Indian state-owned refiners are planning to spend US$35 billion on expanding their petrochemicals output in anticipation of a boom in demand for products ranging from plastics to paints, Reuters reports. The three companies taking part in the strategy are Indian Oil Corp., Bharat Petroleum, and Hindustan Petroleum.
According to interviews with executives from these companies, Bharat Petroleum and Hindustan Petroleum will each invest US$15 billion in expanding petrochemical-producing capabilities, eyeing an increase in this business' share in total revenues of 10 percent. Refiner IOC will spend about US$4.7 billion in petrochemicals expansion, aiming to bring its share in revenues from 25 percent currently to a third in five to seven years.
Earlier this week, IOC secured government permission to import one very large crude carrier (VCCC) of U.S. crude oil every month this year, as Indian firms started buying American crude for the first time. India is the latest addition of Asian customers for U.S. crude, after OPEC's production cuts pushed prices up for the heavy sour crude oil from the Middle East.
According an Indian oil ministry official, even after shipping costs are added, Indian refiners find U.S. crude cost competitive now.
A senior member of the country's Chemical and Petrochemical Manufacturing Association, an industry body, estimated demand for petrochemicals is set to expand by 10 million tons until financial 2019/20, which means the domestic petrochemicals market will grow to US$65-70 billion.
Indian's refiners have traditionally focused on fuel and cooking oil production. At the moment, India is among the top fastest-growing economies in the world, but its use of petrochemicals is about a fourth of the global average, the CPMA member, S. Mitra, also told Reuters. Half of this is imported, and New Delhi is determined to reduce its reliance on imported oil and products.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More