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Overview of Petrochemical Industry

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PRODUCTIO N MANAGEMEN T OVERVIEW OF PETROCHEMICAL INDUSTRY Overview of Petrochemical Industry 7-Abhay Dalal|17-Jyoti Jagtap|27-Deepika Mhatre| 37-Niranjan Parkhi|47-Nishu Kumar|57-Ajaykumar Vadher



Overview of Petrochemical Industry 7-Abhay Dalal|17-Jyoti Jagtap|27-Deepika Mhatre|37-Niranjan Parkhi|47-Nishu Kumar|57-Ajaykumar Vadher


Indian Petr chemical IndustryPetrochemicals are the downstream of the oil and gas industry - an industry whose products affect our daily lives. Petrochemicals are a part of our daily lives - the carpeting on which we walk, plastic soda bottles from which we drink, clothing we wear, fertilizers that grow our crops, tires we rely on for transportation, paints we use to brighten our surroundings, pharmaceuticals we need to remain healthy, cosmetics, and many other applications.

Gl bal Petr chemical IndustryPetrochemicals dominates the global chemicals market with a share of almost 40 percent. The growth of the chemical industry, currently 2 -3 percent above the average world GDP, is likely to face a slowdown in the coming 2 years owing to the global economic slowdown.

Petrochemicals get their raw material - known as

feedstocks - from the refinery: naphtha, components of natural gas such as butane, and some of the byproducts of oil refining processes, such as ethane and propane. These feedstocks are then cracked to obtain the building blocks of the petrochemical industry: olefins, that is, mainly ethylene, propylene, and the so-called C4 derivatives, including butadiene- and aromatics, mainly benzene, toluene, and the xylenes. These products are then processed to produce a wide variety of consumer and industrial products.

The coming years are expected to see the petrochemicals industry undergoing a major metamorphosis, particularly with the Middle East building its strength as a major petrochemicals supplier and China emerging as a major processing hub and end-use market for petrochemicals. The chart below shows the flow of raw materials from the Middle East to the processing hubs and end use markets of China and India from where the finished products will reach the markets of North America and Europe.

Asian markets are undergoing a sea change in the form of high demand markets for petrochemicals. It was projected that the coming years will see China, India, and the rest of Asia becoming hubs for processing of end products as well as a high demand end-use market. By 2018, 60 percent of the petrochemical growth is likely to take place in Asia, with China accounting for about one -third of the growth. However, with the recent recession hitting the industry, Asian markets also have been affected since Europe and North America have cut down on import of finished goods. Even though Asia is expected to soon become a significant end use market, the current world economic scenario will have a negative effect on the industry and instead of growing at about 2-3 percent above GDP; the market is expected to grow at a much lower rate. However, this recession will affect the Western markets more than Asian ones.

Petr chemical Industry in IndiaThe petrochemical industry has been one of the of the fastest growing industries in the Indian economy; it provides the foundation for manufacturing industries such as pharmaceuticals, construction, agriculture, packaging indus try, textiles, automotive, etc.

The petrochemical industry in India is oligopolistic with four main players dominating the market, namely Reliance Industries Ltd. (RIL) along with Indian Petrochemical Ltd. (IPCL), Gas Authority of India Ltd (GAIL), and Haldia Petrochemicals Ltd. (HPL). Currently, India has three naphtha- and three gas based cracker complexes with a combined ethylene annual capacity of over 2.5 MMTA. Besides, there are four aromatic complexes also with a combined Xylenes cap acity of 2.9 MMTA. Polymers account for more than 60 percent of total petrochemical production. As shown in the figure below, the industry has been stagnant in

terms of capacity addition. Combining the demand for all the key segments in the petrochemic al industry, aggregate demand for the entire petrochemical sector in India was around 20 MMTA in 2008

Manufacturing and Marketing Practice and Strategie

Manufacturing Practice

The release of volatile organic compounds (V Cs) to air depends on the products handled at the plant and may include acetaldehyde, acetone, benzene, toluene, trichloroethylene, trichlorotoluene, and xylene. V C emissions are mostly fugitive and depend upon the production processes, material handling and effluent treatment procedures, equipment maintenance, and climatic conditions. V C emissions from a naphtha cracker range from 0.6 to 10 kilograms (kg) (75% are alkanes, 20% unsaturated hydrocarbons about half of these is ethylene, and remaining 5% are aromatics) per metric ton of ethylene; 0.02 to 2.5 kg (45% of these being ethylene dichloride, 20% being vinyl chloride, and 15% being chlorinated organics) per metric ton of product in a vinyl chloride plant; 3-10 kg per metric ton of product in a SB plant; 0.1-2 kg per metric ton of product in ethyl benzene plant; 1.427 kg per metric ton of product in ABS plant; 0.2518 kg per metric ton of product in a styrene plant; and 0.2-5 kg per metric ton of product in a polystyrene plant. Petrochemical units generate wastewaters from process operations (such as vapor condensation), cooling tower blow down, and storm water run off. Process wastewaters are generated at a rate of about 15 cubic meters per3

Waste C aracteristicsFugitive air emissions from pumps, valves, flanges, storage tanks, loading and unloading operations, and wastewater treatment are of greatest concern. Some of the compounds released to air are carcinogenic or toxic. Ethylene and propylene emissions are of concern because of their fate

hour (m /hr) (based on a 500,000 metric tons per year ethylene production) and may contain biochemical oxygen demand (B D5) (100 mg/L), COD (1,500-6,000 mg/L), suspended solids (100400 mg/L), and oil and grease (30-600 mg/L). Phenol levels of up to 200 mg/L and benzene levels of up to 100 mg/L may also be present. Petrochemical plants also generate solid wastes and sludges, some of which may be

Natural gas and crude distillates suc as naphtha (from petroleum refining) are used as feedstoc s to manufacture a wide variety of petrochemicals which are in turn used for the manufacture of a variety of consumer goods The description of petrochemical processes and products presented here is for illustrative purposes only The basic petrochemicals manufactured by crac ing, reforming, and other processes include olefins (including ethylene, propylene, butylenes, and butadiene) and aromatics (including benzene, toluene, and xylenes). The capacity of naphtha crac ers is generally of the order of 250,000 to 750,000 metric tons per year (tpy) of ethylene production. Some petrochemical plants also have alcohol and oxo-compounds manufacturing units on-site. The base petrochemicals or products derived from them along with other raw materials are converted to a wide range of products including resins and plastics (such as low density polyethylene (LDPE), high density polyethylene (HDPE), linear low density polyethylene (LLDPE), polypropylene, polystyrene, and polyvinyl chloride (PV )); synthetic fibers (such as polyester and acrylic); engineering polymers (such as acrylonitrile butadiene styrene (ABS)); rubbers (including styrene butadiene rubber (SB ) and polybutadiene (PB )); solvents; industrial chemicals (including those used for the manufacture of detergents such as linear alkyl benzene (LAB), coatings, dyestuff, agrochemicals, pharmaceuticals, and explosives). A number of alternative methods are available to manufacture the desired products.

processes which lead to the formation of oxides which are extremely toxic. Compounds considered carcinogenic that may be present in air emissions include benzene, butadiene, 1,2-dichloroethane, and vinyl chloride. A typical naphtha cracker at a petrochemical complex may annually release about 2,500 emetric tons of alkenes (such as propylenes and ethylene), when producing 500,000 metric tons of ethylene. Boilers, process heaters, flares, and other process equipment (in some cases may include catalyst regenerators)are responsible for the emission of particulates, carbon monoxide, nitrogen oxides (200 metric tons per year), and sulfur oxides (S x) (600 metric tons per year based on a 500,000 metric tons per year of ethylene capacity).

considered hazardous because of the presence of toxic organics and heavy metals. Spent caustic and other hazardous wastes such as distillation residues associated with units handling acetaldehyde, acetonitrile, benzyl chloride, carbon tetrachloride, cumene, phthallic anhydride, nitrobenzene, methyl ethyl pyridine, toluene diisocyanate, trichloroethane, trichloroethylene, perchloroethylene, aniline, chlorobenzenes, dimethyl hydrazine, ethylene dibromide, toluenediamine, epichlorohydrin, ethyl chloride, ethylene dichloride, and vinyl chloride may be generated in significant quantities. Accidental discharges as a result of abnormal operation especially from polyethylene and ethylene-oxide-glycol plants in a petrochemical complex can be a major environmental hazard releasing large quantities of pollutants and products into the environment. Plant safety and fire prevention and control procedures should be in place

adopting methods such as vapor recovery systems and double seals (for floating roof tanks). Recover catalysts and reduce particulate emissions. Use low NO x burners to reduce NOx emissions. Optimize fuel usage. In some case, organics that cannot be recovered, are effectively destroyed by routing them to flares and other combustion devices.

Elimination/Reduction of PollutantsUse non-chrome based additives in cooling water. Use long life catalysts and regeneration to extend the cycle. 463 Petrochemicals Manufacturing Recycling/Reuse Recycle cooling water and treated wastewater to the extent feasible. Recover and re-use spent solvents and other chemicals to the extent feasible.

Pollution Prevention and ControlPetrochemical plants are typically large and complex, where the combination and sequence of processes is usually very specific to the characteristics of the products manufactured. Specific pollution prevention or source reduction measures are best determined by technical staff. However, there are a number of broad areas where improvements are often possible and site specific emission reduction measures in these areas should be designed into the plant and targeted by plant management. Areas where effort should be concentrated include

Improved Operating ProceduresSegregate process wastewaters from stormwater systems. Optimize tank and equipment cleaning frequency. Prevent solids and oily wastes from entering the drainage system. Establish and maintain an Emergency Preparedness and Response Plan.

Reduction of Air EmissionsMinimize the leakages of volatile organics (including benzene, vinyl chloride, and ethylene oxide) from valves, pump glands (use mechanical seals), flanges, and other process equipment by following good design practices and equipment maintenance procedures. Use mechanical seals, where appropriate. Minimize losses from storage tanks, product transfer areas, and other process areas by

Target Pollution Loads

Implementation of cleaner production processes and pollution prevention measures can provide both economic and environmental benefits. The following production-related targets can be achieved by measures such as those detailed in the previous section. The figures relate to the production processes before the addition of pollution control measures. A good practice target for petrochemical complex is that the total organic emissions (including VOCs) from the process units be reduced to 0.6% of the throughput. Target maximum levels for air releases of ethylene, ethylene oxide, vinyl chloride, and 1,2-dichloroethane are 0.06 kg, 0.02 kg, 0.2 kg, and 0.4 kg per ton of product. Methods of estimating these figures include ambient and emissions monitoring, emission factors, and inventories of emissions sources. Design assumptions should be recorded to allow for subsequent computation and reduction of losses. Vapor recovery systems to control losses of VOCs from storage tanks and loading areas should achieve close to 100% recovery. A wastewater generation rate 15 m per 100 tons of ethylene produced is achievable with good design and operation and new petrochemicals should strive to achieve this.3

Liquid EffluentsPetrochemical wastewaters often require a combination of treatment methods to remove oil and other contaminants before discharge. Separation of different streams (such as stormwater) is essential to minimize treatment requirements. Oil is recovered using separation techniques. For heavy metals, a combination of oxidation/reduction, precipitation, and filtration is used. For organics, a combination of air or steam stripping, granular activated carbon, wet oxidation, ion exchange, reverse osmosis, and electrodialysis is used. A typical system may include neutralization, coagulation/flocculation, flotation/sedimentation/filtration, biodegradation (trickling filter, anaerobic, aerated lagoon, rotating biological contactor, and activated sludge), and clarification. A final polishing step using filtration, ozonation, activated carbon, or chemical treatment may also be required. Pollutants loads which can be achieved include a COD level of less than 1 kg, suspended solids level of less than 0.4 kg, and dichloroethane level of less than 0.001 kg, per 100 tons of ethylene produced..

Treatment Tec nologies Air EmissionsControl of air emissions normally includes the capturing and recycling or combustion of emissions from vents, product transfer points, storage tanks, and other handling equipment. Catalytic cracking units should be provided with particulate removal devices. Particulate removal technologies include fabric filters, ceramic filters, wet scrubbers, and electrostatic precipitators. Gaseous releases are minimized by condensation, absorption, adsorption (activated carbon, silica gel, activated alumina, and zeolites), and in some cases using biofiltration and bioscrubbing (using peat/heather, bark, composts, and bioflora for treating biodegradable organics), and thermal decomposition.

Marketing Strateg

Petrochemical business being an oligopoly has few strong players who cater to almost the entire needs of the markets. Today the Indian petrochemical market can boast of having international standards because it has the blend of low cost coupled with high class infrastructure. Indian petrochemical market today has high demand elasticity with high volume industries and the Indian petrochemical sector is a capital intensive sector. With the rapid growth of the middle class in India, the demand for petrochemical goods is anticipated to increase manifold. Reliance Industries, Nocil, and the IPCL are the 3 major companies which can boast of having fully-integrated plants. Indian petrochemical sector was operated and mastered by the state-owned IPCL till the early 90s. Nocil was the only private sector enterprise set up with modest infrastructure and capacity .However, after liberalization, IPCL and Reliance came up with large-sized plants. 70% of the output of the Indian petrochemical sector constitutes polymers, and in the last few years, the growth rate of these industries has been 16-18% per annum. These petrochemical objects are sold through stockists, C&F channels, and distributors. The companies directly meet the large volume sale. Prices are determined by international pricing and are very volatile in nature.

Manufacturing Process

Petrochemical Industry (Oil Refinery)

products are in great demand for use in internal combustion engines, a modern refinery will convert heavy hydrocarbons and lighter gaseous elements into these higher value products.

Oil can be used in a variety of ways because it contains hydrocarbons of varying molecular masses, forms and lengths such as paraffins, aromatics, naphthenes (or cycloalkanes), alkenes, dienes, and alkynes. Crude oil is separated into fractions by fractional distillation.The fractions at the top of the fractionating column have lower boiling points than the fractions at the bottom. The heavy bottom fractions are often cracked into lighter, more useful products. All of the fractions are processed further in other refining units. Raw or unprocessed crude oil is not generally useful. Although "light, sweet" (low viscosity, low sulfur) crude oil has been used directly as a burner fuel for steam vessel propulsion, the lighter elements form explosive vapors in the fuel tanks and are therefore hazardous, especially in warships. Instead, the hundreds of different hydrocarbon molecules in crude oil are separated in a refinery into components which can be used as fuels, lubricants, and as feedstock in petrochemical processes that manufacture such products as plastics, detergents, solvents, elastomers and fibers such as nylon and polyesters. Petroleum fossil fuels are burned in internal combustion engines to provide powerfor While the molecules in crude oil include different atoms such as sulfur and nitrogen, the hydrocarbons are the most common form of molecules, which are molecules of varying lengths and complexity made of hydrogen and carbon atoms, and a small number of oxygen atoms. The differences in the

structure of these molecules account for their varying physical and chemical properties, and it is this variety that makes crude oil useful in a broad range of applications. Once separated and purified of any contaminants and impurities, the fuel or lubricant can be sold without further processing. Smaller molecules such as isobutane and propylene or butylenes can be recombined to meet specific octane re uirements by processes such as alkylation, or less commonly, dimerization. Octane grade of gasoline can also be improved by catalytic reforming, which involves removing hydrogen from hydrocarbons producing compounds with higher octane ratings such as aromatics.

Manu acturing

pr cess


ships, automobiles, aircraft engines, lawn mowers, chainsaws, and other machines. Different boiling points allow the hydrocarbons to be separated by distillation. Since the lighter li uid

Intermediate products such as gasoils can even be reprocessed to break a heavy, longchained oil into a lighter short-chained one, by various forms of cracking such as fluid catalytic cracking, thermal cracking, and hydrocracking. The final step in gasoline production is the blending of fuels with different octane ratings, vapor pressures, and other properties to meet product

This classification is based on the way crude oil is distilled and separated into fractions (called distillates and residuum) as in the above drawing.

Liquified petroleum gas (LPG) Gasoline (also known as petrol) Naphtha Kerosene and related jet aircraft fuels

specifications. Oil refineries are large scale plants, Diesel fuel Fuel oils Lubricating oils Paraffin wax Asphalt and tar Petroleum coke

processing about a hundred thousand to several hundred thousand barrels of crude oil a day. Because of the high capacity, many of the units operate continuously, as opposed to processing in batches, at steady state or nearly steady state for months to years. The high capacity also makes process optimization and advanced process control very desirable. Petroleum products are usually grouped into three categories light distillates (LPG, gasoline, naphtha), middle distillates (kerosene, diesel), heavy distillates and residuum (heavy fuel oil, lubricating oils, wax, asphalt).

Flow Diagram of Typical Oil Refinery

Common process units found in a refiner

Visbreaking unit upgrades heavy residual oils by thermally cracking them into lighter, more valuable reduced viscosity products.

Desalter unit washes out salt from the crude oil before it enters the atmospheric distillation unit. Atmospheric distillation unit distils crude oil into fractions. See Continuous distillation.

Vacuum distillation unit further distils residual bottoms after atmospheric distillation.

Naphtha hydrotreater unit uses hydrogen to desulfurize naphtha from atmospheric

distillation. Must hydrotreat the naphtha before sending to a Catalytic Reformer unit. Alkylation unit produces high-octane component for gasoline blending. Catalytic reformer unit is used to convert the naphtha-boiling range molecules into higher octane reformate (reformer product). Dimerization unit converts olefins into higher-octane gasoline blending components. For example, butenes can be dimerized into isooctene which may The reformate has higher content of aromatics and cyclic hydrocarbons). An important by-product of a reformer is hydrogen released during the catalyst reaction. The hydrogen is used either in the hydrotreaters or the hydrocracker. Isomerization molecules to unit converts linear subsequently be hydrogenated to form isooctane. There are also other uses for dimerization.

Distillate hydrotreater unit desulfurizes distillates (such as diesel) after atmospheric distillation.

Fluid catalytic cracker (FCC) unit upgrades heavier fractions into lighter, more valuable products.

Hydrocracker unit uses hydrogen to upgrade heavier fractions into lighter, more valuable products.

Merox unit treats LPG, kerosene or jet fuel by oxidizing mercaptans to organic disulfides.

Coking units (delayed coking, fluid coker, and flexicoker) process very heavy residual oils into gasoline and diesel fuel, leaving petroleum coke as a residual product.



molecules for blending into gasoline or feed to alkylation units.

Steam reforming unit produces hydrogen for the hydrotreaters or hydrocracker.






propane and similar gaseous fuels at pressure sufficient to maintain them in liquid form. These are usually spherical

vessels or bullets (horizontal vessels with rounded ends.

constituents petrolatum from vacuum distillation products .

Storage tanks store crude oil and finished products, usually cylindrical, with some sort of vapor emission control and surrounded by an earthen berm to contain spills.

Slug catcher used when product (crude oil and gas) that comes from a pipeline with two-phase flow, has to be buffered at the entry of the units.

Amine gas treater, Claus unit, and tail gas treatment convert hydrogen sulfide from hydrodesulfurization into

elemental sulfur.

Utility units such as cooling towers circulate cooling water, boiler plants generates steam, and instrument air systems include pneumatically operated control valves and an electrical


Wastewater collection and treating systems consist of API separators, dissolved air flotation (DAF) units and further treatment units such as an activated sludge biotreater to make water suitable for reuse or for disposal.[3]

Solvent refining units use solvent such as cresol or furfural to remove unwanted, mainly asphaltenic materials from

lubricating oil stock or diesel stock. Solvent dewaxing units remove the heavy waxy

Logistics & Suppl C ain Processes

Supply chain management in the petroleum industry contains various challenges, specifically in the logistics area, that are not present in most other industries. These logistical challenges are a major influence on the cost of oil and its derivatives. However, opportunities for cost savings in logistics still do exist. The steadily increasing global demand for oil and its derivatives such as petrochemicals has enabled companies Providing these products to reach more

present a high variability of transportation times that can hurt suppliers in terms of service levels and final customers in terms of safety stock costs. Moreover, the transportation process is carried out either by ships, trucks, pipelines, or railroads. In many instances, a shipment has to exploit multiple transportation modes before reaching the final customer s location. Very few industries deal with that kind of complexity in shipping, said Doug Houseman, a senior manager at the consulting firm Accenture (Morton, 2003, p. 31). Such constraints on transportation modes in this type of industry induce long lead times from the shipping point to the final customers location compared to other industries. Hence, considering the amount of inflexibility involved, meeting the broadening prospect of oil demand and its derivates while maintaining high service-levels and efficiency is a major challenge in the petroleum industry. The supply chain of the petroleum industry is extremely complex compared to other industries. It is divided into two different, yet closely related, major segments the upstream and downstream supply chains.

customers and increase their market share and profitability. This boom in global demand along with the ease of international trade and the inflexibility1 involved in the petroleum industry s supply chain has made its management more complex and more

challenging. The logistics network in the petroleum industry is highly inflexible, which arises from the production capabilities of crude oil suppliers, long

transportation lead times, and the limitations of modes of transportation. Every point in the network, therefore, represents a major challenge.

The oil and petrochemical industries are global in nature. As a result, these commodities and products are transferred between locations that are in many cases continents apart. The long distance between supply chain partners and slow modes of transportation induce not only high transportation costs and in-transit inventory, but also high inventory carrying costs in terms of safety stocks at the final customer location. The great distances between supply chain partners

The upstream supply chain involves the acquisition of crude oil, which is the specialty of the oil companies. The upstream process includes the exploration, forecasting, production, and logistics management of delivering crude oil from remotely located oil wells to refineries. The upstream sector includes the searching for potential underground or underwater oil and gas fields, drilling of exploratory wells, and subsequently operating the

wells that recover and bring the crude oil and/or raw natural gas to the surface. The downstream supply chain starts at the refinery, where the crude oil is manufactured into the consumable products that are the specialty of refineries and petrochemical companies. The downstream supply chain involves the process of forecasting, production, and the logistics management of delivering the crude oil derivatives to customers around the globe. Challenges and opportunities exist now in both the upstream and downstream supply chains.

conclusively determine the presence or absence of oil or gas. Oil exploration is an expensive, high-risk

operation. Offshore and remote area exploration is generally only or undertaken national by very

large corporations


Typical Shallow shelf oil wells (e.g. North sea) cost USD$10 30 Million, while deep water wells can

cost up to USD$100 million plus.

Exploration Visible surface features such asoil seeps, natural gas seeps, pockmarks (underwater craters caused by escaping gas) provide basic evidence of hydrocarbon generation (be it shallow or deep in the Earth). However, most exploration depends on highly sophisticated technology to detect and determine the extent of these deposits using exploration geophysics areas thought to contain hydrocarbons are initially subjected to a gravity seismic or survey, magnetic

Extraction of petroleum is the process bywhich usable petroleum is extracted and removed from the earth. The oil well is created by drilling a hole into the earth with an oil rig. A steel pipe (casing) is placed in the hole, to provide structural integrity to the newly drilled wellbore. Holes are then made in the base of the well to enable oil to pass into the bore. Finally a collection of valves called a "Christmas Tree" is fitted to the top, the valves regulating pressures and controlling flows.

survey, passive

regional seismic

reflection surveys to detect large scale features of the sub-surface geology. Features of interest (known as leads) are subjected to more detailed seismic surveys which work on the principle of the time it takes for reflected sound waves to travel through matter (rock) of varying densities and using the process of depth conversion o create a profile of the substructure. Finally, when a prospect has been identified and evaluated and passes the oil company's selection criteria, an exploration well is drilled in an attempt to

Downstream Process: Oil refinery or petroleum refinery: isan industrial process plant where crude oil is processed and refined into more useful petroleum products, such as gasoline, diesel fuel, asphalt base, heating oil, kerosene, and li uefied petroleum gas. Oil refineries are typically large sprawling industrial complexes with extensive piping running throughout, carrying streams of fluids between large chemical processing units. In many ways, oil refineries use much of the technology of, and can be thought of as types of chemical plants. The crude oil feedstock has typically been processed by an oil production plant. There is usually an oil depot (tank farm) at or near an oil refinery for storage of bulk li uidproducts. An oil refinery is considered an essential part of the downstream side of the petroleum industry. Raw or unprocessed crude oil is not generally

Logistics management - Delivering crudeoil from remotely located oil wells to refineries. This is done mainly with the help of oil tankers and pipelines. The logistics network in the petroleum industry is highly inflexible, which arises from the production capabilities of crude oil suppliers, long

useful. Although "light, sweet" (low viscosity, low sulfur) crude oil has been used directly as a burner fuel for steam vessel propulsion, the lighter elements form explosive vapors in the fuel tanks and are therefore hazardous, especially in warships. Instead, the hundreds of different hydrocarbon molecules in crude oil are separated in a refinery into components which can be used as fuels, lubricants, and as feedstock in petrochemical processes that manufacture such products as plastics, detergents, solvents, elastomers and fi bers such as nylon and polyesters. Petroleum products are usually grouped int three o categories: light distillates (LPG, gasoline, naphtha), middle distillates (kerosene, diesel),

transportation lead times, and the limitations of modes of transportation. Every point in the network, therefore, represents a major challenge

heavy distillates and residuum (heavy fuel oil, lubricating oils, wax, asphalt). This classification is based on the way crude oil is distilled and separated into fractions (called distillates and residuum).

This part of the petroleum supply chain comprises the transport of finished fuels from the door of the refinery to consumers and the sale of the products either in bulk or in small quantities in gas stations. The distribution of finished products is made by pipeline, tanker, truck, rail or barge. The quantities transported are smaller (typically 10 to 50,000 tons) than in the case of crude oil(generally over 100,000 tons) and therefore the economies of scale are less important than in the case of bigger crude oil tankers. Sales may target the direct delivery to big consumers (e.g., heating oil, heavy oil for power plants) or the retail selling through a network of service stations. In the case of the network of service stations, fuel retailing is a well differentiated part of the business where marketing strategies are critical. Fuel retailing is similar in some aspects to the consumer products goods industry. Therefore, this part of the business presents rather different challenges in supply chain than the refining or upstream activities, less focused on final consumer needs.


Distribution and marketing

Cost Drivers

The petrochemical industry consumes some of the oil production and gas production as well. For operation costs of a petrochemical plant, the purchase of energy and feedstock would take around 50%. People working for petrochemical plants have jobs ranging from research scientists to equipment operators. There is also a notably higher percentage in productivity per worker because of the large investment in equipments. The technology under the petrochemical industry engages in high pressures and temperatures, generally requiring world class engineering, not to mention the equipment, to be able to use the energy in an efficient manner. On the other hand, the government control can also have an effect in the industry. The price of gas and oil is especially crucial to the international competitiveness of the petrochemical industry. When the environment is concerned, the petrochemical industry made its mark in controlling unwanted emissions from the plant. As compared to other resource industries, the emissions are quite low per unit of output. Usually gaseous, emissions can arise from production processes of the plant, from handling to storage. In addition, this particular industry does not generate large volumes of contaminated water, and is prevented from doing so.

The life span of this industry is infinite, for as long as the population continues to use and make use of such materials, this industry has enough oxygen to breath.

C allenges and SWOT Anal sis

The Indian petrochemical industry faces a number of challenges for sustained growth, putting India at a competitive disadvantage in the competition with China. India's ethylene capacity is far smaller than China's and is unlikely to rise above its Asian rival's levels in the next 5-7 years. This will make it impossible for India to develop applications further downstream. The availability of new hydrocarbon resources in India has spurred the demand for petrochemicals in the country and spawned an industry that is based largely on captive and low-cost feedstock. There is no denying that opportunities in the petrochemicals business must be capitalized upon for growth. Today, the petrochemical industry is driven by size and cutting-edge technology. In the current competitive environment, small-sized plants make no sense.


Prevention of reservation on Small Scale Units


Plastic waste to be recycled and the littering habits to be discouraged


India requires advantage on feedstock, so the import cost has to be brought down


The industry should have access to the primary amenities of infrastructure

However, on a positive note, the challenges facing India petrochemical industry provides the industry with better tools which would in turn help the growth of the economy.

Following are t e c allenges facing India petroc emical industry

High cost of energy and feedstock and the impact on demand


The transformation in the kinetics of competition in manufacturing


Increase in the cost of project

Problems faced b t e India petroc emical industry

The manufacturing units mostly use obsolete format of technology and are not able produce optimally


There is a necessity for the modernization of equipments


Excise duty on synthetic fiber should be rationalized



& %





SWOT Anal sis:The Indian petrochemicals industry is finally discarding its nascent stage tag and the companies are now vying for a major chunk of the global pie of the petrochemicals market. Indian major Reliance has recently acquired a German polyester major Trevira GmbH and this marks the private sector giant's entry into the European markets in a big way. At the same time, ONGC and IOC are planning entry into the business in a major way as this is in line with their forward integration plans. The petrochemicals cycle is currently on a global uptrend thanks to growing demand from China and other developing nations. In the domestic markets, growing activity in infrastructure and construction segments coupled with strong growth in the auto sector on the back of lower interest rates have actually boosted the performance of the petrochemicals sector. Major beneficiaries of this uptrend are the integrated players such as Reliance Industries, GAIL and IPCL (to some extent). A low per capita consumption of 4 Kgs of plastic as compared to a global average of 20 Kgs leaves enough scope for capacity expansion resulting in ONGC and IOC venturing into the business. The following are

Strengt s of Indian Petroc emical industr yLarge and very fast growing Indian petrochemical market

y y

Huge trained talent pool Competitive labour cost

Weaknesses of Indian Petroc emical industry

Insufficient basic infrastructure for the petrochemical industry


High feedstock cost in comparison to Middle East countries

y y

Prevalence and use of old technology Synthetic fibre industry is unorganized and operates in small clusters

Opportunities in Indian Petroc emical industrysynthetic fibre

Huge demand for polymer and


Great opportunity for product development exists


Low consumption of polymer in comparison to global consumption rate


Stiff competition from other regional players like, china and the Middle East countries

y y

Stiff rational pricing pressures Environmental hazards concerns



the major uses of the products

Threats to Indian Petrochemical




0 (




y y

Low market recognition Relocation of manufacturing sites to region with abundance of feedstock


India has stably established itself in the core of the international production of petrochemical and petrochemical- related products in the present scenario.

major downstream expansions in naphtha crackers. The olefin-based capacity is expected to increase from 5 MMTA to 10 MMTA and aromatics based capacity is expected to increase from 3 MMTA to 6 MMTA.

The global economy is a dynamic and ever-growing one in spite of the high cost of energy. This in turn is forging the demand for petrochemicals. The strong growth in demand is not backed by a sufficient supply so the cost is still to come down. Operating rates of major petrochemical product segments are very high presently. The future of the Indian petrochemicals industry is bright with domestic demand driving the market for products. With Government support slowly falling into place, the future could see more investments from multinationals as well as domestic companies.

The major driver for the growth of petrochemical industry in India is its (India's)ongoing economic development. With the Government announcing an infrastructure development program of over INR 500 Billion, coupled with growth in key enduse sectors like auto, personal / lifestyle products, and retail (packaging), a boost is expected in the demand for petrochemical products in India. The Government has set in place policies to promote investment in the petrochemical sector, and several key domestic companies have unveiled ambitious expansion plans for the next few years. Two major elements in this support are the decision to allow 100 percent foreign direct investment projects in this sector, and establishment of a series of special economic zones (SEZs) and a number of petroleum, chemicals, and petrochemical investment regions (PCPIRs).

The refining capacity in India is expected to rise to 210-225 MMTA in 2011-12, translating into increased availability of 8-10 MMTA of naphtha. This additional availability of naphtha has already prompted petrochemical majors to announce