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Extracts from Nandini Chemical Journal, Jun 2010

Recycling electricals|Natural gas|Tar sands|Aseptic paper|H1N1 vaccine

Highlights of Some of the Articles
TALK OF THE MONTH

NATURAL GAS PRICE INCREASE

ROBBING PETER AND PAYING PAUL

Price of administered price mechanism (APM*) gas has been increased by Government of India.

APM gas refers to gas produced by ONGC and Oil India who were awarded gas fields prior to the PSC (Production Sharing Contract) regime without competitive bid. The price of gas from these fields is administered by Ministry of Petroleum and Natural Gas. The power and fertiliser sectors, small consumers having allocation up to 0.05 mscmd and consumers drawing gas under Supreme Court orders are given priority for supply of APM gas.
ONGC and Oil India Ltd (OIL) can now sell gas from the fields given to them on a nomination basis at $4.2 per mBtu, on par with the price of Reliance Industries Ltd's (RIL) Krishna-Godavari Basin field gas. This would help the oil companies recover the cost of operation.
The fields of ONGC and OIL are mature and ageing. Hence, substantial expenditure is necessary to maintain their gas production. On an annualised basis for ONGC, the price increase would mean gas revenues will go up by  Rs 5,400 crore and net profit by Rs 3,200 crore.
The customers from the North-East, however, would get a subsidy of 40 per cent.
Apart from the gas price increase, the Government of India has also allowed GAIL (India) Ltd to levy a marketing margin of Rs 200  per  thousand cubic metres (11.2 cents per mBtu) of natural gas. Earlier, GAIL was not allowed to levy marketing margins on APM gas.For compressed natural gas, it would mean price increase of 20 per cent depending on the city and the company.
*        The new price of APM gas is fixed for four years

*        Prices of APM and KG gas will be revised simultaneously in 2014
  

At present, of the total availability of natural gas of 140 mscmd (million standard cubic metres per day), APM gas constitutes 55 mscmd. Of this, 24.5 mscmd is being supplied to the power sector.

Impact of price increase on power cost

Gas-based power plants drawing APM gas supply power mainly to north Indian states such as Haryana, Punjab, Delhi, Gujarat, J&K, Rajasthan and Himachal Pradesh.

APM gas is largely used by central utility National Thermal Power Corporation  (NTPC) that runs seven of its power plants (excluding RGPPL) with a total capacity of 3,955 MW on APM gas. Against a requirement of 16 to 17 mmscmd of gas, NTPC sources 8 to 9 mmscmd of APM gas for its plants at Anta, Auraiya, Dadri, Faridabad, Kawas, Gandhar and Kayamkulam. It also gets gas from RIL’s KG D-6 block and through spot purchases.

The APM gas price hike will raise electricity generation cost of gas-based power utilities by 90 paise to Rs 1.20 per unit (Kwh). The ultimate loser due to the government’s  decision would be the consumers who will have to pay more as electricity charges coming from gas based stations. The final price of electricity for consumers will be marginally higher subject to price formula worked out by distribution companies and approved by regulatory commissions which may go upto Rs.1.5 per unit.

Impact of price increase on fertilizer sector

Natural gas is used as  feedstock in urea manufacturing. Of the total urea production costs, gas price (APM and other sources) accounts for an estimated 70%. Urea manufacturing cost for pre-92 gas based plants, at prevailing APM gas price, is estimated at Rs 5600 per metric tonne.

For mixed feedstock plants, costs are  estimated at Rs 7000 per metric tonne.

APM gas is used as a feed-stock as well as a fuel in fertilizer units. The price increase of APM gas will lead to the increase of cost of production of urea fertilizer proportionately.

Since urea is the only controlled fertiliser at present, the additional cost due to increase in APM gas price  between its actual manufacturing cost and the retail price has to be borne by the government and not by the urea fertilizer industry. Urea is currently retailed at a controlled rate of Rs.4830 per metric tonne, and the Government of India has to  subsidise  the difference.

Even after the price increase of APM gas, the retail prices of fertilizer will remain the same but the government will pay Rs.24000 to 30000 million more on fertilizer subsidy

Concern of the urea industry

The move to increase the price of APM gas has raised apprehensions in the fertiliser sector, especially since APM gas meets 45% of the total gas needs of the sector.

While the fertilizer industry fears bigger problems on timely recovery of subsidy from the Government of India in the short term, it perceives high and market-linked gas price pushing up urea production costs inordinately in a deregulated environment in the near future.

Subsidy concern

The price increase of natural gas would boost input prices for urea manufacture and increase industry problems in reclaiming the subsidy or concession.

At any given time, several months worth of subsidy payments due to industry are stuck in the government’s pipeline. The Government of India has been unable to clear all the dues to industry in the running fiscal for the last three years and has carried over huge amounts into the next year’s subsidy bill.

Impact of price increase on transport oil

In cities like Mumbai and Delhi, 80 to 90% APM gas is used as domestic and transport fuel.

Fuel cost for automobiles and households may go up by 20 to 35% depending on cities.

The Government’s change of approach

The pricing of APM gas at the same level as Reliance gas is signalling the new benchmark price for all gas, irrespective of source.

There is bound to be an impact of the gas price hike in a de-regulated environment. Once it becomes fully de-regulated two or three years down the line, benchmark market-linked gas price will account for a big part of urea production costs.

Robbing Peter and paying Paul

It is extremely difficult to understand the logic of Government of India in increasing the price of APM gas, which would result in increase in the cost of production of fertilizers.

As the Government can not increase the retail price of fertilizer as it would affect the agricultural operations, it has to necessarily extend the subsidy of  around Rs.50,000 million to fertililiser industry after increasing the APM gas price.

The question is as to why not the government give the subsidy of Rs.50000/- million straightaway to ONGC and Oil India , instead of increasing the price of APM gas and destabilizing the price mechanism of the fertilizer industry and upsetting the power industry which is sensitive issue with far reaching significance.

The Government’s move  is just like robbing Peter and paying Paul. This would lead to cost push inflation through increase in gas price as well as fuel and power cost. This would not help public interests. This also indicates the government’s mindless reversal of it’s policies  and committing itself to the methods of capitalist economy , without bothering about the ground realities in India.

 

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TALENT CRUNCH WEIGHS HEAVY ON INDIAN CHEMICAL INDUSTRY

Chemical and biotech companies are reported to be of the view that 80% of fresh engineers and technologists recruited by them in recent times are really not employable straightaway. Such persons have to undergo a training process for several months, before being given responsible positions, for which the industries have to spend substantially.

The great paradox is that there is no dearth of qualified candidates but employable ones are hard to find the industry. While there is a large supply of graduates, there are not enough people for more complex functions such as design and detailed engineering,  research and development, process optimization studies etc.

The salary figures offered to graduates in chemical and biotech industry are , not comparable with other professions like information technology. where candidates at the same level get roughly double this salary. There are many cases where chemical and biotech professionals leave the industry mid-way to take up jobs in software industry attracted by the salary level.

However, the industry argues that salary is never a limitation for getting talent. It is often the lack of talent, particularly for research, design, planning and management, that is worrying.

At the senior levels, Indian firms have been able to attract good talent from the US, weaning back some of the best brains that left the shores many years ago. But even at that level, there are only a few companies that can offer attractive perks. Though Indian companies cannot match the salaries of their counterparts in developed markets, good quality assignments can attract and retain top-class talent. Candidates with niche skills may attract a premium. However, the differential between salaries in India and the US is shrinking. Here. salaries increase by 10 to 15% a year while in developed economies the increase is between 2  to 4%.

The matter of concern is that many colleges offering chemical and biotech courses do not have the proper infrastructure or trained faculty to groom the students.

Though there is availability of talent, it is not adequate and this is essentially an academic problem, where large percentage of students do not meet the requisite standards for taking up responsible jobs, immediately after passing out.

While high student interest remains in the subject, this has not helped the passed out students to meet the level of technical skills demanded by the jobs.

Most of the students graduating from colleges are not industry ready and the kind of education in colleges is not adequate for them to really take on the challenges of being a professional. Keeping this in view, the concept of “finishing schools’ have to be introduced, wherein  specialised institutions can offer course to its students that will teach high end skills and makes students industry ready.

It is necessary to organize finishing schools to bring young graduates up to the mark. New certification programmes have to be developed, which will rate candidates and serve as an indicator for their aptitude before they would start working.

In the next five years, huge demand for talent is likely to arise . In such a situation, students will have to be graduated through “finishing schools” in order to meet the skill requirements of the industry. Industry may prefer to wait rather than hire a fresher who may later deemed to be unfit for their requirements.

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CARPET RECYCLING INDUSTRY IN USA

Each year, around the world millions of carpets are laid. At the same time, million of metric tonnes are ripped up and carted away that contain material including nylon 6, nylon 6,6, polyethylene terephthalate (PET) and polypropylene (PP) fibers. These materials can be reused or recycled. Instead, 95% of it ends up in landfills.

In recent years, the Carpet America Recovery Effort (CARE), a group of carpet makers and waste carpet collectors, have been striving to promote a new industry focussed on the recovery of used carpet and its conversion to energy, resin stocks, new carpet and other products.

This article briefly discusses the recent developments.

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TAR SANDS OIL EXTRACTION - RECENT DEVELOPMENTS

Soaring crude prices and growing shortage of drilling sites have encouraged the energy industry to look at a series of “unconventional” hydrocarbon deposits that are in places such as Jordan, Morocco as well as the U.S..

Canada is currently the only major centre of production but investment is expanding, including by European oil companies such as BP, Shell, Total and ENI.

This article contains the following details :

  • Efforts of BP
  • Efforts of Shell
  • Efforts of ENI
  • Environmental issues
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BASF’S PROJECTS IN CHINA

BASF is investing in new capacity in China as part of its strategy to locate production closer to customers. But to stay ahead of the competition, it needs to focus on niche products

BASF-YPC Co. (BYC) joint venture (JV) is located in Nanjing in China's Jiangsu province.

BYC, which is owned 50:50 by BASF and China's state-owned Sinopec, is broadening its product offering to supply China's widening array of industries, from construction and pharmaceuticals to automotive and chemical manufacturing.

This article contains the following details :

  • Expansion of ethylene capacity
  • Expansion of ethylene oxide capacity
  • Plans for fuel additive
  • Project schedules
  • Styrenic’s project
  • Plans for MDI complex

 

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ASEPTIC PAPER – INVESTMENT OPPORTUNITY

Aseptic paper is used in the packaging of milk and other liquid foods such as fruit drinks. Aseptic packaging is a procedure that is performed under sterile conditions. It functions as a system incorporating aseptic paper.

Aseptic packaging

Aseptic packaging refers to a packaging process where products to be packaged such as food, beverage and drugs are first sterilised for a short period, then filled and sealed under aseptic conditions, including packaging containers, packaging devices and products to be packaged.

This ensures that the product is shelf stable at ambient conditions.

Aseptic packaging generally offer four months of shelf life for dairy products and six months for other beverages in unrefrigerated conditions. The products do not require preservatives to be added.

Composition of aseptic paper consist of number of layers providing total protection in packaging

Aseptic paper is composed of different layers, consisting of paper layer, polyethylene plastic films and aluminium foil. The structure of aseptic paper is made by extrusion and laminating machines that combine the paper with the other layers of plastic and aluminium foil.

Type of aseptic packaging

There are different types of packages which may be aseptically filled as listed below

*        Carton Boxes
*        Bags and Pouches
*        Cups and Trays
*        PET bottles and Jars
*        Metal Cans
*        Plastic Cans
*        Composite Cans

This article further discusses the following details :

  • Application of aseptic packaging
  • Advantages of aseptic packaging
  • Demand driver for aseptic paper/ aseptic packaging
  • Cost of operation and system flexibility of aseptic packaging
  • Elimination of clean room facility for packaging
  • Extension of shelf life
  • Growing market for non carborated beverage
  • Technology development efforts
  • Emerging regional markets
  • Niche applications
  • Likely future trend
  • Projected growth
  • Global market for aseptic packaging : Period 2013
  • Usage trend of aseptic packaging material - Period 2009
  • Important global producers
  • Market share
  • Processing of aseptic package
  • Aseptic paper composition        
  • Product specification of aseptic paper
  • Manufacturing process
  • Process flow
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NATURAL GAS NEEDS OF FERTILISER COMPANIES

A urea fertilizer plant's natural gas requirement is a function of both the quality (heating value) of the gas being supplied as well as the energy efficiency of the unit.

A standard cubic metre (scm) of gas generates anywhere from 8,000 to 10,000 Kcal of energy, while being higher at the landfall or onshore entry point and lower as it is transported along pipelines to distant areas.

The energy consumption for producing one metric tonne of urea is 5.5 to 6 million Kcal for gas-based plants, whereas it is higher for units operating on naphtha (7 to 7.5 million Kcal) and fuel oil (7.5 to 8 million Kcal).

Taking an average calorific value of 8,200 Kcal per scm and a specific energy consumption of 6.2 million Kcal for every metric tonne of urea, the gas requirement for one million metric tonnes of urea comes to 756.1 million metric scm or 2.3 million metric scm per day (mmscmd) over 330 working days.

For 30 million metric tonnes of urea, the total requirement, then, works out to about 70 mmscmd.

Fertiliser companies are seeking an additional 25 million metric standard cubic metres per day (mmscmd) of natural gas supply from Reliance Industries Ltd's (RIL) Krishna-Godavari fields to cater to the feedstock needs of their existing as well as proposed new urea capacities.

This article further discusses the following details :

  • Natural gas based units
  • Naphtha / fuel oil based units
  • Requirement of natural gas
  • New capacities
  • Need for more allocation
  • Urea production vs.import

 

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H1N1 VACCINE SCENARIO IN INDIA

India's vaccine manufacturing market has become mature and is growing rapidly. Around 60% of all vaccines in the DTP family are produced and supplied globally by Indian companies. 90% of the measles vaccines are manufactured by India.

In a major advancement in influenza science, India is ready with its first indigenous vaccine against H1N1 swine flu.

This article discusses the following details :

  • Cost and licence
  • Clinical trials
  • Indian scenario

 

RECYCLING OF ELECTRICAL EQUIPMENT - WEEE REGULATIONS

The recent industry-wide European program is the Waste Electrical and Electronic Equipment (WEEE) Directive, which was passed in 2003 to ensure recycling of electrical equipment.

WEEE aims to minimize the impact of waste electrical goods on the environment by making the producer responsible for financing the collection, treatment and recovery of waste electrical equipment.

Manufacturers of all sorts of products are now responsible for their ultimate collection and recycling.

This article discusses the recent developments.

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OTHER FEATURES

PLANT CLOSURES

The article discusses the plans for closure of selected units by the following players

  • Dow declares force majeure on Tarragona ethylene
  • TDI closure
  • Permanent plant shutdowns

 

ANTI DUMPING PAGE

The antidumping measures introduced in  the various countries in the last few weeks on the following products are discussed:

  • PA 6 chips
  • Caprolactam
  • Sodium tripoly phosphate
  • Viscose staple fibre

 

SAFETY AND ACCIDENT PAGE

Following safety and accident details are discussed:

  • ABAN’S OIL RIG SINKS IN VENEZUELA
  • Power plant chimney collapsed
  • Oil spill in Gulf of Mexico

 

NEWS ROUND UP

The recent developments on the following products/events are discussed:

International

  • mLLDPE plant
  • Flexible PP plant
  • Polyamide
  • Saudi Yanbu refinery project
  • Superabsorbent polymers
  • Fertilizers / acrylics facility in Brazil
  • Petrochemical complex in Singapore
  • Methanol
  • PVC
  • Petrobras partners in biodiesel plant

 

India

  • Natural gas likely to come under Goods and Services Tax
  • Free supply of fly ash
  • Deadline for imported tyres certification extended

 

 

CHINA NEWS

The recent developments on the following products/events are updated :

  • Phenol/Acetone project in China
  • New refinery
  • Methacrylic acid
  • Compounded resins plant
  • Nitrile rubber
  • Polyvinyl butyral
  • Oxalic acid
  • Ammonium phosphate
  • Methanol
  • Engineering plastics
  • Ephacarboximidamide

 

TECHNOLOGY DEVELOPMENT

The recent developments on the following technology efforts are highlighted

  • CLRI to create fuel using waste from tanneries
  • New way to produce cheap insulin

 

ENERGY PAGE

The recent developments on the following products/events are discussed:

  • Subsidy for solar power generation
  • Indian government releases renewable energy count

 

PRICE DETAILS –INTERNATIONAL

Global price trends on the following products are provided :

  • Ethylene
  • Polypropylene
  • Butadiene
  • Toluene
  • Paraxylene
  • Polyethylene terephthalate
  • Phthalic anhydride
  • Titanium dioxide
  • Spot bulk chemical prices
  • Contract bulk chemical prices
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    OTHER ARTICLES
  • Oil exploration efforts in Cambay Basin
  • Engineering and  R&D market in India- Findings of the study
  • Indian Guar Production Scenario
  • Projects of Alstom
  • New Projects - International
  • Tender
  • Chemicals imported at the Chennai port during the month of April 2010
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