Rosneft-backed Nayara Energy has received a major boost in its petrochemical plans with Royal Dutch Shell likely to buy a 50 per cent stake in the proposed project.
Nayara, formerly Essar Oil, operates a 20-million-tonne refinery at Vadinar in Gujarat apart from a network of 5,700 retail fuel outlets.
In January 2019, the company had announced that it is working on a milestone development programme for its Vadinar refinery and that the first stage involves a foray into the Indian petrochemical market.
It had then disclosed that the first phase of the programme includes construction of units to provide for production of up to 450,000 tonnes of polypropylene per annum. The project is to be completed in 2022.
The preliminary cumulative investments for the first phase was put at $850 million. Nayara had then said that the programme will be funded through internal accruals and bank financing.
Subsequently, there were reports that it was looking to expand the capacity of the Vadinar refinery and set up a petrochemical complex with a capacity of around 10.75 lakh tonnes.
On Wednesday, Reuters had reported that Royal Dutch Shell is planning to buy a 50 per cent stake in the proposed petrochemical project of Nayara. Quoting sources, the report said that the petrochemical joint venture between the two entities was discussed at the meeting of the board of directors of Nayara in November and December last year.
The entire project, which will be completed in five years, will have a 1.8-million-tonne ethylene cracker and linked downstream units and the total cost would be around $9 billion.
At present, Nayara owns and operates India’s second largest single site refinery at Vadinar. The refinery has a Nelson complexity of 11.8, which is among the highest globally which enables it to process the toughest of the crudes.
Observers said that the interest shown by Shell in Nayara’s petrochemical complex reflects the potential of the Indian market and bodes well for domestic giant Reliance Industries Ltd (RIL).
RIL has been betting aggressively on petrochemicals. In November last year, it confirmed plans to invest Rs 70,000 crore to establish a crude oil-to-chemicals complex at the company’s Jamnagar facility. It also commissioned a refinery off-gas cracker in January 2019 at the same site with 1.5-million-tonnes ethylene capacity.
Though the industry is now facing challenging conditions amid the Covid-19 pandemic, analysts do not expect the present situation to last longer.
Industry leader RIL has been betting aggressively on petrochemicals. In November last year, it confirmed plans to invest Rs 70,000 crore to establish a crude oil-to-chemicals (COTC) complex at the company’s Jamnagar facility. It also commissioned a refinery off-gas cracker in January 2019 at the same site with 1.5-million-tonnes ethylene capacity. RIL is spinning off its oil-to-chemical business into a separate subsidiary in which it will induct strategic partners.