India's BPCL future oil, refining landscape to feature much larger petrochemicals footprint

India's Bharat Petroleum Corp. has crafted out a major expansion strategy that will see the state-run refiner investing close to $6.5 billion over the next few years to sharply expand its footprint in petrochemicals, lubricants and renewables, as it prepares for a changing energy landscape.

Company sources said the move is a part of a wider plan by all state-run refiners which are now looking to actively diversify their portfolio by raising their petrochemicals intensity in order to ensure that businesses remain relevant just in case electric vehicles take a toll on demand for transport fuels.

"Bharat Petroleum is undergoing a strategic transformation to become a comprehensive energy conglomerate, moving away from its heavy reliance on sales of transport fuels. The company is making significant investments in oil-to-chemicals, green energy, and renewable fuels to diversify its product portfolio," said Sumit Ritolia, Senior South Asia Oil Analyst at S&P Global Commodity Insights.

BPCL is an integrated energy company engaged in the refining of crude oil and marketing of petroleum products, with a significant presence in the upstream and downstream sectors.

BPCL's refineries at Mumbai, Kochi and Bina Refinery have a combined annual refining capacity of around 35.3 million mt. Its marketing infrastructure includes a network of installations, depots, energy stations, aviation service stations and LPG distributors. Its distribution network comprises over 21,000 energy stations, over 6,200 LPG distributors, 525 lubricant distributors, 123 POL storage locations, 53 LPG bottling plants, 70 aviation service stations, four lubricant blending plants and four cross-country pipelines.

Petrochemicals push

"BPCL is further increasing the company's footprints in the petrochemical segment and renewable energy, together with augmenting marketing infrastructure," the company said in a recent statement.

Out of the various expansion projects the company has decided to pursue, the core component of the expansion projects will be the ethylene cracker (EC) project, which will drive the production of essential petrochemicals.

The overall expansion project will encompass the establishment of an EC complex, downstream petrochemical plants, as well as the expansion of the existing annual refinery capacity from 7.8 million mt (156,000 b/d) to 11 million mt at its Bina refinery.

"Bina refinery expansion will meet the growing demand of petroleum products in central and northern India while also providing necessary feedstock to the EC complex. The petrochemical plant will cater to the growing domestic demand for petrochemical products," BPCL said.

According to S&P Global, BPCL is adopting an integrated refinery approach, where refining, petrochemicals, and specialty chemical units are interconnected.

This integrated set up aims to enhance the sustainability and stability of refinery operations, as well as reduce its vulnerability to global events and fluctuations in demand for certain fuels.

"By integrating the refinery with a petrochemical complex, the company can also generate high-value products and improve gross margins. This integration acts as a safeguard, insulating BPCL's margins from volatile global market conditions," Ritolia added.

In addition, BPCL is planning to set up petroleum oil lubricants (POL) and lube oil base stock (LOBS) installations with receipt pipelines at Rasayani in Maharashtra with a project cost of around Rupee 27 billion ($327 million). This project aims to augment storage capacity, smoothen the supply chain and streamline the distribution of essential petroleum products.

Renewables footprint

In its quest to boost renewable energy footprint, the company also plans to set up two 50 MW wind power plants in the states of Madhya Pradesh and Maharashtra for captive consumption at Bina and Mumbai refineries, respectively. With a total project cost of approximately Rupee 9.8 billion ($119 million), these wind power plants will be contributing to a greener and more eco-friendly operation, BPCL said.

"BPCL has leapfrogged into the world of petrochemicals as we embark upon the Rupee 490 billion ($5.94 billion) ethylene cracker project in our Bina refinery, in step with the expansion of refining capacity to 11 million mt/year. Combined with our investment in wind energy and new age petroleum oil lubricants installations built for sustainable processes, this is a watershed moment in our strategic endeavor to be at the forefront in meeting the rapidly growing demand for energy and petrochemical products in India," said BPCL chairman and managing director G. Krishnakumar.

"We are steadfast in aligning our strategic imperatives with the government's mission to make India a self-reliant and globally competitive petrochemical powerhouse. These future defining projects will generate employment opportunities and bolster our sustainable energy capabilities, a step towards a secure and net zero future," he added.

BPCL has also chalked out a plan to offer electric vehicle charging stations at around 7,000 energy stations over the next five years. With a focus on sustainable solutions, the company is developing an ecosystem and a roadmap to become a net zero energy company by 2040, in Scope 1 and Scope 2 emissions, BPCL said.

"By pursuing a dual approach of expanding its presence in the refining and petrochemicals sector, while investing in renewables, biofuels and new energy, BPCL aims to strike a balance between traditional and sustainable energy sources," Ritolia added.