GAIL (India) Ltd., a state-run enterprise, has entered into a 15-year agreement with Bharat Petroleum Corp. Ltd. (BPCL) to supply propane for its upcoming petrochemical facility in Usar, Maharashtra.
Valued at over $8.4 billion (Rs. 63,000 crore), the deal entails GAIL sourcing 600 KTPA of propane from BPCL’s LPG import unit at Uran. The existing facility, currently with a capacity of 1 MMTPA, is undergoing expansion to handle 3 MMTPA of propane and butane imports.
GAIL’s pioneering Usar-based propane dehydrogenation unit, slated to commence operations in 2025, will boast a nameplate capacity of 500 KTPA. Additionally, the unit will seamlessly integrate propylene production into a polypropylene plant of equal capacity, marking a first for the nation.
This strategic project aligns with the surge in polypropylene demand, projected to reach 6.3 million tonnes by 2025, according to a statement by GAIL.
The venture is a key component of GAIL’s diversification strategy, as outlined in its FY23 annual report, where new business initiatives are emphasized for enhancing profitability and market reach.
In a recent development, India’s largest gas firm had acquired the private-sector chemical company JBF Petrochemicals Ltd in bankruptcy proceedings earlier this year. The company has now been rebranded as GAIL Mangalore Petrochemicals Ltd.
For the quarter ending September, GAIL reported revenue from operations of approximately $4.3 billion, slightly lower than $4.4 billion in Q1 FY24. However, net profit increased by 70% sequentially to approximately $325 million in Q2 FY24.
Sandeep Kumar Gupta, Chairman, and Managing Director of GAIL, acknowledged that performance during the quarter was impacted by lower realization in polymers and LPG, but he expressed optimism about improvements in the future. Gupta highlighted the company’s capex of approximately $650 million in the first half of the fiscal year, primarily allocated to pipelines, petrochemicals, and equity in joint ventures, among other areas.