of the polyolefin family, PP shares similarities with polyethylene due to their analogous monomer – propylene and ethylene, respectively. Despite these resemblances, significant differences exist in terms of density, service temperature, rigidity, resistance to environmental stress cracking, and susceptibility to oxidation.

Polypropylene boats have commendable mechanical properties, exceptional chemical, thermal, and electrical properties, as well as aesthetic appeal in applications like transparent films. Its lower cost per unit weight and greater yield on a volumetric basis due to its low density offer substantial economic advantages to converters and end-users.

Rising demand

According to industry sources, India’s demand for PP reached 6.6 million tonnes during the financial year 2023-24, marking a 6 percent rise from the 6.1 million tonnes reported in the preceding fiscal year. PP accounted for more than 37 percent of the overall polymer demand in India during the financial year 2022-23. In the January-March 2023 quarter, India’s PP demand was approximated at 1.9 million tonnes, in contrast to the 1.7 million tonnes recorded in the same period of the preceding year.

However, India’s increasing demand revealed domestic PP production to be insufficient. Consequently, the total PP imports for India were documented at 960,000 tonnes in the financial year 2022-23. As a result, PP emerged as the second most imported polymer in India, trailing only behind polyvinyl chloride (PVC), which accounted for a total import volume of 1.44 million tonnes during the financial year 2022-23.

PP consumption in India has been steadily ascending in recent years, driven by its extensive range of applications. The Indian plastic industry projects the country’s PP demand to escalate by 5.4 percent in the financial year 2023-24, following a 6 percent upsurge reported in the financial year 2022-23. PP finds extensive use across various industries, with approximately 40 percent dedicated to packaging and a cumulative 29 percent utilized in consumer and institutional applications. The transportation sector consumes roughly 10 percent, while the remaining 21 percent is allocated to miscellaneous sectors, districts from the aforementioned segments.

Capacity expansion

A recently published report reveals that Indian producers have been consistently devising strategies to expand their production capacity, aiming to cater to the escalating domestic demand and foster self-sufficiency in polypropylene. Consequently, the Indian industry could potentially witness an additional capacity of approximately 3 million tonnes per annum (MTPA) within the next three years, facilitated by Nayara Energy’s 0.5 million tonnes project, set to commence operations in 2023.

Three projects, one from each Hindustan Petroleum Corporation Ltd (HPCL), Chennai Petroleum Corporation Ltd (CPCL), and Indian Oil Corporation Ltd (IOCL), are anticipated to become operational in 2024. HPCL is slated to commence commercial production with its 1 million TPA project, while both CPCL and IOCL are projected to initiate their 475,000 TPA and 450,000 TPA of PP production, respectively, in 2024. Furthermore, IOCL and Gail India Ltd are preparing to launch commercial production for their 200,000 TPA and 500,000 TPA PP projects in 2025.

Nevertheless, these capacity expansions might prove insufficient to meet India’s mounting demand across existing and emerging applications. The projection indicates that India’s PP demand will continue its growth trajectory, thereby offering a promising prospect for global exporters. The consultancy firm TransGraph has estimated that the transportation, rubber, and plastic sectors will be pivotal in driving India’s PP demand to reach 7.84 million tonnes by the financial year 2026-27.

Experts’ comment

Deepak Balani, Director General of the All-Indian Plastics Manufacturers Association (AIPMA), remarked, “India is a deficit country, compelled to resort to imports due to inadequate domestic production. The country’s production capacity falls short of its overall demand. Indian entities import specific, limited quantities of unique PP grades to fulfill highly specialized applications that are not presently manufactured domestically. Consequently, the imposition of BIS quality standards is poised to adversely impact the availability of these specific grades, as well as PP overall. The costs associated with such materials will inevitably rise.”

“In terms of quality standards, international companies have already adhered to the quality regulations of the European Union, alongside other Asian and American guidelines. Given their adherence to these standards, there appears to be no rationale for introducing an unnecessary quality standard that could obstruct the process. However, predicting the context of Indian companies’ compliance with BIS standards is challenging. Such quality norms are traditionally applied to products with surplus domestic production in order to discourage imports. Yet, India’s local PP production falls short of consumption, rendering such a quality standard unnecessary,” Balani elaborated.

An expert, speaking to Polymerupdate, conveyed that the government should not deter PP imports through superfluous quality standards. “By importing PP at competitive prices, we are able to manufacture high-quality finished products for export, positioning ourselves to compete effectively with global counterparts in foreign markets. Imposing restrictions on imports would drive up our production costs, making us less competitive internationally and thereby undermining our export potential.” He further commented, “The government should prioritize the finished product sector, which generates maximum employment. Import of raw materials should remain obstructed. However, the government should consider regulating the import of finished products based on quality and other standards.”

Chemicals-petrochemicals firms must focus on quality, global competitiveness: Mansukh Mandaviya

Date: 28th July, 2023

Source: Economic Times

Chemicals and Fertilisers Minister Mansukh Mandaviya on Friday asked chemicals and petrochemicals players to focus on quality and become competitive in the global market to make India a manufacturing hub. Addressing a summit on 'Global Chemicals and Petrochemicals Manufacturing Hubs in India' here, the minister asserted that India is the best destination for global investments and the industry should encash this opportunity to boost manufacturing.

Mandaviya said he has given direction for establishing chemical parks for making India an investment hub and added that "the work is happening in this regard".

"Today there is a need to focus on quality and become competitive in the global market," he said.

The minister assured the government's support in making the domestic industry in becoming competitive at a global stage. He asked the industry to make a white paper in this regard.

Mandaviya noted that industry is important for any economy as it helps in becoming self-reliant. He said it is the responsibility of the government to support industry.

He highlighted that the government is taking policy decisions in a holistic manner and after wide consultations with all stakeholders. This has helped in increasing industrial production as well as foreign direct investments.

Mandaviya said the government has brought labour reform, reduced compliances and brought a bill to the decriminalisation of minor offences as part of its effort to create an industry-friendly atmosphere.

He stressed making India the 'factory of the world' for all kinds of industries, including chemicals and petrochemicals.

The minister said India has become the best and safe destination for global investments because of a stable long-term policy, democratic system and justice on merit by the Indian judiciary, besides being a large consumption centre.

He asked domestic players to encash this opportunity and form partnerships with global firms.

Mandaviya also asked the industry to partner with central and state governments to set up plants as well as chemical parks with all infrastructure facilities.

The summit saw the participation of global leaders, CEOs, government authorities, key industry players, state governments and subject matter experts from around the globe to discuss the key sectoral issues and the way forward with respect to Indian chemicals and petrochemicals industry.

India considering PLI scheme for chemicals, petrochemical sector: Nirmala Sitharaman

Date: 27th July, 2023

Source: Economic Times

India is considering the Production Linked Incentive (PLI) scheme for chemicals and petrochemical sector, said union finance minister Nirmala Sitharaman. Sitharaman also said that the country has set its sight on becoming energy independent by 2047 and achieving net zero by 2070. "Net Zero can’t be achieved unless each industry and sector contribute to it. We are very focused on green growth.

Carbon intensity has to be reduced and therefore each one of the sectors will have to contribute to this," said the finance minister at the third edition of the summit on Global Chemicals and Petrochemicals Manufacturing Hubs in India. The remark "achieving net zero by 2070" comes amid government's keen focus on giving a boost to Indian manufacturers and industries by introducing PLI scheme. The government had announced the re-bidding of PLIs for 20 GWh Advanced Chemistry Cell manufacturing -- India's Rs 18,100-crore programme to boost local battery cell production last week.

The Ministry of Heavy Industries (MHI) will facilitate a stakeholder consultation with industry representatives on July 24, 2023 for their inputs and suggestions before the start of the re-bidding process of remaining 20 GWh capacity. "The ministry is committed to finalize the bidding documents and proceeding with the rebidding process at the earliest," an official statement said. ACCs are the new generation of advanced storage technologies that can store electric energy either as electrochemical or as chemical energy and convert it back to electric energy as and when required. These have major applications in the electric vehicles, maintaining grid stability, solar rooftop, consumer electronics etc. With India's commitment towards renewable energy and achieving net-zero by 2070, energy storage is expected to play a crucial role in the overall energy ecosystem.

Haryana to provide 350 acres for expansion of Panipat refinery: CM

Date: 13th July, 2023

Source: Times of India

The government will provide 350 acres of land for the expansion of Panipat refinery, chief minister Manohar Lal Khattar said. He said the expansion of the refinery would generate jobs for Haryana youth. Khattar was the chief guest at the silver jubilee function of the Indian Oil Panipat Refinery and Petrochemical Complex.

Addressing the gathering, the CM said the refinery was planning to expand its capacity from 15 million MT to 25 million MT and the government had decided to make the land available for the expansion. Around 350 acres of panchayati land has already been identified at Bal Jattan, Khandwa and Assan Kalan villages, he said.

The Panipat refinery will invest around Rs 60,000 crore in the upcoming and ongoing projects, which will also benefit the people of Haryana, said the CM.

Khattar said: "Today Panipat refinery has become the largest integrated refinery and petrochemical plant in India and the third largest in South Asia. This has provided immense employment opportunities to the youth of this state as well as neighboring states. It contributes a lot to the revenue of Haryana."

Union minister of state for petroleum and natural gas Shri Rameshwar Teli said the petroleum and petrochemical sector was playing an important role in the country's economic progress.

The Panipat refinery is going to increase its capacity, which will reduce the country's import in terms of energy consumption, he said. Shrikant Madhav Vaidya, chairman, IOCL, was also present.

REC to provide Rs 4,785 crore loan for refinery project in Rajasthan

Date: 04th July, 2023

Source: PTI

State-owned REC Ltd on Tuesday said it will provide a loan of Rs 4,785 crore to HRRL's project in Rajasthan. HRRL is a joint venture between Hindustan Petroleum Corporation Ltd (HPCL) and Rajasthan government. HPCL holds 74 per cent equity stake in HRRL.

"REC extends Rs 4,785 crore for HPCL Rajasthan Refinery's project in Barmer. HRRL has executed a loan agreement under consortium arrangement for Rs 48,625 crore wherein the share of state-run REC Ltd is Rs 4,785 crore," REC said in a statement.

HRRL is setting up a green field refinery cum petrochemical complex, with a capacity of 9 MMTPA at a project cost of Rs 72,937 crore.

The project includes setting up of an energy efficient and environment friendly refinery cum petrochemical complex, crude and product storage facilities, township and allied facilities and utilities, a captive power plant for meeting refinery power and steam requirement.

It will be producing clean fuels such as BS-VI grade Motor Sprit (MS or Petrol) & BS-VI grade High Speed Diesel (HSD or Diesel) and Petrochemical products such as Polypropylene, Butadiene, LLDPE, HDPE, Benzene and Toluene.

How cheaper crude oil from Russia has changed India's fuel trade matrix

Date: 27th June, 2023

Source: Business Standard

Sourcing cheaper crude oil from sanction-hit Russia has opened new doors for boosting exports for India while it seems to have alienated traditional buyers of processed petroleum products from the country.

While countries like Singapore (-41.7 per cent), USA (-13.2 per cent), Australia (-58.8 per cent), South Korea (-23.9 per cent) and Malaysia (-52.8 per cent) have reduced their purchase of petroleum products from India in FY23, countries like the Netherlands (70.6 per cent), Israel (85 per cent), Brazil (114 per cent), South Africa (60.6 per cent) and Togo (32 per cent) have substantially increased their purchase of fuel products from India.

Since India is a key supplier of refined petroleum products, this has changed the pecking order of key export destinations. While the Netherlands became India’s third-largest export destination in FY23 from fifth position a year ago, Israel jumped 10 positions to 16th, while Brazil jumped five positions to 11th rank, South Africa by six positions to 17th rank, and Togo 11 positions to 23rd rank during the same period.

Biswajit Dhar, professor of economics at the Jawaharlal Nehru University said that while Russia is playing a major role in the churn in oil trade, Europeans have made a dash for cheaper petro products from India. “The Netherlands is a distribution centre for petro products to the EU because Rotterdam port is a storage centre and distributes fuel products to the rest of Europe. So what Europe is doing is bypassing the sanctions on Russia. We are also happily doing it as we want to strengthen our relationship with EU,” he added.

Similarly, since India imported rough diamonds worth $1.2 billion, 48 per cent higher than the previous year, many countries wary of sanctions by Western countries, reduced their purchase of polished diamonds from India. Countries like the USA (-28.7 per cent), UAE (-7.5 per cent), Belgium (-11.8 per cent), Thailand (-15 per cent), Israel (-21.5 per cent), Japan (-25.7 per cent) and Hong Kong (-28.3 per cent) reduced their import of polished diamond from India, while countries like Germany (490 per cent), Singapore (188 per cent) increased such imports manifold.

The G7 countries have not yet imposed a ban on the import of diamonds from Russia. However, they have agreed to restrict the use of diamonds mined, processed, or produced in Russia. This could include tracking the movement of diamonds through the borders and imposing sanctions on companies that continue to trade in Russian diamonds.

“Some exporters are also wary of exporting diamonds because they don’t want to play foul with Western countries,” Dhar said.

There has also been a change in the product mix of fuel exports by India in FY23. While diesel remains India’s most exported product, it saw a 1.8 per cent decline in exports in FY23 and so were the shipments of high-speed diesel, dipping 28 per cent during the year. However, exports of aviation turbine fuel shot up in FY23 by 57 per cent, becoming the second-highest exported product in FY23 from its sixth position in FY22. Export of petrol also declined two per cent in FY23, so was light naphtha dipping 7.5 per cent.

On the import side, while India has ramped up crude oil imports from Russia, with the share going up from just two per cent in value terms in FY22 to 19.1 per cent in FY23, it has simultaneously reduced crude oil imports from traditional suppliers such as Iraq (from 24.8 per cent to 20.7 per cent), Saudi Arabia (18.7 per cent to 17.9 per cent), USA (9.2 per cent to 6.3 per cent). To be sure, while in volume terms Russia is the biggest source of crude oil in FY23 at 21.6 per cent, closely followed by Iraq at 21.4, in value terms Iraq is shown to have a higher share because India gets cheaper crude from Russia.

Dhar said at present it suits us. “There could be an argument that we have dumped our traditional suppliers and suppose Russia goes through a turmoil, would it mean that we would not be getting enough crude oil supplies from these countries? But I think these are commercial considerations and India is a large consumer of crude oil, both for domestic and export purposes. For suppliers, it is always preferable to have large consumers. So India will always remain an attractive destination for our traditional suppliers of crude oil,” he added.

India to overtake China in oil demand growth by 2027: IEA report

Date: 14th June, 2023

Source: Business Standard

The growth in demand for oil in India will overtake that in China by 2027, said a report by the International Energy Agency (IEA). 'Oil 2023', the multilateral agency’s outlook for the next five years, said China’s demand will fall consistently from 2024 after a massive rise this year. The United States, China, and India are the world’s three largest oil consumers in that order. IEA raised its forecast for world oil growth demand to 2.4 million barrels per day in 2023, after the Chinese economy rebounded towards growth faster than expected.

China will in 2023 account for nearly 60 per cent of global growth in oil demand. Later, slowing industrial growth and falling domestic consumption will reduce China’s demand. On the other hand, demand in India is expected to rise steadily. India consumed 222.30 million tonnes of petroleum products in 2022-23: 10.2 per cent more year-on-year. Global crude output reached an estimated 82.3 million barrels per day till April 2023 due to record production runs in Asia, IEA said.

Global demand:

The report predicted a steep fall in the annual growth in demand for oil in the short to medium term. Electric vehicles (EV) and the oil industry use improved technology and logistics will reduce global growth in demand for oil: from 2.4 million barrels per day now to 400,000 barrels per day by 2028. IEA said that after 2024 oil demand growth will be less than 1 million barrels per day. "Global oil demand will rise by 6 percent between 2022 and 2028 to reach 105.7 million barrels per day," it said. Despite this cumulative increase, annual demand growth is expected to shrivel from 2.4 million barrels per day this year to just 0.4 million barrels per day in 2028, putting a peak in demand in sight. 

Of this, the largest share of growth would come from petrochemicals (LPG/Naptha) and aviation fuel. The annual growth in demand for petrochemical feedstocks is expected to reduce at the slowest pace. Petrochemical feedstocks refer to feedstocks derived from petroleum for the manufacture of chemicals, synthetic rubber, and a variety of plastics. Meanwhile, demand for oil required in the road transport sector is expected to turn negative by 2026. This effectively means, demand for oil as the primary fuel for vehicles would begin to reduce from 2027 onwards. Oil prices retreated during April and May as concerns over the health of the global economy and oil demand prospects depressed market sentiment.

Changing Energy Landscape:

• India’s oil demand to grow by 1 million barrels per day (b/d) by 2028

• Growth in Chinese oil demand to shrink from 2024 onwards

• China accounts for 60% of global oil demand growth in 2023

• Global oil demand at 102 million b/d in 2023

• Overall global oil demand growth to peak in 2028 at 105 million b/d

Indian imports of US ethane for Petchem to expand

Date: 07th June, 2023

Source: Argus Media

India's ethane imports from the US are on course to increase significantly in the coming years as new ethane-fed ethylene projects open and existing plants switch from natural gas liquids (NGL) stripped from Mideast Gulf LNG to the US' supply. State-controlled refiners Bharat Petroleum (BPCL) and Gail are investing in new ethane-fed cracker projects at their existing petrochemical facilities to capitalise on the abundant availability of cheap US ethane and the growing fleet of very large ethane carriers (VLECs).

This follows on from private-sector refiner Reliance switching to US ethane at its 1.5mn t/yr ethylene cracker in Jamnagar, in west India's Gujarat state, over the past few years, having previously relied on ethane extracted from LNG imports from the Mideast Gulf. Gail operates two 450,000 t/yr crackers at its Pata petrochemical plant in Uttar Pradesh in northern India, which can use either ethane or propane. This arrives through the HaziraVijaypur-Jagdishpur pipeline having been fractionated and processed from LNG at Hazira on the west coast of Gujarat.

BPCL is also increasingly integrating its refining operations with petrochemicals, but presently only has 500,000 t/yr of propylene capacity at its 310,000 b/d Kochi refinery in Kerala. BPCL is investing close to $6bn to develop an ethane-fed cracker at its 156,000 b/d Bina refinery in Madhya Pradesh, while Gail is spending a similar amount on building a 1.2mn t/yr ethanefed cracker near its 5mn t/yr LNG plant at Dabhol in Maharashtra. Gail has signed an initial agreement with Shell Energy India to import US ethane and has expressed interest in hiring VLECs to transport the supply over 20 years starting from mid-2026.

The plans are partly aimed at cutting reliance on LNG after a shortage last year prompted by disruptions to supplies from Russia's state-controlled Gazprom in the wake of the war in Ukraine and surging international prices. Petrochemical producers in India imported 1.3bn m³ of LNG in 2022, down by 47pc on the year, oil ministry data show. This resulted in Gail shutting down its Pata plant for a few months and then operating it at a lower utilisation when it was brought back online. Besides the price and reliability of LNG imports, the act of processing and fractionating it for use in NGLs in India also adds complication and costs.

Plant pressures

India's ethane imports have been relatively steady in recent years. They reached 1.62mn t in 2022, compared with 1.53mn t in 2021 and 1.57mn t in 2020, Vortexa data show. But the country's expanding ethylene production capacity and domestic consumption will boost this in the coming years. India's ethylene demand is likely to increase to 8.7mn t and polyethylene consumption to 6.9mn t by 2026, Argus calculates. Yet the outlook for the polymers markets this year remains bleak, with a number of Indian polyethylene producers facing inventory pressures at their plants. Low polymer prices have made it difficult for producers to reduce prices further in this current bearish environment to clear excess inventories. Margins have also been squeezed, with Reliance's polymer margins declining by 9pc during its 2022-23 financial year. Linear low-density polyethylene import prices had fallen by 43pc on the year to $950-980/t by 1 June. This has negatively affected buying ideas in India's domestic markets. Stronger spreads from ethane cracking could give Indian producers more scope to cut polyethylene prices to stimulate demand if needed in the future. But oversupply of olefins and polymers continues to be a global challenge