British Petroleum, one of the world's largest energy and petrochemical companies, plans to expand its India operation by setting up a 1 million tonne petrochemical plant for Rs 3,500 crore.
The company is already in talks with Indian oil refiners to buy paraxylene which is developed from naphtha, a refining byproduct. The company plans to use paraxylene as a raw material to make purified terephthalic acid (PTA), a petrochemical product used in polyester and plastic.
"BP sees petrochemicals as a strategic business to expand its foothold in India," said a person familiar with the developments, adding that the plant may come up in Gujarat.
"The company is in talks with refiners who are setting up paraxylene plants," said the source. He declined to name the refining companies with which BP is in talks on grounds that doing so would affect the negotiations. In an email response, the company said it would not comment on market speculation.
Oil refiners are now avoiding selling naphtha directly in the market because of declining margins. Instead they produce paraxylene themselves and sell it to petrochemical makers.
BP is one of the big players in PTA globally with a market share of about 20 per cent. In Asia, it is present in countries such as China, South Korea and Malaysia.
The company also has its exploration and production activities centred in Asian countries such as China, Indonesia, Vietnam and Pakistan. In India, BP Solar has a manufacturing plant and also markets lubricants and oil products.
The company's petrochemical investment follows an unsuccessful attempt to enter the refining business through a tie-up with state-owned Hindustan Petroleum Company's upcoming nine million tonne Bhatinda refinery three years ago. BP later pulled out saying the investment climate did not suit new investments in refining and fuel marketing.
Fuel marketing for private companies is a challenge in India for private companies since the government subsidises the sale of petrol, diesel sold through the public sector marketing companies.
Indian companies such as Reliance Industries and Essar Oil have not been successful in retail auto fuels for these reasons.