Interview: Indian Oil’s head of chemical exports studies NGL feedstocks

HOUSTON -- In the run up to the NGL Feedstocks And Derivatives Congress 2016 ( head of petrochemical exports at Indian Oil Corp. granted an exclusive interview to discuss the importance of current feedstock and global export opportunities.

Mathew George, who will host a session at the Feb. 23-24 conference in Houston regarding feedstock and petrochemical challenges and opportunities in India, explained what Indian Oil had concluded regarding expansion plans in the context of feedstock constraints.

A transcript of his Q&A can be read below:

Q: Why are NGL feedstocks and the global export opportunities so important in the industry right now?

A: The abundant supply of shale gas in North America has re-energized the North American petrochemical industry, unleashing a wave of capital investment in new facilities. Since many shale fields contain, in addition to oil and natural gas, large quantities of natural gas liquids (NGLs), such as ethane, propane and butane, major new supplies are entering the market at low costs. This low-cost feedstock has already shifted profit pools from gas producers and processors to petrochemical manufacturers. 

However, in view of the recent fall in crude prices, the balance may shift back, so petrochemical executives are making long-term capital decisions in a time of tremendous uncertainty. Industry executives in China, the rest of Asia and Europe are all watching carefully as they make investment decisions that depend on the amount of natural gas, NGLs and polymers consumed in and eventually exported by the US.

Q: What are the main plant projects that you are currently working on at this time in India? Can you give a brief description?

A: Indian Oil has recently commissioned a new 15 MMtpy refinery on the eastern coast and we are also in the process of commissioning a 700,000 tpy polypropylene unit with propylene derived from the FCC.

Additionally, we are also looking at investments in acetic acid as also a new grassroots refinery, which is expected to provide feedstocks for one more cracker.

Q: What are the main considerations on selecting a country to export goods to?

A: Price netbacks are obviously very important so supply chain costs and ease of shipments including infrastructure availability is critical. Payment security is important too and the banking system in the destination country needs to be robust.

Q: What are the key logistical challenges when exporting feedstock to India?

: Port congestion in India is a fairly common phenomenon. Also ship berths which can handle gas vessels, shoreside terminals and distribution infrastructure like pipelines and railheads are also inadequate and needs upgrading.

Q: What are you most looking forward to at the Global NGL Feedstock and Derivatives conference? 

: Developing an understanding of how the industry views the viability of NGL feedstocks in view of the recent crude crash.

Q: What are the implications of seasonal demand variables on the capacity of naphtha and ethane?

A: India, being a country of fairly uniform weather, seasonal demand variations are less. However, the monsoons are a time when demand pattern undergoes changes, as well as festival times. It is important to note that especially when shipping naphtha or ethane, the monsoon is to be taken note of and all weather berths are a requirement.

Q: Is there an opportunity to export either naphtha, ethane, propane or butane to India, and if so, why?

A: India has a robust double digit growth in polyolefins and the feedstock availability as things stand now just doesn’t match up. If India wants to remain relevant as a manufacturer of building blocks and petchems, we need to look at feedstocks. So I would say opportunities for export for all the above products do exist, once downstream investments are tied up in the long term.

Q: Which region are you mostly looking to import the majority of your naphtha and ethane from?

A: Middle East and the US.

Q: Almost all of the major petrochemical and productions companies are involved in large-scale global export of feedstock, but what would you say to smaller companies that are considering export opportunities?

: It all depends on how the NGL versus crude scenario pans out. I feel that in an evolved scenario, size doesn’t matter as the smaller size players will consolidate in the form of common use infrastructure like shore terminals, pipelines and ships.

Q: What do you see as being the next area of progress in the NGL and feedstock space?

A: I expect that the relevance of naphtha as a feedstock will remain for some time to come in Asia and the Middle East, especially when one considers the co-products of naphtha cracking like butadiene and propylene. 

Once the current crude shock is over and some semblance of normalcy is attained, the relevance of NGLs – ethane especially, will see a rapid rise and ethane will continue as an advantaged feedstock. We are also seeing a wave of on purpose propylene projects in China, the US, etc. Therefore, the expected propylene shortage seems to be a myth. 

A new class of vessel, the very large ethane carrier (VLEC) with Type B containment systems (self-supporting prismatic tanks) of around 90,000 cubic meters of capacity will be the transportation of choice for ethane movements in view of the volumes involved.

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