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Gail to invest Rs 50,000 crore in petrochemical unit in Madhya Pradesh

The new ethane cracking unit aims to meet the domestic demand for petrochemicals, which is projected to nearly triple to $1 trillion by 2040


Vasudha Mukherjee New Delhi

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State-run gas supplier Gail (India) plans to invest up to Rs 50,000 crore to establish a 1.5 million tonnes per annum (MTPA) ethane cracking unit at Sehore, Madhya Pradesh, according to a report by The Economic Times (ET). This investment marks one of the most significant capital expenditures by the state-run gas utility to date.

The new facility aims to meet the robust domestic demand for petrochemicals, which is projected to nearly triple to $1 trillion by 2040.

Ethane, a natural gas component, is cracked into ethylene, a crucial input for producing plastics, adhesives, synthetic rubber, and other petrochemicals.

Ethane cracking units in India

Currently, Reliance Industries is the only Indian entity importing 1.5 MTPA of ethane for its crackers in Dahej, Hazira (Gujarat), and Nagothane (Maharashtra).

Gail’s new ethane cracker will almost double its existing 810 thousand tonnes per annum (KTA) petrochemical facility at Pata near Kanpur, Uttar Pradesh. Global engineering consultant Engineers India Ltd is preparing the detailed feasibility report for the project, which is expected to be operational in the next 5-6 years.

Initially, Gail considered setting up the new facility in Maharashtra’s Aurangabad or Dabhol, near its 5 MTPA liquefied natural gas plant, but later decided on Madhya Pradesh.

Bharat Petroleum Corp is also investing nearly $6 billion in an ethane-fed cracker at its 156,000 barrels per day Bina refinery in Madhya Pradesh.

Shift in feedstock and industry trends

In February, Gail announced plans to import ethane from ethane-surplus countries to be transported through its pipeline systems to demand centres. This March, the company signed a tripartite memorandum of understanding (MoU) with Oil and Natural Gas Corporation (ONGC) and Shell Energy India to explore opportunities for importing ethane and other hydrocarbons and developing evacuation infrastructure at Shell Energy Terminal, Hazira.

Traditionally, petrochemical players have used naphtha as a primary feedstock. However, demand for ethane has surged in recent years due to its higher ethylene yield—over 80 per cent compared to 30 per cent from naphtha, ET noted.

Gail’s board has approved the construction of a C2/C3 liquid pipeline from Vijaipur to Auraiya at an estimated cost of Rs 1,792 crore, expected to be completed in 32 months, according to a company regulatory filing.

This project aims to augment feedstock availability, increase polymer production at the Pata petrochemical complex, and reduce energy consumption and carbon footprint.

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First Published: May 22 2024 | 4:28 PM IST

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