Mangalore Refinery and Petrochemicals Ltd (MRPL) has said it would make calibrated investments in petrochemicals to embrace long-term changes.
In its annual report for 2022-23, the company said this will shore up the revenues in the future during the period of declining returns from fossil fuels.
An integrated refinery with 25-30 per cent petrochemical intensity would require an investment of two-to-three times that of a conventional refinery. Mentioning that the present petrochemical intensity of MRPL is 10 per cent, the annual report said the company would make calibrated investments in petrochemicals to embrace long-term changes, while continuing to ensure relevance and viability of its existing assets.
The expected gains of such an integration would be from feed stock availability, lower capital cost, lower operating cost, and the advantage of domestic market where significant growth is projected.
“For petrochemicals, MRPL will optimally time its investment to decouple from past and infuse capital in future. This will free it from the pressures of new situations and consequent risks of lower capacity utilisation and margin reduction that can impact cash flow,” the annual report said.
The investment yardsticks would include repurposing existing units, addition of on-purpose units, greenfield petrochemical pathway, and sustainable imperatives, it said.
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Annual report mentioned that the present petrochemical consumption of India is about one-third of the global average.
As of now, around 50 per cent of the products of MRPL are for the road transportation sector. It said that this poses a challenge for the company. Lower demand means less need for refining to produce fossil fuels. There is a risk of contraction in profit margins when refinery capacity utilisation falls.
Petrochem feedstocks
In contrast, demand for petrochemical feedstocks will continue to grow. The major oil-derived petrochemical feedstocks are ethane, liquid petroleum gas (LPG), and naphtha. These are primarily used in the production of polymers for plastics, synthetic fibres, and other petrochemical intermediates. Demand for these products will continue to grow with rising wealth, it said.
However, India is expected to remain a bright spot for fossil fuels into the next decade. This will enable MRPL to generate capital for the next phase of investment.
The report said refineries cannot be reluctant to invest in infrastructure for the changing times, adding, MRPL intends to be an integrated refinery of the future by capital deployment in new pathways.
Referring to the emerging trends in bio fuels and green hydrogen, the annual report said these are early times and their costs are high.
“However, the company cannot afford to ignore these developments. The transition to the future by the company will include efforts in clean energy, carbon footprint reduction, sustainable initiatives and effective deployment of capital resources,” it said.
It also said MRPL is dependent on oil marketing companies for much of its domestic sales. There are plans to have 1,000 retail outlets of its own in five years, the report added.