Assam’s mini methanol project

Why is it that state-owned companies refuse to think big? After GAIL (India)’s small cracker it is Assam Petrochemical that has floated a plan for a 165,000 tonnes/year methanol plant in Northeast India.

A company source has confirmed that negotiations have started with Oil India Ltd (OIL) and Oil & Natural Gas Corp (ONGC) for gas supplies and that a start-up date would be set once talks are completed. The company expects to take 30-36 months to complete the project.

The company is also ramping up capacity of its existing plant from 100 tonnes/year to 130 tonnes/day.

India’s methanol demand this year is expected to hit 1.1m tonnes and the country faces a deficit of around 500,000 tonnes. A worldscale methanol project is well over a 1m tonnes/year. With Indian demand growing at about 8%/year, there is certainly room for a big plant in India. But the problem is lack of gas at the right price.

Assam Petrochemical would have planned a bigger plant if it could have secured enough gas. Supplies for even this small a plant are likely to be difficult given GAIL’s plan for a 280,000 tonnes/year cracker in Assam. GAIL was forced to settle for a dual feed cracker as there was not enough gas available in this part of the country. The current plan is to utilise about 160,000 tonnes/year of naphtha from Numaligarh Refinery with the balance gas supplied by ONGC and OIL.

But this could change as Assam Petrochemical is vying for some of that gas for its methanol project. Gail would then have to secure more naphtha.

Both projects are being driven by political forces. The small markets in Northeast India with limited growth prospects can easily be serviced by plants elsewhere in the country. But the government is keen to build a petrochemical industry as a platform for ecoomic developement of the region. It is offering plenty of incentives to make the projects viable. This probably explains why state-owned companies are being forced to think small.

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