Nayara Energy’s next big leap: From refining giant to green hydrogen and petrochemical powerhouse?

NAYARA ENERGY could claim many identities when it charts its India journey. The legacy of Russian oil giant Rosneft, its largest shareholder, or the other two prominent foreign investors which significantly influenced the company’s growth, or the Ruia family. In 2017, a Rosneft-led consortium acquired Essar Oil from the Ruia Group and renamed the company Nayara Energy.

Currently, Nayara Energy runs India’s second-largest single-location refinery in Vadinar, Gujarat, with a capacity of 20 million tonnes per annum (MTPA). According to reports, it plans to invest $8 billion (₹68,000 crore) to set up a 1.5-MTPA ethane cracker at the refinery. An ethane cracker breaks down hydrocarbon into ethylene, a key chemical used in making plastics, adhesives and other petrochemicals.

The refining major, also the country’s largest private fuel retailer, operates over 6,000 outlets. It plans to add another 1,200 petrol pumps over the next few years.

“As an Indian company, Nayara is in India and for India,” the company says in its mission statement. “We secured consistent and affordable energy supplies from various geographies and ensured that most of our products were consumed in India for India. We contribute about 8% of India’s refining output and are vital to empowering its energy security,” its FY24 annual report said. The refiner reported a 30.7% year-on-year jump in net profit to ₹12,321 crore in FY24, while total income increased 15.6% to ₹1,34,371 crore. The company processed 20.32 MT of crude with 101.6% capacity utilisation during the fiscal. Its Vadinar refinery processed 95% ultra-heavy and heavy crude oil and produced 88% of high-margin light and middle distillates, while minimising the yield of low-value products such as naphtha and petcoke. It also processed 129 different grades of crude oil.

The production of LPG, domestic MS/petrol and domestic diesel were at a record 1.2 MT, 3.3 MT and 6.6 MT, respectively. ATF production was maximised to 1.9 MT through in-house optimisation initiatives. The company also introduced two new grades of MS-ethanol blended motor spirit (E12 and E20) and one new grade of bio-fuel blended diesel on an experimental basis during the fiscal. “We are planning to set up two new ethanol plants in India to reduce crude oil import and improve supply reliability,” it said in its annual report.

Nayara has adopted a phase-wise asset development strategy to foray into the petrochemicals sector, a significant step in its crude-to-chemicals journey. It is also building a polypropylene plant, and plans to build one of the largest integrated refining and petrochemical complexes in the country.

The company has also started automation of the majority of its petrol pumps. “We are exploring various initiatives to make our network future-ready such as non-fuel retail opportunities, B2C loyalty programmes, mobility solutions, AI- based video analytics, and alternate fuels, including CNG, battery swapping and EV charging points,” it said. Multiple non-fuel retail opportunities are also being identified under food, auto services and other categories.

The refiner is also engaged in environmental conservation efforts, including tree plantation. It recently signed an MoU with the forest department to plant mangroves across 250 hectares in coastal regions for CO2 absorption and biodiversity conservation, and has also entered into an MoU with NTPC Green Energy to explore opportunities in the green hydrogen space.

For many decades, India’s refining and oil marketing space was controlled by public sector giants, including IOCL, BPCL and HPCL. The Ambanis and the Ruias announced their refinery projects in Gujarat in 1995. While RIL completed it in July 1999, Essar’s refinery was delayed till 2006. The expansion of Essar’s refinery capacity to 18 MTPA from 10.5 MTPA took another 5-6 years. By the time, Ambanis had built their second refinery, expanding the total capacity to 60 MTPA.

In 2017, when Rosneft bought 49.13% stake in Essar Oil’s refinery and captive port and power plant for $12.9 billion, a similar-sized holding was purchased jointly by French commodities trading firm Trafigura and Cyprus-based Russian investment group United Capital Partners. Trafigura later sold its 24.5% stake to Rome-based energy investment group Hara Capital Sarl in 2023.

Nayara’s expansion and forays into new segments are all set to change the refining and petrochemicals landscape in India.