Vol 3, PW 1 (03 Feb 99) Midstream & Downstream

Indias market for the supply of Liquefied Petroleum Gas (LPG) is set for a fierce battle of supremacy, with Reliance Industries the likely winner.

The marketing of LPG was delicensed in 1993 and opened up to private players. Since then, a number of Indian companies have set up LPG marketing and distribution projects, notably the Shri Shakti Group and the Tamil Nadu-based Southern Petrochemical Industries Corporation (SPIC).

Last year, SPIC sold its operation to Caltex in a deal valued at $47m. Shri Shakti is currently in negotiations with Arco.

Last year also saw the arrival of some new players, among them: SHV of Holland, Elf Aquitaine, Mobil and Exxon. None of these projects, however, compare to the ambition of Wimco Petrogas and Reliance Industries.

Wimco is setting up an import jetty and storage terminal in Okha, Gujarat along with five 150,000 tons a year (t/y) bottling plants in adjoining states. Wimco anticipates that by the fifth year of operation its LPG throughput will exceed 600,000 t/y - over 15 times existing LPG sales of SPIC-Caltex.

The project is promoted by the Maharashtra-based Jatia group, which is reportedly close to signing an equity agreement with an (undisclosed) international oil major. Reliance Industries is behind the second major project and has already begun to market LPG from its fractionator at Hazira, which is producing 18-19,000 tonnes of butadiene per month, with a maximum capacity of 30,000 per month.

By 2000, Reliance is expected to begin flooding the market with cheap, low cost LPG when its 27-28m t/y refinery in Jamnagar comes on stream, producing over 1m t/y of LPG - equivalent to 25% of national demand. The good news for smaller private players is that Reliance and Wimco are - for the moment at least - only focusing on Gujarat and Maharashtra.