Top News

Mukesh Ambani has planned to make India a global hub of plastic by betting on ethane gas imports from US. This will bring a big change in Indias oil economy and trade relations. Amid US trade war India can replace China and reduce oversupply in the American market which will benefit both countries. Asias richest man Mukesh Ambani is in the news again. This time the reason is the large import of ethane gas from US which was earlier sent to China but is now coming to India. Due to the trade war of US President Donald Trump there has been a big change in the world which has given India a good opportunity. Ambanis company Reliance is preparing to unload this gas in Dahej Gujarat. This gas will be used to make ethylene a plastic making material. This will make India a global hub of plastic. Whats Ambanis bet in the ethane game? Mukesh Ambani had bet on US ethane about a decade ago. His company Reliance started an ethane cracker unit in Dahej Gujarat in 2017 which was the worlds first major initiative of its kind. At that time Reliance claimed that it was the first company to import ethane from North US. Today this foresight can prove to be a big weapon for India in trade agreements. In the ongoing talks between India and the US on the $43 billion trade deficit India can say We are buying your gas so forget about the tariff. US 26% tariff deadline is going to expire on July 9 and India is ready to take full advantage of this opportunity. This move of Reliance is not limited to trade only. Ethane which is a part of natural gas plays an important role in making plastic. It is a colorless odorless gas which is brought in liquid form in special ships. Currently one such ship STL Qianjiang is moving from the Gulf Coast of US to Dahej. Reliance has six such ships and the company is now planning to add three more ships. Why is ethane special? Earlier Reliance and other refineries used naphtha which is made from crude oil to make plastic. But only 30% ethylene can be made from naphtha whereas this figure reaches 80% from ethane. That is ethane is more economical and effective. In terms of energy ethane is almost half cheaper than naphtha. Earlier ethane did not get that much priority in India. Even in the natural gas coming from Qatar ethane was not separated. But now the situation is changing. Qatar Energy has clearly stated in the new agreement with Indias Oil and Natural Gas Corporation (ONGC) that it will give only lean gas. If ethane is required then it will have to be paid for separately. ONGC has also taken steps in this direction and has signed a deal with Japans Mitsui OSK Lines for two large ethane carriers. But Reliance has already won the game. The company is now planning to lay a 100 km long pipeline from Dahej to its second unit in Gujarat. Whats impact on Indias oil economy? The increasing use of ethane can bring a big change in Indias oil-based economy. Currently Indias refineries are mainly dependent on crude oil coming from the Middle East. But if the use of ethane increases some refineries may go into losses. Naphtha which earlier played an important role in making polyester detergents fertilizers and cosmetics may now take a back seat. The oil industry in India has now entered a new phase. Last year about one-third of the cars of the countrys largest car manufacturer were running on CNG. To reduce pollution and reduce dependence on foreign oil the government has made a rule to add 20% bio-ethanol to petrol. Also the increasing demand for electric vehicles is also reducing petrol consumption. Despite this a government company is building a new refinery of 9 million tonnes per annum in Andhra Pradesh. Experts believe that this project is running only for the greed of subsidy and employment because its investment does not make much economic sense. How is Trump-Ambanis friendship? This move of Mukesh Ambani can prove to be beneficial not only for India but also for US. Due to Trumps trade war questions have been raised on the demand for American ethane. China was a big buyer of this gas but now India can take its place. Even if India cannot buy as much ethane as China it can definitely help in reducing the oversupply in the US market. This will be an opportunity for Trump to praise his trade policy and say that he is making US great again.