Petrochemical Industry

Petrochemical Industry

Overview

The chemical industry contributes significantly to the economic stability and development of a country. It provides key linkages in terms of products and technical solutions to several downstream industries like engineering, automotive, consumer durables, food processing, etc. The global chemicals industry is the largest manufacturing industry in the world, with sales of approximately USD 2.5 trillion in 2010; the Indian chemical sector was estimated to stand at US $91 billion in 2011 and has the potential to reach US $134 billion by 2015.

Growth potential of the chemicals sector is immense, considering the current low per-capita consumption in the country. It is one of the fastest growing domestic sectors, comprising of both small and large scale enterprises, and is currently in a state of restructuring and consolidation. This movement aims to achieve product innovation, branch building, improved technical services and marketing abilities to stand through global competition. A recent report by global consultancy firm McKinsey suggests that around $350bn of the estimated $1tn world specialty chemical industry would move eastwards to Asia to meet manufacturing costs and downstream demand.

The petrochemical sector has been one of the fastest growing sectors in the Indian economy. From its modest beginnings in mid-sixties, this industry has come a long way. Today, plants of global capacities operate in specialized categories and supply to both local and global markets. Four main players dominate the petrochemical sector, namely, Reliance Industries Ltd. (RIL), Indian Petrochemical Ltd. (IPCL), Gas Authority of India Ltd. (GAIL), and Haldia Petrochemicals Ltd.

The Indian petrochemical industry is presently valued at $40bn and is expected to grow at 12-15% annually over the next five years, according to a report from the Associated Chambers of Commerce and Industry of India (Assocham). The sector currently employs more than 10 lakh people.

Factors that will drive growth in the chemical and petrochemical sectors

·         Compared to US and China, India’s per capita consumption of polymers (PO +PVC) is still in nascent stage. Opportunity to reach out to a large population and sustain the current economic growth would drive India’s polymer consumption.

·         Asia and Middle East, which provide abundant sources of petrochemical feedstock, are fast becoming hubs for foreign investments.

·         Indian government plans to establish new petroleum, chemical and petrochemical investment regions (PCPIRs) in states like Tamil Nadu and Karnataka.

·         Low cost infrastructure that India can offer will drive exports projected to reach $300bn by 2015.

·         Large unexplored reserves of oil and gas stand to create new opportunities.