State-owned gas utility GAIL India plans to import ethane from countries like the US for a $5 billion petrochemical plant it is setting up in Andhra Pradesh jointly with Hindustan Petroleum Corp Ltd (HPCL).
GAIL will be the second company after Reliance Industries to plan import of ethane - a component of natural gas found in abundance in the Marcellus shale and used for making root chemical for plastics, resins, adhesives, and synthetic products.
Officials said GAIL is seeking supplies of up to 1.3 million tons per annum of ethane for 15 years on the east coast of India beginning 2022.
GAIL-HPCL are planning the petrochem project after their plans to team up with France's Total, Lakshmi N Mittal Group and Oil India Ltd (OIL) for a 15 million tons a year refinery-cum-petrochemical plant at Visakhapatnam in Andhra Pradesh fell through.
That project fell as partners pulled out one after the other due to weak global demand.
RIL plans to import 1.5 million tons of ethane annually from the US to substitute its current propane imports and a portion of naphtha used for ethylene production. Imports could start as early as end-2016.
The company has executed storage and capacity agreements for liquefaction of ethane with a North American terminal and has also ordered six VLECs (Very Large Ethane Carriers) for transporting ethane to India.
Officials said GAIL-HPCL plan to set up an ethane cracker plant. The plant will make ethylene, which is the most commonly produced petrochemical.
Ethylene is used as the basis for plastics like beverage containers, food wrap, polyvinyl chloride (PVC), polyester, and chemicals like those found in antifreeze, solvents, urethanes and pharmaceuticals.
The five-way alliance of HPCL, explorer OIL, gas utility GAIL India, Mittal Investment Sarl and Total in October 2007 had signed a memorandum of understanding to look at the feasibility of setting up the Vizag project.
In 2009, the Rs 50,000 crore project was put on hold as petrochemical demand then was seen as too weak to justify the investment.
Total did pre-feasibility for the refinery project and demand studies, while GAIL was in charge of the study of the petrochemical unit.
But the project in 2010 was put on back burner before equity structure could be decided.
While the refinery was to be built to process sour and heavy crudes, which are cheaper than low-sulphur sweat crude oil, the petrochemical plant was to use the naphtha produced in the refinery as feedstock.
Officials said the petrochemical plant now being conceived will use natural gas as a feedstock.