How digital transformation can reshape refining and petrochemicals

Unveiling the future of refining & petrochemicals: Energy transition, digitalization, and sustainability reshaping India's energy landscape.

Related topics

Energy and resources

In conversation with:

Portrait picture of Harsha

Harsha Kapoor
Partner , Energy, Oil and Gas – EY-Parthenon

Portrait picture of Puneet

Puneet Kumar
Director, EY-Parthenon

In this episode of our ‘Entergy transition dialogues series’, we explore how energy transition and customer orientation are reshaping the refining and petrochemical sectors, despite the conventional roots. EY senior partners Harsha Kapoor, an experienced professional in digital and refining, and Puneet Kumar, a senior professional in petrochemicals and marketing, delve into the latest trends, challenges, and opportunities in these industries. They focus on digital integration, asset optimization, market competitiveness, and sustainable supply chains. Join us for an insightful discussion on the future of refining and petrochemicals in India.

Key takeaways:

The biggest benefits of digital integration are in optimized refining and petrochemical operations, enhanced production planning, improved supply chains, and better asset performance.
Refining capacity expansion positions India as a global refining hub amid the ongoing energy transition and peak oil anticipation phase.
To stay competitive in a growing market, petrochemical marketing requires advanced segmentation, pricing analytics, and sustainable supply chains.

Digital interventions can optimize production processes, enhance planning, improve supply chain responsiveness, and leverage advanced analytics to help companies select the best strategies to tackle business challenges.

Harsha Kapoor

Partner , Energy, Oil and Gas – EY-Parthenon

Petrochemical marketing is evolving with sustainability, pricing analytics, customer responsiveness, and integration driving future growth.

Puneet Kumar

Director, EY-Parthenon

For your convenience, a full text transcript of this podcast is available on the link below:

Gaurav Moda: Good morning. Welcome to another session on ‘Entergy transition dialogues series’ with EY. I am Gaurav Moda. I lead the energy practice for EY in India. Today, we are here to talk about how the refining and petrochemical space is getting reshaped with energy transition and with huge customer orientation, despite being the conventional business traditionally. I have with me here today, Harsha Kapoor, who is a practitioner for digital and refining, and Puneet Kumar, who is a practitioner for petrochemicals and marketing. Welcome Harsha, welcome Puneet.

Harsha Kapoor: Thanks, Gaurav. It is a pleasure to be here.

Puneet Kumar: Thank you, Gaurav. Excited to be a part of this conversation.

Gaurav Moda: Thank you.

Harsha Kapoor: Gaurav, let us talk about the refining in petchem market and the growth. With the refining capacity addition and the petchem built up, what are your views on where the market is heading, and what are some of the challenges that you foresee?

Gaurav Moda- Harsha, I must say these are very exciting times, because India is in a situation where it has to balance the dichotomy of growing rapidly, and at the same time, manage energy transition, and we are at the forefront of pushing very hard on both.

In that context, on the refining side, two things are happening. One, our refining capacity additions are necessary for the growth of our economy and the energy requirements that we have. At the same time, with global economies looking to shift more towards energy transition, a number of global refineries are expected to shut down or be relooked at. In that context, there is a huge potential for India to become the refining hub, as Indian refineries stand up to the next level. Domestically and internationally, there is a need for refining to build up.

At the same time, when we look at the petrochemical side, there are two aspects to consider. Aspect one is, at some point, India will get to reach peak oil and therefore in anticipation of that, the Indian refiners are doing the right thing in looking at new and capacity additions on petrochemicals to have a view on crude-to-chemicals. That also puts us in an advantageous situation where the Indian economy is growing and the middle class is burgeoning. So, the need for petrochemical-based products is expanding very rapidly, and therefore capacity additions are very timely. And we will probably see many more of these in the near future. I think while the overall view is clear, Harsha, in your view, because you have done a lot of digital and refining work, how do we really get our refineries to step up to this ask?

Harsha Kapoor: Thanks a lot, Gaurav for your insights on refining and petchem additions. Talking about digital, there is a significant opportunity that the refinery companies have currently, especially on three counts. First, on the commercial optimization and commercial excellence part – the entire crude-to-chemical journey that you talked about. One, digital can actually enable an integrated view, what is happening across from refining to petroleum. And that is where digital interventions can help them to a) optimize on the mix, enhance production planning, improve their entire supply chain responsiveness, and utilize advanced analytics to help companies select the best scenarios to answer some of the business challenges that they might see. So, that is on the commercial part.

The other part where companies are significantly now deep diving, because on commercial, there are some of the players who have already achieved their one integrated supply chain in other parts is asset optimization. It is willing to look at the use of time and ensuring that the machine runs almost near 100% with a very clear predictability. That is what companies are looking at.

There are digital and analytics interventions globally, wherein we have seen the contribution of digital and analytics us around 1 to 1.5% in the overall margin. That is where the opportunity lies for the Indian players to explore and exploit how they can optimize their asset by having a clear visibility around their asset performance, then identifying performance interventions with the help of analytics, and then deploying the right digital tools to monitor and take it forward from there.

The other important part is around safety and environment. are critical areas. Now, one of the biggest challenges right now is do we know what we need to track; we need to have a good mechanism to look at what we need to track in these aspects. And we have established that, then we need to look at what further we can optimize and move forward, especially from the ESG perspective. To sum it up, if this entire part is thought through and done smartly, I think Indian refining companies can leverage this a lot going forward, and also meet, entire market demand and the growth that you talked about.

Gaurav Moda: Thank you, Harsha. These are very deep insights on commercial optimization, extracting 1% to 1.5% through asset, and balancing the energy transition with the ESG platform. Thank you. I think this will really go a long way in making our refineries competitive and future ready.

Puneet, if we shift back to how we market all of the petrochemical products, given the expansion, what I am seeing in the market is that conventionally we had maybe two to four players. Now, a series of players are coming in, and new players getting added. So, the market is becoming competitive. At the same time, petchem is a bulky product. Logistics and supply chain form a large portion of the cost, and much of this is very commoditized. So, margins are thin. How are companies looking at really competing and growing in this space? What are your thoughts?

Puneet Kumar: Thank you, Gaurav, and thank you, Harsha, for talking about refineries because refineries and petrochemicals go hand-in-hand. When I look back at petrochemicals, capacities are expected to become two to three folds, and all Indian players are investing heavily in it. Until a few years back, people were just talking about half the capacity. Right now, each and every player has a set plan for fixed capacity additions. Imports are also rising, and as imports rise, new players are entering, which means that marketing has become very important.

Another important thing happening in the industry is the use of technology, the customer who was traditionally B2B, are now thinking about B2C as well, and their demands are coming from that perspective. There is also an energy transition perspective; people are talking about green chemicals, energy protection norms, and sustainable supply chains. If we bring them all together and see how we have to do petrochemical marketing in this new scenario, it is about doing some things better. For example, the entire process of segmentation, targeting, and positioning needs improvement. Today is not just about key accounts but also about industrial clusters and MSME customers. How can you supply to them, linking it back to the middle-class story where MSMEs are the next beacon of growth? That is where industrial parks are coming up, and that growth is very important for segmentation.

Second is pricing analytics. Today, across the world, people are investing heavily in pricing analytics, artificial intelligence, and machine learning. We are talking about new ways of doing pricing analytics so that margins are still available. For example, today people are considering how events in China, like a big billion-day, impact market sales, volumes, and prices in India. Petrochemical is becoming integrated globally, almost like a commodity.

Third important change is product portfolio. Players are looking at increasing the share of the customer's wallet. They are ready to buy new companies, invest in joint ventures, and hold trading portfolios. They are interested in trading and risk management.

Fourth is customer responsiveness. It is not just about being compliant on product quality or complaint handling; it is about sustainable supply chains, green supply chains, and producing green commodities and chemicals. How do we make it happen?

Last but not the least, as the scale and complexity rise, with more marketing players and new demands emerging, it is crucial for every marketing player to relook at their business processes to manage them better and reduce risk. All in all, I see that petrochemical marketing has tremendous scope for the future. In the next 10-15 years, this market is going to become huge.

Gaurav Moda: Thank you for these interesting insights, Puneet. In context of the wider energy transition, how do we really make sure our core conventional industries like refining and petchem remain responsive to the market and grow to the next level? We have had deep insights from Harsha on refining, and Puneet on marketing on petrochemicals. Thank you so much for your time and this interaction. Look forward to the next podcast.

Puneet: Thank you.

Harsha: Thanks a lot for having us. It has been a pleasure.

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Episode 04

Duration

10m 52s

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