State-owned oil refiner HPCL plans to add up to 5 million tonnes of petrochemical production capacity over the next five years. This would involve a significant portion of HPCL’s planned ₹61,000-crore capital expenditure for that period, MK Surana, CMD, said after the company’s annual shareholder meeting.
HPCL’s proposed refinery in Barmer, Rajasthan, will be the first integrated refinery in the country, Surana said, with both an oil refining and a 2 mt petchem production capacity built into the design.
Besides this, the company is in talks with the Andhra Pradesh government to set up a 1.3 mt petchem plant in Kakinada along with GAIL. Additionally, the licensor has been selected for the company’s existing refinery in Bhatinda, Punjab, to set up petchem capacity of 1.3 mt in the next couple of years.
HPCL has also set up a petchem marketing department to find the best prices for its products, Surana added.
The company’s investments in the petchem industry are in line with the plans of the other two state-owned oil refiners. Last week, BPCL said it intends to invest ₹45,000 crore in petchem capacity expansion over five years, while its larger counterpart Indian Oil Corporation plans to invest ₹32,000 crore.
The investment push comes as refiners expect the demand for plastics, adhesives and synthetic fibres to multiply in the coming years even as the future of their traditional revenue streams from refined fuels appears shaky amidst the government’s push for e-vehicles.
Also, petrochemicals are a good way for such companies to “derisk in the motor fuel segment,” Surana said.
On ONGC’s pending acquisition of the government’s 51.1 per cent stake in HPCL, Surana said the Centre has formed an advisory panel which will determine the per share transaction value of the deal. However, HPCL will continue to be a separate entity after the acquisition, he said.
While he did not give a completion date for the proposed new refinery in Barmer, Surana said the revised plans for the long-pending plant have a better technical configuration and will be able to process a wider variety of crude oils than before.
Earlier this year, HPCL signed revised terms with the Rajasthan government — a joint venture partner in the refinery — losing many of the tax breaks that had been initially promised. “However, the internal rate of return remains about the same even under the new terms,” Surana said. “This is because the earlier agreement was drafted when international benchmark crude oil prices were at twice where they are now.”