Assam Petrochemical Complex Likely to be Commissioned by 2012

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Researched by Industrial Info Resources (Sugar Land, Texas)--Brahmaputra Cracker and Polymer Limited (BCPL) (Guwahati, Assam), which is developing a petrochemicals complex at Lepetkata in Assam, has indicated that despite delays, some units at the facility should be commissioned by the end of 2012. The complex, which will consist of a 280,000-ton-per-year cracker and other allied plants, will be constructed on 1,323 acres of land. Company sources have indicated that the petrochemicals complex will produce 60,000 tons per year of propylene and 220,000 tons per year of ethylene. The facility will also have units for ethane, heavier hydrocarbon recovery and gas sweetening.

As part of the development activities, BCPL recently awarded contracts to Jaihind Projects Limited (BSE:531339) (Ahmedabad, Gujarat) and Hindustan Dorr Oliver Limited (BSE:509627) (Mumbai). The $21.25 million order secured by Jaihind Projects includes pipeline construction and other activities. Hindustan Dorr Oliver has been awarded the $17.22 million effluent treatment plant contract. As part of the agreement, the company will undertake engineering, construction, transportation, procurement, delivery, installation and commissioning of the treatment plant.

BCPL is a joint venture between GAIL (India) Limited (BSE:532155) (New Delhi), the government of Assam, Numaligarh Refinery Limited (NRL) (Guwahati, Assam), and Oil India Limited (BSE:533106) (OIL) (Noida, Uttar Pradesh). While GAIL holds a 70% stake in the company, the others hold 10% each. In October last year, BCPL completed financial closure of the $1.22 billion petrochemicals complex. The project, which will be funded by a debt-equity ratio of 2:1, has also secured feedstock and capital subsidies. The equity component will be $234.4 million. Debt of $469 million has been arranged with a consortium of banks led by Punjab National Bank (BSE:532461) (New Delhi). However, officials have indicated that project investment may increase by 15% to 20%.

The petrochemicals complex was envisaged as part of the Assam Accord, which was signed in 1985. Although the letter of intent was signed with the Assam Industrial Development Corporation Limited (Guwahati, Assam) in 1991, the project made little progress because of a lack of sufficient feedstock. In 2003, the Ministry of Finance directed GAIL to undertake feasibility studies to assess the project. In 2006, the project received mandatory approvals and clearances from the state and federal governments.

The ethylene cracker will receive naphtha and natural gas feed from NRL and OIL. The companies will supply 160,000 tons per year of naphtha and 6 million standard cubic feet per day of natural gas respectively. Talks are also in progress for natural gas supply from Oil & Natural Gas Corporation Limited (BSE:500312) (New Delhi). As part of the project construction activities, the existing C2 (ethylene and/or ethane) and C3 (propylene and/or propane) recovery facilities at GAIL's Lakwa plant will be changed to process C2+ inputs. The C2+ liquids will be delivered at Lakwa through a pipeline network from the BPCL complex. BCPL is also constructing gas compression and dehydration facilities at Dulaijan to transport the natural gas feed from OIL's facility at Dulaijan.

Experts have observed that the project holds great economic significance for northeastern India. The government of Assam, which is one of the states in this region, is offering several incentives and subsidies to boost economic development. The state, which has 156 billion cubic meters of natural gas and 1.3 billion tons of oil reserves, accounts for nearly 15% of India's crude oil production. It is estimated that the petrochemicals project at Lepetkata will provide direct and indirect business and employment opportunities. About 500 downstream processing and plastics facilities are likely to be established after the petrochemicals complex is commissioned.

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