February 23, 2024

India’s Mangalore Refinery and Petrochemicals Ltd. shelved a planned refinery expansion to focus on boosting its petrochemical production capacity, which may cost as much as 470 billion rupees ($5.7 billion).

A shifting energy landscape primarily driven by the uptake of electric vehicles has prompted MRPL to focus its efforts on increasing output of chemicals that can be used for plastics and paints, Sanjay Varma, managing director, said in an interview. The company’s major investment will be on a new production plant in the southern Indian state of Karnataka, he said.

Indian and Chinese refiners along with majors such as Exxon Mobil Corp. are betting on petrochemicals to underpin future oil demand as the transition to electric vehicles chips away at consumption of transport fuels. The new MRPL plant is likely to be operational in the next three to five years, said Varma.

India is a net-importer of petrochemicals and the country is facing a “make-or-buy” decision, said Larry Tan, vice president of chemical consulting in Asia at S&P Global Commodity Insights in Singapore. “There is better value to capture production locally.”

MRPL — majority owned by state-controlled Oil and Natural Gas Corp. — plans to spend around 300-400 billion rupees on the new plant, and a further 60-70 billion rupees on smaller petrochemical units, Varma said. The investment will help “de-risk MRPL’s future” during the energy transition, he added.

The investment will contribute to ONGC’s overall spend of 1 trillion rupees to expand its petrochemical capacity to 8 million tons a year by 2030, from 3.4 million tons, according to a spokesman for ONGC.

While MRPL shelved plans to boost the capacity of its refinery on the west coast to 18 million tons a year from 15 million tons, the plant has still run above operational levels, said Varma. The refinery operated at a record average of 17.1 million tons a year over the 12 months ended March 13, he said.

–With assistance from Elizabeth Low.

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