India needs to increase its petrochemical production capacity to meet local and global demand and contain China’s growing dominance of the sector, a senior Reliance Industries official said on Friday.

Petrochemical margins have shrunk across the world as China’s capacity expansion has created a surplus. For some of its refiners, up to 40%-50% of their output can be petchems, more than double typical capacity levels in India.

India’s petrochemical demand for now is a tiny fraction of the global average but the nation’s consumption is set to rise as the economy expands.

India’s economic growth is the highest of any major economy, while China’s is stagnating and its gasoline and gasoil demand have peaked, many analysts say. In India, the use of the two auto fuels is still rising, although at a slower pace as the country seeks to shift to cleaner fuels.

Vikram Sampat, senior vice-president, strategy and business development, for the polyester chain at Reliance Industries RELIANCE1! told an industry conference that China was taking over “the entire petrochemical industry” and India needed to take action.

“If we don’t do it, China will continue to grow,” he said.

Sampat said Reliance has a petrochemical intensity, or production capacity in its overall refining portfolio of 20%.

Analysts say Indian refiners will increase their focus on petrochemicals to sustain margins and growth as demand for fossil fuel transport fuels approaches its peak in the coming years.

Sampat said he expects refiners to redirect 30%–50% of the gasoline yield toward petrochemical production, if petrol demand peaks. If diesel demand peaks, the share of output going into petrochemicals could rise to as much as 50%–70%.

Source: Reuters