Plans to set up naphtha cracker in the next 5 years in Pakistan

The Chinese are showing interest to invest for the Naphtha cracker. There have been talks for its investment, and Pakistani companies are ready to invest too. The plan is that they will set up downstream industries, which will partly supply to Pakistan and the rest will be exported. A naphtha cracker will allow exports of chemicals that are being imported currently. Other than PTA, no chemicals are exported.

Pakistan chemical industry is not that big, there are about 7 to 8 major chemical manufacturers and about 40 to 50 medium to small sized chemical manufacturers. Hardly 10 percent of the chemicals consumed within Pakistan are manufactured here, 90 percent are being imported. Pakistan’s current imports of chemicals, including petrochemicals is about $1.6 billion and it is likely to go up to $2 billion within two years’ time.

One of the main reason for the volume of imports so high is that they not manufacture chemicals within Pakistan basically due to the lack of a naphtha cracker. Another reason is that the size of the market is small. Also, the instability in the country has prevented new investment from coming in.

Most chemicals are downstream from naphtha cracker. There are also mineral based chemicals, but these are not in demand much. But if the naphtha cracker comes, they will have enormous possibilities. One naphtha cracker will set up a lot of downstream industries.

The investment required for a naphtha cracker is enormous, about $3-$4 billion. They are working on a feasibility report, but it will take another 3 months to finalize. There are some engineering companies in Saudi Arabia dominated by Pakistani engineers, and there is a Japanese company working on the feasibility report. Ultimately, the chemical association will pay for the feasibility report, but the bulk of the cost will be shared by the major chemical producers.

For the naphtha cracker to be set up in Pakistan will take at least 3 to 5 years. Other than the Chinese, there are also some private companies in GCC countries interested in setting up a naphtha cracker. By mid next year they will know from which country the investment for naphtha cracker is flowing in.

Balochistan is the most likely recipient of the naphtha cracker. It will be a Greenfield project away from the major cities. There are two possibilities in Balochistan; one is near Gwadar and the other is near Gadani. They will have to make two berths for it, but that should not pose a problem. It can also be set up in Sindh, near Port Qasim.

The dwindling textile sector is adversely impacting the chemical sector as many chemicals are used by the textile sector. And in the textile sector, unfortunately 145 spinning and weaving factories have closed down d because of the high cost of production. They cannot compete in the international market if they continue to manufacture at the current rate of energy.

The textile sector consume the bulk of the chemicals manufactured within Pakistan as all the companies involved in dyes and printing chemicals supply to the textile sector. Some chemicals are used by other sectors such as the paper industry and the leather industry.