AP proposes hydrocarbon cracker project with an investment of Rs 1 lakh cr in Machilipatnam

State government in talks to form consortium with domestic and global players

The Andhra Pradesh government is planning to promote the establishment of a multi-billion dollar oil and natural gas cracker complex project in the port town of Machilipatnam by stitching up a consortium with PSU oil companies as well as private global players, including the Kharashi group of Dubai.

Chief minister N Chandrababu Naidu had written a letter to Prime Minister Narendra Modi in this regard and received a positive response from the latter, a senior industry official told Business Standard on Wednesday. Cracking is a process involving the breakdown of complex and heavy hydrocarbon molecules in oil and natural gas into simple molecules forming several raw materials including as a feedstock by the downstream industry.

The proposal also involves  inclusion of Machilipatnam into the existing Petroleum Chemicals and Petrochemical Investment Region (PCPIR) centered around Visakhapatnam.

The government has chosen Machilipatnam, which is a little over 350 km away from Visakhapatnam down south and located almost at the middle point of AP’s seacoast, for the project since it is unlikely to get environmental clearances at the existing PCPIR location due to coastal zoning regulations among other things, according to the official. The town is also part of the proposed capital city region.

The project is proposed to have a 10-million tonne capacity requiring an investment of around Rs 1 lakh crore, the official said. Compared with the existing cracking units in India, the capacity of the proposed unit is quite huge.

The Kharashi group, which had earlier shown interest in the AP PCPIR, has revived its consultations with the present government on possible investments in the project. On the other hand, the state government is planning to rope in other big companies, including ONGC, as the project requires huge investment, officials said.

According to a working paper published on feedstock for Indian petrochemical industry by the Indian Council for Research on International Economic Relations (ICRIER) in Feb 2014, the country currently has three naphtha-based, three gas-based and one mixed feed cracker units with a combined annual ethylene capacity of 3.3-million tonne.

The major feedstock used in Indian petrochemical units is naphtha and natural gas (propane and butane) while the major intermediate products produced in the country are ethylene, propylene, butadiene, benzene, toluene and xylene, which are used in a variety of industries.

According to a Ministry of Chemicals and Fertilisers report in 2014, ONGC Petro additions Limited (OPaL) is setting up a grassroot mega petrochemical project at Dahej in Gujarat PCPIR with main dual feed cracker unit having a capacity to produce 1.1 million tonne ethylene, 400,000 tonne propylene in addition to several other hydrocarbons at lesser capacities.

Similarly, RIL is significantly expanding its petrochemical capacity with a range of projects including doubling of the paraxylene capacity at Jamnagar besides commissioning several new cracking plants targeting to produce a variety of molecules.

Meanwhile, the officials said the land required for the project had already been identified. The government had already acquired about 6,000 acres of land for the development of port here.