Exports of naphtha could reach record high of 10m t/y

Vol 11, PW 5 (12 Jul 07) Midstream & Downstream

Traders in Singapore see no let up in naphtha exports from India.

“On present trend exports could easily touch 9m t/y,â€‌ we hear. “It could even touch 10m t/y if all Indian refineries work to full capacity and future capacity additions all come on stream.

â€‌ One â€کcapacity addition’ under particular scrutiny is Essar Oil’s refinery at Vadinar in Gujarat, commissioned last November at a cost of $2.4bn after nearly a decade of delay. When trial runs began on November 24th the refinery was working to 7.5m t/y.

But soon production will ramp up to full capacity of 10.5m t/y (230,000 b/d) in September or October this year (see below). “Last year Essar exported only one (30,000-tonne) parcel of naphtha in December,â€‌ reports a trader.

“But when the refinery begins full production from September we might see two parcels (60,000 tonnes) coming to the market every month.â€‌ In total, that’s a potential supply addition of 720,000 tonnes every year.

Another important driver behind rising naphtha exports from India to the Far East is the reducing demand for naphtha among fertiliser and power industries in India, who are increasingly switching to gas. “Globally India is unusual in that its fertiliser industry uses naphtha instead of gas,â€‌ says Tony Regan of consultants Nexant.

“But the government has begun encouraging the fertiliser industry to switch to gas because it is cheaper. Reliance’s D-6 gas from the Krishna Godavari Basin selling at around $5 per mmbtu will put further pressure on naphtha.

â€‌ For now traders see the growing popularity of R-LNG in India as the main driver behind soaring exports of naphtha. IOC especially, is likely to export more as fertiliser and power customers that earlier bought its naphtha switch to R-LNG, that it is selling from its allocation of Petronet-LNG’s imports at Dahej.

“Shell’s Hazira plant is not yet working to full capacity and the Dahej expansion is underway,â€‌ we hear. “All this will have an impact.

When more LNG comes to India, naphtha will be exported in ever bigger volumes.â€‌