Indian Oil Giants Invest Billions in Petrochemicals during Fuel Demand Decline

Indian oil companies inclines up petrochemical investments as outdated fuel demand decreases, along with mixed prospects for long-term gains.

India’s top public sector oil and gas companies are increasing their investments in the petrochemical sector. Indian Oil Corp Ltd (IOCL), Hindustan Petroleum Corp. Ltd (HPCL), Bharat Petroleum Corp. Ltd (BPCL), and Oil and Natural Gas Corp. (ONGC) are wagering billions on petrochemicals during declining global demand for outdated fuels and a push toward clean energy.

According to a report by Kotak Institutional Securities, the combined capital expenditure (capex) of these companies has surged from an annual average of Rs 34,000 crore in FY05-09 to Rs 1.1 lakh crore in FY19-24. This substantial investment is aimed at expanding refining capacities and entering new markets such as specialty chemicals and biopolymers.

IOCL plans to invest Rs 61,000 crore in its Paradip petrochemicals complex, while BPCL has allocated Rs 75,000 crore for similar ventures. ONGC Petro-additions Ltd has committed Rs 22,728 crore, and HPCL has announced significant investments without disclosing specific figures.

Analysts caution that the sector’s returns may be limited despite these aggressive investments,. The historical performance of state-run companies in petrochemicals has not been that strong and new refineries and market competition could impact profitability.

The push into petrochemicals is seen as a planned necessity for these companies as fossil fuel demand declines. The sector, producing crucial materials like plastics and fertilizers, is projected to grow due to increasing demand from various industries.