GNFC’s acetic acid dream crumbles at IOC doorstep

Gujarat Narmada Valley Fertilisers Corporation Ltd’s (GNFC) plans to expand its acetic acid manufacturing capacity to 7 lakh tonnes per annum has received a bodyblow with licensing partner BP Plc joining hands with IndianOil.

GNFC is India’s biggest and the most cost-efficient maker of acetic acid, and with a proposed expansion, could have reached an inflexion point.

But B, which offeres technology support to the company, has refused to extend the scope of the licence beyond 1 lakh tonnes.
In April last, DNA Money had reported that both companies were negotiating to extend the licence.

“The reason why BP was not keen is because it had been looking at a domestic player with a lot more muscle power. There were talks of them tying up with Reliance Industries, but they finally settled for IndianOil,” said a prominent consultant in the chemical space in India.

GNFC is a joint sector enterprise promoted by Gujarat and the Gujarat State Fertiliser Company Ltd.

“We had been talking to BP since the last one year to set up a new acetic acid plant but we could not make any headway,” said a GNFC official, who did not wish to be named.

“Our commitment to GNFC on the licensing arrangement will continue unhindered. We are unable to disclose specifics of our commercial & technical arrangements with our partners,” a BP spokesperson told DNA.

Under the licensing agreement, BP was given the technology to manufacture acetic acid through the methanol route.
Conventionally, acetic acid is manufactured through the ethanol route, which is costlier.

Acetic acid is largely used to process textiles, preserve food and for printing.

In November, both BP and IndianOil signed an agreement to form a joint venture for a million tonne acetic acid plant using BP’s patented Cativa XL technology.

“While BP did not make any formal announcement about its agreement with GNFC, its tie-up with IndianOil means that it will not extend the license for capacity expansion with GNFC as now it becomes a competitor,” said the chemical industry consultant.

BP is one of the few companies in the world with the technology to manufacture acetic acid from methanol. Others who have it are Dallas-based Celanese, Tennessee-based Eastman Chemicals and Chiyoda of Japan.

When asked why it chose IndianOil over GNFC to set up the acetic acid plant, BP said: “”IOC is India’s biggest commercial enterprise and largest refining and marketing company and the right local partner for BP in this area.”