The Time Has Come for Refinery Integration in India

Refineries have traditionally focused only on delivering conventional fuels derived from the crude oil stream. For 30 years or more, these products have primarily meant gasoline, diesel and jet fuel.

Today, as India looks toward a future of steadily declining consumption of hydrocarbon-based fuels, other products deserve a look. It is time for refiners to examine alternative business models integrating petrochemicals into refinery production for more diverse and sustainable future.

These factors are defining this evolution of Indian refineries:

• Petrochemical growth
• Challenges to integration
• Sustainability and flexibility

Petrochemical Growth

Advancement in technologies help integrated refineries/petrochemical complexes to have optimum molecule management. This occurs through utilization of byproducts of fuel processes to produce a variety of chemical products. This trend is expected to accelerate due to growth in the petrochemicals industry as margins track along with the enormous increases in end products from crude oil processing.

The overall Indian economy stands to be a big winner from this pivot towards petrochemicals as integrated refining and petrochemicals would drive down the need to import these products.

Petrochemical feedstocks currently account for 12% of global oil demand. This figure is certain to increase over the near and intermediate terms as demand increases for plastics, fertilizers and many other petroleum-derived products.

Challenges to Integration

The current fleet of refineries in India will ultimately need to implement a number of steps to capture opportunities for petrochemicals integration. A few of these steps include:

• Deploy Advanced Technology. Conventional refineries were designed without consideration of the scope of future expansions. This can be overcome with current advanced technologies deployed for planning and design options.
• Stream Selection. To manage the product pool, feedstocks should be identified and selected during conceptual stages.
• Market Cycle Timing. Identifying the correct market cycles for entry is more important for petrochemicals than for traditional refinery products. Market studies with sophisticated financial modeling will help narrow options, including the right timing for entering the petrochemicals business. Refineries should model the potential negative impacts of carbon costs as emissions increase due to petrochemical process integration. Currently, there are no carbon costs in India, but these are certain to come soon.
• Staggered Startup. The needs of refineries and petrochemical processes are different. Upfront planning to manage utilities and product pools will be important.
• Correct Integration. Unfortunately, it is often the case that high-value products are not economically viable, due to incorrect integration processes.

Sustainability and Flexibility

The migration from refining-only to refining-plus-petrochemical operations is an option that should be considered by Indian refineries. For example, during the worst of the COVID-19 pandemic, one refiner reduced fuel gas production and diverted feed towards materials needed to produce masks and PPE suits, which were needed at the time. Global demand for sustainable environmental practices and new products with lower carbon intensity means the time is right for Indian refiners to begin the transition with correct technology. 

Accelerating demand for transportation fuels, combined with higher demand for olefins, biodegradable detergents and aromatics, will help refiners sustain the market. With the current Indian population and steady increases in purchasing power, demand for petrochemical products is likely to increase even more. Integration is a prudent course for Indian refiners to consider and the time is now.

A rising middle class in India and China is driving high demand for petrochemical-based consumer products.