In a surprise move, the privatisation-bound national oil marketing company Bharat Petroleum Corporation Ltd (BPCL) has shelved its biggest ongoing expansion project at its Kochi Refinery.

BPCL said its board has approved a proposal for evaluating the option of putting up a polypropylene unit at Kochi Refinery and to discontinue the Polyols project. The ₹11,130-crore project to build polyols specialty chemical manufacturing complex was approved by its board in 2018 and the foundation stone was laid by prime minister Narendra Modi in January 2019.

BPCL's foray into production of polyols, used in manufacturing a large basket of products for the automobile, textile, furniture, footwear, foam and construction products, was seen as a move by the country to reduce import dependency for niche petrochemicals and evolution of India as makers of high-value-added specialty chemicals. Estimates say India requires about 4 lakh tonnes of polyols annually, but current local production is only 15,000 tonnes.

Plans were to set up six processing units for propylene oxide, propylene glycol, polyols, ethylene oxide and mono ethylene glycol, ethylene recovery unit and a cumene unit at the Kochi Refinery and use 250 kilo tonnes per annum (KTPA) of propylene made by the refinery as feedstock. The project was proposed to be completed by 2023-24. Now the board's suggestion is to make a polypropylene plant to use the propylene made by Kochi refinery.

BPCL says cost escalation has affected the viability of the project. "The project was developed further by carrying out activities such as award for licensing of technology and related activities to licensors and appointing project management consultant (U.S.-based Fluor Corporation). During the development of the project, cost estimates with an accuracy level of +/- 10% were prepared based on front-end engineering design of the facilities. However, the revised cost estimates are much higher than the original estimate, mainly on account of increase in equipment and material cost. As this has adversely affected the project economics, the board has approved the proposal to discontinue the polyols project," said BPCL.

The Kochi Refinery was commissioned in 1966 with a crude oil processing capacity of 2.5 million metric tonnes per annum (MMTPA) and subsequently augmented to present level of 15.5 MMTPA. As part of its plans to foray into specialty chemicals in a big way, BPCL recently set up a ₹5,246 crore specialty petrochemicals plant at Kochi Refinery to produce acrylic acid, oxo alcohols and acrylates. It also set up a ₹3,280 crore BS-VI MS block project to upgrade surplus naphtha produced in the refinery to motor spirit meeting BS-VI specifications.

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