"Naphtha Scenario & Petrochemicals

Feedstocks - India;
Outlook, Challenges and Imperatives"

3rd Platts Asian Refining Summit

Singapore – 3-4 March 2016
Agenda

1. Petroleum Refining Scenario in India

2. Demand/Supply and Naphtha Scenario in India

3. Importance of Naphtha as Petchem feedstock in Indian Context

4. Naphtha Crackers and their Viability improvement

5. Challenges & Imperatives in Naphtha Utilisation

6. Future Scenario & Conclusions

2
Agenda

Petroleum Refining Scenario in India

3
Real GDP growth of emerging markets has slowed,
holding back global growth

Real GDP

4
 India – the growth engine
Strong growth at above 7% Huge population size
8.0 1,400
7.8 1,380
1,360
7.6 1,340
GDP Growth, %

7.4 1,320

in millions
1,300
7.2
1,280
7.0 1,260
6.8 1,240
1,220
6.6 1,200
6.4 1,180
2013 2014 2015 2016 2017 2018 2019 2020 2013 2014 2015 2016 2017 2018 2019 2020
Source: IMF Source: IMF

Young population - More than

70% are under 40
Source: Census of India 2011

5
India: Refining capacity

Capacity Share

ESSAR IOC/CPCL BPC/NRL/

9% 35% BORL
14%

RIL
26%

ONGC/
MRPL HPC/HMEL
7% 10%

Capacity (IOC): 69.3 MMTPA

Capacity (CPCL): 11.5 MMTPA
Group Capacity: 80.8 MMTPA
India Capacity: 230.1 MMTPA
6
India : Refining Capacity Growth
MMTPA
250 230
213
200 178
149 150
150 127 127 132 135
117 106 106
90 94 94 99
100 78 80
73

50 33 44
27 33 33

0
2003 2004 2005 2006 2007 2009 2012 2015*
* XIth Plan Projection
PVT PSU Total
• As on January 1, 2016, India has a total refining capacity of 230.0 MMTPA.
• 17 out of the total 22 refineries in India belong to PSUs.
* Considering commissioning of Paradip Refinery in 2015-16
Indian Refineries : Capacity Utilization
250 120
230 234
108 106 219 222.5 223
105 106 213 215 215
204 104 102
200
196 193
103 103 100
187 185
178
161 80
149
150

%
TMT

60
100
40

50
20

0 0
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

Installed Capacity, TMT Crude T'put, TMT Capacity Utilisation, %

Expected Nos for 2015-16

India : Product Demand & Refining Capacity

250 Gap between Refining Capacity & Product Demand 230

213
200 186 44
178
65
148
150 136 42

100

50

0
2008-09 2011-12 2015-16

Refining Cap (MMT) Product Demand (MMT)

Source: PPAC/ Draft XI Plan Demand Document
• HSD export prospects will diminish with competition from
• ME & US for Europe supply
• Japan & Australia for Asia Pacific
• Gasoline export problem in view of
• ME capacity addition
• Lower Gasoline demand in US
 India - Situational Analysis

Attribute Opportunities

Feedstock Availability Limited

Feedstock Cost No relative advantage

Demand/Demand growth High Demand Growth Potential

Technology Access Low

Competitiveness Low

Ease of doing business Low

Political & Economic Situation Political situation is fundamentally stable

Infrastructure Below average

Legal Framework Complicated

10
Prospects and Development of the Asian Petchem
Sector
Japan and South Korea
Matured markets with little
demand growth expected
Expected to have less export
availability as there would be
little further capacity
developments and capacities
Promising India may be rationalised.
Among the fastest growing
Asian petrochemical markets
Surplus Naphtha but high
import dependency for
petrochemicals mainly due to
lack of olefins feedstock Southeast Asia
More petrochemical capacity
developments would take place
in the developing region.
Vital to focus on domestic
demand

11
India is dependent on imports for many
petrochemical products, with some requiring
more than 50% of imports 21%
18%

32%
37%
PTA
PE

India
Elastomers 48%
Styrene 69%

100%
100% 34%

PVC 51%

Import dependency MEG 45%

47%
PC
Domestic Supply
2010: Inner Ring 100%
2015: Outer Ring 12
100%
Agenda

Demand/Supply & Naphtha Scenario in

India

13
Naphtha Consumption Profile - India

Prior to 2015 Post 2015

2%
3%
20%
21%

56%
22%
16% 60%

Petrochemicals Fertilizer
Power/Steel Others

*Additional 1.2 MMT being used in Southern Urea Plants

14
While crackers in NE Asia & SE Asia continue to remain
reliant on Naphtha Imports, India will continue to have
surplus Naphtha…

SE Asia Naphtha Balance NE Asia Naphtha Balance

5 0
-10
0 -20

million tonnes
million tonnes

-30
-5 -40
-50
-10 -60
-70
-15 -80

• Northeast and Southeast Asia are forecast to remain reliant on imports for naphtha supply
through the period to 2025 and beyond.
• The two regions will be largely supplied by the Middle East, with Africa, as alternative
source of naphtha, when African refining capacity increases.
• In 2014, the Middle East exported 24.6m tonnes and 8.4m tonnes of naphtha to Northeast
Asia and Southeast Asia respectively.
• This presents an advantage to India in petrochemical investments compared with the two
regions, given its current naphtha surplus and proximity to major supplier Middle East as
well as emerging Africa. 15
Naphtha Surplus but will naphtha crackers be cost
competitive?
NAPHTHA DEMAND SUPPLY SCENARIO IN INDIA Advantages
(Mn Tons) • C3-C6 based streams available
• Aromatics can be produced from Naphtha
cracker Py- gas
30 • Py-gas is primarily used for gasoline blending
25 24 in India.
• Toluene and higher aromatics can be
20 19 18 extracted from py-gas stream from naphtha
cracker, India is significantly short in these raw
15 12 PRODUCTION materials
CONSUMPTION • Styrene needs (100% imports currently) can
10 be met through naphtha crackers
5 • Ability to target specialty products/niche
grades for import substitution
0 Concerns
2014 2019 (E) • Single site feedstock availability -pooling
• Competing in the C2 stream with ethane
based producers
• Polypropylene already surplus in India – need
to find new outlets/products.
Naphtha Demand Estimates for FY19 as per MOPNG

Source: PPAC
 SURPLUS NAPHTHA AVAILABILITY(PSU)
17
IOCL’s Projected Naphtha Availability
Refinery Surplus Naphtha Available
(For export)
2015-16 2021-22
Barauni 100 104
Gujarat 250 580
Haldia 62 117
BGR 118 0
CPCL-M 256 400
Total 786 1201
All Fig in TMT

No substantial extra naphtha generation at Barauni, BGR and Haldia as the same is
expected to be absorbed in MS pool.
 SURPLUS NAPHTHA AVAILABILITY(PSU)
18

PSUs Refinery PROJECTED NAPHTHA AVAILABLE

2015-16 As per Future Plans

Mumbai Refinery 180* NIL

HPCL
Vizag Refinery 180* 839
Mumbai Refinery 545 192
BPCL Kochi Refinery 359 50**
BORL 120 100
MRPL 800-1000 800-1000
TOTAL 2384 2181

* Currently majority naphtha from MR/VR gets consumed in domestic market

**Proposed to revamp/install new CCR

TOTAL ( including IOCL) 3170 3382

All Fig in TMT

* Approx 3.7 MMTPA Additional Surplus Naphtha from Pvt Refiners

Inputs from HPCL, BPCL, MRPL
Surplus Naphtha though seemingly scattered, but
largely concentrated in the West…

*Demand includes petrochemical use, fertilizer sector and power sector

Source: PPAC; ICIS Consulting Analysis

 India’s naphtha surpluses are in the South

and West, while East India sees a deficit.
 However, there is insufficient feedstock
supply for new crackers other than West
India. 19
How has the industry changed?
 Shale revolution in the US and the rise of downstream industry in the
Middle East have significantly changed the petrochemical landscape in
the past decade. Both the US and the Middle East will remain as the key
exporters through the period to 2025 and beyond.
 In Asia, matured markets like Japan and South Korea will remain key
suppliers, though capacity rationalization will lead to declining exports.
 Continued development in China’s petrochemical industry and ongoing
economy reform to focus on slower but more sustainable growth in the
country are likely to bring about new changes.
 Meanwhile, signs are pointing towards a less import dependent China. In
fact, China has turned a net exporter for some products.
 Market will get more competitive. Southeast Asia is to focus on domestic
demand and be less reliant on exports in its business model.
 South Asia notably India demand potential remains and is not matched
with existing & planned capacity in the pipeline

20
Agenda

Importance of Naphtha as Petchem

Feedstock in Indian Context

21
 Steam Cracking Around the World
The Heavier the Hydrocarbon Feed Russia/CIS:
the more complicated the Ethane
North America: economics Refinery Integration
Shale Gas Naphtha

Asia:
Naphtha
Heavy Liquids
Middle East:
Ethane
Refinery Integration
Liquids

Configuration is Important
India – Ethylene Capacity by Feedstock

3%

16%

Naphtha
Ethane
Propane
18%
Others
63%

23
 India – Ethylene/Propylene Capacities

HMEL(FCC)
Propylene-450 GAIL(Gas Cracker) BCPL (Gas Cracker)
Ethylene - 800 Ethylene – 230
IOCL(Naphtha Cracker)
Propylene – 60
Ethylene -857
Propylene – 640

OPAL(Mixed Feed
Cracker)
Ethylene– 1100 HPL (Naphtha Cracker)
RIL, Nagothane,
Propylene– 350 Ethylene – 750
Vadodara, Gandhar,
Propylene – 350
Hazira, Jamnagar
(Cracker/FCC) IOCL(FCC)
Ethylene - 2954 Propylene – 700
Propylene – 2020

MRPL(FCC) Red – New/Proposed

Propylene– 450
24
Source: IOCL Analysis
India – Ethylene Capacities

Ethylene Feed Mix(%)

Capacity
No Name Location (KTA) Ethane Propane C4-C6 Naphtha Remarks
1 Gas Authority of India Ltd Pata, UP 850 55-75 20-30 5-6 Natural Gas
2 Haldia Petrochemicals Ltd Haldia, WB 670 100 Naphtha Cracker
3 Indian Oil Corporation Ltd Panipat, Har 857 100 Naphtha Cracker
Reliance Industries Ltd
4 (IPCL) Vadodara, Guj 180 100 Naphtha Cracker
Reliance Industries Ltd
5 (IPCL) Gandhar, Guj 420 35-50 50-65 Import Ethane
Reliance Industries Ltd
6 (IPCL) Nagothane, MH 530 35-50 50-65 Import Ethane
Import Ethane,
7 Reliance Industries Ltd Hazira, Guj 860 18-25 12-14 6-8 55-65 Naphtha
Brahmaputra Cracker &
8 Polymer Ltd (GAIL) Dibrugarh, Asm 220 40-65 15-25 15-20 15-30 Natural Gas + Naphtha
ICGC, Syngas, Import
9 Reliance Industries Ltd Jamnagar, Guj 1200 50-65 25-35 Ethane,

10 ONGC Petro Additions Ltd Dahej, Guj 1100 18-25 12-14 6-8 55-65 Mixed Feed
Total 6887
25
India – Propylene Capacities

Propylene
No. Name Location Capacity (KTA) Remarks
1 Haldia Petrochemicals Ltd Haldia, WB 370 Naphtha Cracker
2 Indian Oil Corporation Ltd Panipat, Haryana 640 Naphtha Cracker
Naphtha Cracker +
3 Reliance Industries Ltd (IPCL) Vadodara, Gujarat 140 Gandhar - 30 KT
4 Reliance Industries Ltd (IPCL) Nagothane, MH 100 Gas Cracker

5 Reliance Industries Ltd Hazira, Gujarat 430 Mixed Feed Cracker

Brahmaputra Cracker & Polymer Ltd
6 (GAIL) Dibrugarh, Assam 60 Gas Cracker
7 Reliance Industries Ltd Jamnagar, Gujarat 2020 FCC

8 ONGC Petro Additions Ltd Dahej, Gujarat 350 Mixed Feed Cracker
9 Hindustan Mittal Energy Ltd Bhatinda, Punjab 450 FCC
Mangalore Refinery Petrochemicals
10 Ltd Mangalore, Kar 450 FCC
Total 5010
26
India Import Requirement Grows Despite New
Capacity Build
Million Metric Tons, Equivalent Ethylene

1.0
Net Exports
0.0

-1.0

-2.0

-3.0

-4.0 Net Imports

-5.0
08 09 10 11 12 13 14 15 16 17 18
Ethylene Vinyls Styrenics Polyethylene
Glycol Others Net Trade
Asia : A Paradigm Shift in Competitiveness

Ethylene- Cash Cost of Production

1400

1200

1000

800
$ Per MT

600

400

200

0
2010 2011 2012 2013 2014 2015 2016

28
U.S. Ethane NEA Naphtha MDE Ethane China CTO
 RATIONALE FOR REFINERY-
PETROCHEMICAL INTEGRATION
 Need for Petrochemical Integration:-
• Limited growth in liquid fuel business
• Substitution of liquid fuels by gas
• Reduced Margins
• Adding value to all molecules of refinery

 Key driving factors for forward integration:-

• Utilization of refinery streams
• Generation of petrochemical building blocks, at
competitive cost
• Sharing of facilities/ utilities
• Better response to market volatility

 Refinery and Petrochemical business are inter-related

• Similar bases for technology
• Assured feedstock availability
• Absorption of return streams
• Identical approaches for operation and maintenance.
 Steam Cracker Feedstock Slate Becoming Lighter

ASEAN World
100% 100%

80% 80%

60% 60%

40% 40%

20% 20%

0% 0%
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
From Ethane/Light Gas from LPG From Ethane/Light Gas from LPG
From Naptha From Middle distillates From Naptha From Middle distillates
from Heavy Condenstae From Others from Heavy Condenstae From Others

•Global Cracker Feedstock is lightening, primary driven by Ethane/LPG gas cracking growth in North America
•Combined North America LPG/Ethane cracking would contribute 94% of NA C2 feedstock, up from 83% in 2010
•ME feedstock will remain more stable as LPG/Naphtha additions offset continued growth in ethane cracking
•Both NE & SE Asia, to remain heavily based on Naphtha cracking
30 Source:ICIS
Global Olefins Production Trends from Steam Crackers have changed
dramatically

Propylene Ethylene Ratio

180 0.42

160
Steam Cracker Production, Million Metric Tons

0.4

140
0.38
120

100 0.36

80 0.34

60
0.32
40

0.3
20

0 0.28
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Ethylene Propylene Propylene Ethylene Ratio

31 Source:IHS
The Indian Perspective
• Indian per capita polymer consumption @ 8kg/yr compared to global
average consumption of >25kg/yr
 Double digit yearly growth in plastic demand
 1 kg/yr increase corresponds to 1.2 MMTPA demand increase; size of a
world class Ethylene complex

• Indian refining capacity @ 230 MMTPA (5th largest in the world); 2014
Ethylene production in India 4 MMTPA
 Enormous opportunity to integrate with Refineries
 7MMTPA of excess Naphtha available as on date
 Gasoline Growth, Resultant Maximization and India’s move to BS 6
(Euro 6) by 2020 could reduce Naphtha Availability

• Regional imbalance
 Eastern India with 26% of national population takes 11% of demand
 Northern India 31% of national population takes 21% of demand
 Development of Northern and Eastern India in line with Western India
India Ethylene & Propylene Balances

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 • In Worst case scenario, where
-500 capacities do not materialise or there
are no new investments, India will
-2500 Best Case see a deficit of up to 8 million tonnes
-4500 and 3.5 million tonnes in ethylene
-6500
and propylene respectively.
Ethylene Worst Case
-8500 • Expect addition of around 4m
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 tonnes ethylene and 2.6m tonnes
0 propylene capacity to be invested by
-500 2025.
-1000 Best Case
-1500
• In other words, given India’s huge
-2000
deficit in ethylene and increasingly
-2500
Worst Case for propylene it presents a case for
-3000
Propylene development in upstream crackers
-3500

Source: ICIS 33
 India – Ethylene Derivatives – Gap Analysis

Demand/Supply Gap (kTa)

Product 2020 2035

Prod Cap Demand Gap Prod Cap Demand Gap
Polyethylene 4400 5500 1100 4400 11200 6800
PVC 1535 3650 2115 1535 5500 3965
MEG 1970 3100 1130 1970 6200 4230
EVA 40 260 220 40 430 390
Styrene 0 800 800 0 1500 1500

Total Ethylene Gap 3200 12800

•Based on Name Plate Production Capacity, Announced Expansions and Expected Growth34
 India – Propylene Derivatives – Gap Analysis

Demand/Supply Gap (kTa)

Product 2020 2035

Prod Cap Demand Gap Prod Cap Demand Gap
Polypropylene 5115 6100 985 5115 11700 6585
Acrylonitrile 40 160 120 40 228 188
Propylene Oxide 37 125 88 37 393 356
Phenol 82 420 338 82 710 628
Super Absorbent Polymer 0 130 130 0 405 405

Total Propylene Gap 1450 7700

•Based on Name Plate Production Capacity, Announced Expansions and Expected Growth35
 India – Feedstock Requirement Analysis

Requirement Feedstock Requirement (kTa)

(kTa)
Product
2020 Case 1 Case 2 Case 3

Ethylene 3200 Naphtha - 10300 Propane-5200 Ethane-4000,

Naphtha-3500 Propane-1650
Propylene 1450

Case 1 – Naphtha as Feedstock

Case 2 - Mix of Propane and Naphtha
Case 3 – Ethane Crackers & PDH

36
 India – Feedstock Requirement Analysis

Requirement Feedstock Requirement (kTa)

(kTa)
Product
2035 Case 1 Case 2 Case 3

Ethylene 12800 Naphtha – 47500 Propane-11800 Ethane-16300,

Naphtha-35000 Propane-9000
Propylene 7700

Case 1 – Naphtha as Feedstock

Case 2 - Mix of Propane and Naphtha
Case 3 – Ethane Crackers & PDH

37
Agenda

Naphtha Crackers and their Viability

Improvement

38
Naphtha Cracker Complex

Utilities Waste

Ethylene
Hydrocarbon Traditional focus
Feed
Steam Cracker
Co-Products
• Hydrogen
• Methane
Co-products drive
• Propylene Economics
• C4’s
• PFO
• Etc..

Operations &
Maintenance
Typical Product slate from Naphtha cracker

Feedstocks Ethane Propane Butane Naphtha Diesel Fuel Vacuum

Distillate
Products Yield (% wt)
Hydrogen 8.8 2.3 1.6 1.5 .9 0.8
Methane 6.3 27.5 22 17.2 11.2 8.8
Ethylene 77.8 42.0 40 33.6 26 20.5
Propylene 2.8 16.8 17.3 15.6 16.1 14.0
Butadiene 1.9 3.0 3.5 4.2 4.5 5.3
Other C4 0.7 1.3 6.8 4.5 4.8 6.3
Gasoline C5-200 1.7 6.6 7.3 18.7 18.4 19.3
Includes:
Piperylene 0.3
Cyclopentadiene 1.4
Isoprene 0.8
Benzene 6.1
Toluene 3.1
Xylene 1.0
Styrene 1.0
Other C9+ 5.0
Fuel
40 Oil - 0.5 1.5 4.7 18.1 25.0
Source: Axens
Utilization of Valuable Molecules of Naphtha cracker

Naphtha Cracker Potential Molecules in Value Addition

Streams streams
C4 Butadiene SBR, PBR,SBS, ABS etc
MTBE MMA,PMMA, butyl Rubber, PIB etc
Isobutene
Butene-1

C5 Dicyclopentadiene HCR, Ink , adhesives etc

Piperlyene HCR
Isoprene IIR, SIS, etc

C6- C8 Benzene, Toluene & Xylene Various derivatives of Benzene

C-8 Styrene SBR, SIS, ABS etc
C-9 Resin oil, di olefins C9 based HCR
C-10 Naphthalene
C11- C12 Aromatic Solvents
41
Typical reduction in ethylene Cash Cost

Derivative Projects Reduction in cash cost of ethylene

Based on Butadiene (140KTA) :

 SBR (120 KTA) 12%
 SBR (+ 60 KTA) (+) 6%
 SBS (35 KTA) (+) 4%
Extraction of Styrene from Py-gas (20 KTA) (+)2%
Based on C4’s (200 KTA) (+)20%
(Includes MMA, Butene-1, Maleic Anhydride/
Butanediol)
Based on C5’s (90 KTA) (+)15%
(Includes Di cyclo pentadiene, Isoprene,
Piperlyene)
Source: in-house estimate

With implementation of all value added downstream derivatives, ethylene cash cost is
likely to be reduced by ~60%.
42
Agenda

Challenges and Imperatives for

Naphtha Utilisation

43
Challenges in Naphtha Utilisation

 Naphtha Quality for petrochemicals.

Naphtha availability at a single location for world scale

petrochemical Unit

 Naphtha Pooling at a single location:

 Logistics cost
 Inadequate infrastructure

 Price fluctuation impacts the profitability of Naphtha based

petrochemicals

 Competition from gas/coal based petrochemicals.

44
CHALLENGES FOR REFINERIES

Indian Industry is faced with following challenges:-

 Feedstock Constraints
• Insufficient availability of natural gas to drive high petrochemicals
growth
• Non availability of indigenous Coal & its poor quality

 High Energy Cost

• Refineries & Petrochemical industry dependent on its own CPP based
on LNG or Naphtha or LSHS resulting in higher power/ utilities cost.

 High feedstock prices (non availability of advantage feed stock) are

squeezing margins.
 CHALLENGES FOR REFINERIES

 High Operating Cost – energy costs

 No plug & play system for utilities

 High Logistics Cost

• Poor infrastructure for raw material/product movement at
ports/roads etc.

 High Capital Cost

 Cost competition from:

• Olefins from Middle East (NG based)
• Olefins from China (Coal based)
Agenda

Future Scenario & Conclusions

47
Future Scenario

 Refinery-Petrochemicals integration is an essential driver for economic

growth, as well as corporate profitability. Significant opportunity exists for
refinery-petrochemical integration.
 One single refinery or even one PSU does not have sufficient Naphtha
available to cater to a world scale Naphtha cracker plant. Therefore, option
of pooling of feedstock by PSU refineries needs to be explored.
 Locate petrochemical plants within refinery site as brownfield expansion, for
max integration synergy.
Build world scale capacities, to exploit economies of scale – ethane imports
Evaluate & utilize High severity FCC for basic petrochemical building blocks
 Consortium cracker approach may resolve the availability of building blocks
issue for downstream units.

48
Feedstocks – What can India Do?
• Mixed Feed Crackers
• Pool Naphtha from Existing and New Refining Sources for Cracker
Taxation for Pooling – Stock Transfer.
Coastal Shipping
Rail Utilisation
• Reverse SEZ Offshore
Opportunity with the Opening up of Iran
Modification/Clarifications in Exim Norms/Tariffs
• Import Naphtha from Middle East
Surplus Naphtha Available in ME
Long Term Contracts
Port and Transportation Infrastructure
• Import Ethane from US
Surplus Ethane in US
Long Term Contracts
Port , Shipping and Pipeline Infrastructure
• Import Condensate
Higher Percentage of Oil Production now in Condensate form ~ 12%
Availability of Field Condensate on the rise in US and ME
Port , Shipping and Pipeline Infrastructure
Long Term Contracts
49
Initiatives Planned for Future Growth

• Reverse SEZ – Iran

• Examining opportunities for collaboration with petrochemical
players for setting up gas/condensate based, cost competitive
Petrochemicals Complexes
• Possibility of setting up petrochemical plant in India, on a
coastal location, being explored by sourcing feedstocks from
ME/USA – transportation remains a concern
• Objective – to enhance availability of low cost polymers in
India

50
Conclusions

• Naphtha remains surplus in the medium term in South Asia

• Naphtha cracking is now very competitive
• India will be deficient of feed to match Petchem growth
• Conventional designs might miss economic opportunity
• Ability to be feed flexible helps in an uncertain market place.
• Import of Condensate and/or Naphtha and/or Ethane is a
possibility
Thanks !!