Borealis/ADNOC to join BASF/Adani in expanded propylene & derivatives project
About a year ago, BASF, the Germany-headquartered chemical giant, had announced it will be setting up an integrated acrylics and oxo-alcohols complex that will include a propane hydrogenation (PDH) unit to provide the feedstock, propylene, required for the project. The project has now been given a new dimension by the roping in of two other companies – Borealis and the Abu Dhabi National Oil Company (ADNOC) – taking it one step closer to fruition. If the project is realised in the form now newly conceptualised it will be a big boost for the Indian chemical industry with its many firsts. At an investment of the order of $4-bn it will also represent one of the biggest foreign investments in an industry hitherto dominated by domestic players.
Growing demand-supply gap for C3 derivatives
The demand-supply gap for several propylene derivatives in India is alarmingly high and nearly all propylene is currently consigned to making polypropylene (PP). As a consequence, India is severely dependent on imports to meet the requirements of several other C3-derivatives including acrylic acid & esters; oxo-alcohols (such as n-/isobutanol, and 2-ethylhexanol), propylene oxide & glycol, amongst others. This state of affairs also exists in several other chemical value chains (e.g. styrene, acetic acid, vinyl acetate monomer, methanol etc.) due several reasons – the most important of which is lack of availability of feedstock at competitive prices.
The good news is that there are, at last, a few initiatives to address some of the gaps. India’s first world-scale acrylic acid and derivatives project, as also a large-scale oxo-alcohols facility, is now nearing completion at Kochi. This project is being set up by Bharat Petroleum Corporation Ltd. (BPCL) as a forward integration of their refining business to value-added petrochemicals. But even when these plants are up and running, there will be scope for additional ones, and this is the context in which the BASF project, to be implemented in a JV with the Adani Group, at Mundra, is to be seen.
As first conceived this project was to include a PDH unit based on imported propane. Though the exact configuration of the downstream plants have not been revealed, given the nature of the Indian market it will likely include plants for butyl & 2-ethylhexyl acrylates, as well as the related oxo-alcohols (n-butanol & 2-ethylhexanol).
In the revised and expanded mode, with two additional partners – Borealis and ADNOC – two changes will take place. For one, the PDH plant will be enhanced in terms of capacity to meet the needs of a world-scale PP plant. The size of the PDH/PP plants have not been revealed, but Borealis is building a 750-ktpa propylene plant in Belgium for PP production and the Indian project will also need to be sized to be competitive with these super-plants. ADNOC’s involvement will tie in supplies of propane. Though the merchant market for propane is sizeable, ensuring supplies through an invested partner will bring in additional comfort to project investors.
Secondly, and to no surprise, the capital expenditure for the project will go up from the $2.3-bn first announced by BASF/Adani, to about $4.0-bn now. But the entry of two additional partners will spread the risks around, and make it even more attractive. Though the shareholding pattern has not been announced, the acrylics/oxo-alcohols business will be the turf of BASF/Adani, while Borealis/ADNOC will take care of the PP business.
PDH – a well-established technology, but a first for India
PDH is a viable on-purpose propylene production technology and is widely considered an excellent option to source propylene and/or supplement production from cracking or refinery operations. The technology has seen several improvements that have improved the reliability of plants, improved yields of propylene and the process economics. Several PDH plants are operational, especially in China, and several more are under implementation in that country, as also in Europe. In October last year, INEOS, the UK-headquartered petrochemical player, announced it will build a PDH plant with a capacity of 750-ktpa of propylene in Antwerp (Belgium) to feed plants for polypropylene and other chemical derivatives. Around the same time, Borealis announced that it too was investing about €1-bn in building a similar sized plant at the same location, for start-up in the H2 2022.
When completed, the PDH plant will be India’s first. Earlier plans for such a project in India were stymied by bureaucrats in New Delhi (in the license raj regime) and later by the inability of private promoters, acting in a consortium, to put together a viable financial and offtake structure.
Growing PP markets in India
Borealis/ADNOC will also be the first foreign companies to participate in the Indian PP markets through local production. The market is currently dominated by Reliance and a few other public and private sector companies, and is the fastest growing among all polymers. It will also be the first foreign foray by Borealis/ADNOC and in line with their corporate strategy to grow by leveraging opportunities in under-served markets such as India.
Renewable technology focus
BASF is also on record as saying that the project will be significantly based on renewable energy – presumably a combination of solar and wind – and this will be pioneering. The German giant, as may other petrochemical majors, has outlined a growth strategy that hinges on using low-carbon approaches to meet energy demand, but this will probably be the first time the energy needs of an entire plant is met to a large extent from renewable sources. Details on how this is to be achieved and the extent to which the carbon footprint is lowered will emerge as the project takes shape, but the path taken may be something others will find worthy of emulation.
The project is to be located in Mundra – an area already in control of Adani – and this should put at rest any concerns over land availability. Such concerns have caused significant delays in several other projects, the most recent of which is the Ratnagiri refinery, which is being set up by a consortium of the three public sector refineries of India and two overseas oil companies, Saudi Aramco (Saudi Arabia) and ADNOC. It would not be too much of a stretch to say the choice of the Adani Group – which has no experience in chemicals – was swung by the ready availability of land and other infrastructure at Mundra.
The port-based location is ideal, both for importing propane, as well as for export of finished products. Though the products coming out of the derivatives plants will be largely intended for the Indian market, there could be brief periods when surpluses could prevail and exports could become necessary to keep operating rates high.
Great news for consumers
The partners in the project expect to finalise the feasibility study by Q1 2020, and if all goes well the project could see completion by 2024. Customers across a slew of industries will have reasons to rejoice.
Acrylates are widely used to make resins that find use in paints and coatings, adhesives, textiles, paper, leather, water treatment and several other applications. India’s entire annual requirement of about 275-kt is currently imported, and can support two world-scale plants. Demand is growing at a CAGR of about 10%, which could get a further boost with domestic availability. A world-scale acrylates complex typically has a configuration of 160-ktpa acrylic acid, with about half converted to glacial acrylic acid for conversion to superabsorbent polymers and the balance turned to esters. The configuration of the esterification plant can be fine-tuned to produce more or less of one ester, depending on market conditions. In the Indian context, capacity for butyl acrylate will dominate.
The market for oxo-alcohols are also under-served by domestic production and will soon be able to support two world-scale plants thanks to strong underlying fundamentals in markets for plasticisers for polyvinyl chloride (PVC), as well as acrylate esters, amongst other applications.
PP markets in India too will grow, not withstanding the current concerns over single use plastics, though perhaps not at the pace seen in the past.
Besides filling several voids in domestic availability, the project, if taken to completion, will send a strong and positive signal that despite all the travails India is a country worthy of investing.
Delivering the latest product trends and industry news straight to your inbox.
(We'll never share your email address with a third-party.)
Chicago agricultural futures prices on the 6th
L'Oreal Group officially acquires Clarins' perfume brands Mugler and Azzaro
Jingming as chief technology officer of continental China
BASF and Toray sign supply agreement for automobile industry
Technip FMC acquires sol based epichlorohydrin Technology
Ethylene glycol's price continues to bottom in the short term