The Indian petrochemical industry is poised for a growth of 12 to 15 per cent over the next five to seven years, four times higher than current 3 to 4 per cent, and this is expected to translate into investments of $12-15 billion for the chemicals industry, says a Tata Strategic Management Group study on future outlook on the organic chemicals industry.

At current prices, the downstream petrochemical industry production is expected to increase from $15-$18 billion currently to $30-35 billion over the next 5-7 years.

India's refining capacity is expected to increase from 135 million tons per annum (mtpa)in 2006-07 to 210-225 mtpa by 2011-12, according to petroleum ministry estimates.

This would by default create an export surplus of refined products of 78to93 mtpa by 2011.

The refinery sector exported products worth $11.3 billion between April to October 2006, making it the top merchandise exporter for the period.

This growth in refining capacity is led by Reliance [Get Quote], which on the verge of completion of its second refinery in 2008-09.

Reliance would then have added 62 million tons of capacity in a decade, comparable to the entire capacity of the regional refining hub in Singapore, which has a refining capacity of 67mtpa. 

Reliance's first refinery was able to secure a price of $2-3 per barrel from inception, better than the refining margin of the Singapore complex, proving its global competitiveness.

In addition to Reliance's second refinery (29mtpa), Essar would be commissioning a new refinery with a capacity of 10.5mtpa, apart from capacity additions and greenfield projects by the public sector undertakings worth 35-50mtpa. This growth, estimated to be nearly 60 per cent by the TSM study, would lead to availability of 8-10mtpa of naphtha by 2011. 

The study further indicates that as the power and fertiliser operations will cut the use of naphtha by 2.5mtpa by 2011, it will again increase the availability of naphtha in the country to 12.5mtpa.

Riding on the back of this increased availability of naphtha, the major petroleum players like Reliance, Oil & Natural Gas Corporation, Hindustan Petroleum limited, Mangalore Refinery and Petrochemicals [Get Quote] limited, have already announced major downstream expansions in naphtha crackers.

The olefinic base chemical capacity is expected to increase from 4.5mtpa to 8-10mtpa, while aromatic base chemical capacity is expected to increase from 3.2mtpa to 5-6mtpa over the next 5-6 years. 

Vertical integration of these base chemical capacities would lead to near doubling of capacity in fiber intermediates, and basic petrochemical end products. 

The study predicted that in the next 5-6 years, the Indian petrochemical sector could become a regional production hub.

That would translate into availability of base petrochemical products for further processing in numerous customer applications, together with availability of building blocks like olefins and aromatics for other organic chemicals, at globally competitive costs.