India’s Haldia Petchem to reduce dependence on imported naphtha

06 August 2012 09:55  [Source: ICIS news]

By Ajoy K Das

KOLKATA (ICIS)--India’s Haldia Petrochemicals Ltd (HPL) will reduce dependency on imported naphtha over the next six months, as part of its measures to cut cost and working capital requirements, a company official said on Monday.

Its annual naphtha imports should fall to 12m tonnes, with a 60% share in its total 20m-tonne requirements for the petrochemical feedstock, down from 80% in the previous years, the official said.

HPL runs a petrochemical complex in eastern Indian port town of Haldia with a nameplate naphtha cracking capacity of 670,000 tonnes/ year.

Talks were on with Bharat Petroleum Corp Ltd (BPCL) and Mangalore Refineries and Petrochemicals Ltd (MRPL) for domestic sourcing of naphtha for HPL in view of the weakening Indian rupee, the official said.

The depreciation of the Indian currency requires importers to shell out more rupees for their dollar-denominated cargoes.

In another measure to tide over working capital crunch facing HPL, the company would offer an overseas petrochemical company idle capacity for contract conversion of naphtha to the extent of 50,000 tonne/year, entailing payment of conversion charges.

A petrochemical company for contract conversion would be selected through an open tendering process and contract manufacturing slated to commence around end-September, the official said.

To overcome the fund crunch faced by HPL, the company had sought $180m (€146m) additional working capital from Indian commercial banks both in form of fund-based loans and letters of credit (LC) loans, for the next two years. The banks, last month sanctioned an additional $36m LC-based loans to the company, but no decision has been taken so far on higher working capital loans to HPL, the company official said.

Despite acute shortage of funds impacting operations of HPL, the provincial government of West Bengal, a principal promoter of the company, has yet to take a decision on a proposed buy-in by MRPL into HPL.

“We have formally submitted our interest in picking up equity stake in HPL but we have not heard anything from the West Bengal government for over two months. We are interested but it seems that they are not interested,” said a senior MRPL official.

“The refining capacity of MRPL was being increased to 21m tonnes/year from 15m tonnes/year and the higher production of naphtha could have been linked to HPL if our proposal for equity stake in the company [has] been accepted,” he said.

MRPL’s equity participation in HPL would have ensured much higher synergistic efficiencies than just a feedstock supply agreement, which would be considered on purely commercial terms, the MRPL official said.

MRPL, a subsidiary of India’s oil exploration and production major, ONGC Ltd, operates a grassroot refinery along with two hydro-cracker units in southern Indian province of Karnataka. The principal promoters of HPL were The Chatterji Group (TCG) with 44.21% stake, West Bengal government 43.29%, Indian Oil Corp 9.62% and the balance with the Tata Group.

($1 = €0.81)

By: Ajoy K Das
+65 6780 4359

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