As India's energy landscape undergoes rapid transformation, the downstream sector is being reshaped by decarbonisation, digitalisation and evolving market dynamics. In an exclusive interview with ENERGDIVE, Atanu Mukherjee, CEO, Dastur Group of Companies, explains why the future of energy transition lies beyond electrification alone. He discusses pragmatic decarbonisation, value-added petrochemicals, carbon management, artificial intelligence, energy security and the strategies needed to strengthen India's global competitiveness.
Q: How do you reimagine the downstream sector, especially when it is undergoing a profound transformation driven by decarbonisation, digitalisation and changing energy patterns? What will define the next phase of growth and competitiveness for India's downstream sector?
A: I think that there are a couple of things that we need to look at in terms of how the downstream sector can evolve into a healthy, much more value-creating and value-adding sector for the entire industry. So, a couple of things are involved here: you have to create value in different kinds of commodities in the downstream, as it is no longer sufficient to have most value creation in fuels; you need to determine what kind of petrochemicals make sense in different markets, as there is already a lot of capacity that has been expanded or invested in certain markets such as China; so you have to have specific areas in the petrochemical sector which make sense.
Besides, you need to figure out how you can expand that downstream based on which part of the barrel. So a lot of opportunity, I think, in the downstream has got to do with the bottom of the barrel, which essentially comprises the heavy residues that come out of the refining process.
Most of it today we process into motor spirits and other lower-carbon products, but the opportunity exists to convert that into a much wider variety of downstream petrochemical products, such as paraxylene, for example, and its other derivatives.
At the same time, we have this residue called petcoke that we sell today in the market, but it is very polluting. However, we can transform that petcoke using gasification into a variety of chemical products like methanol, DME and others.
So you need to look at a more comprehensive downstream. You need to look at carbon management around this, and carbon management needs to be much more economic. It cannot be just about saying, ‘I want to do carbon management just to be green’. It has got to be economically viable and sustainable in terms of how you are able to do it most effectively and most efficiently. When you couple both these things together, you have an ecosystem which is developing and evolving over time and has got enormous potential as you go forward.
Q: The energy transition is no longer just about cleaner fuels but about broader industrial transformation. How do you see energy transition reshaping India's refining, petrochemical manufacturing and technology ecosystem over the next decade?
A. Energy transition to date for some time had been thought about transition into electrons, which is electricity and electrons. That is not sufficient. Energy transition has got to include molecules, which cannot be substituted by electrons. You cannot substitute a hydrocarbon molecule with electricity of some form. Although that is a desire that does not happen and will not happen. Hydrocarbons will be consumed in some form or the other as you move forward.
So the question then becomes: how do you look at energy transition from a molecule perspective, which is how do I make it much more effective, clean; how do I create products which are much more effective and value-added and at the same time clean to produce. How do I use systems like carbon capture to make it much cleaner, given the fact that they will emit carbon dioxide? So you are talking about not transforming electrons, substituting electrons for molecules, but how do I create those molecules in different product forms from different parts of the barrel? At the same time, use things like carbon capture, efficiency systems, carbon-to-value, captured carbon into utilisation to value, and how do I make these things most effective economically so that it makes sense for the general population to consume it at the right price. That is what the challenge is, not really transition, which is substituting electrons for molecules.
A lot of opportunity, I think, in the downstream has got to do with the bottom of the barrel, which essentially comprises the heavy residues that come out of the refining process
Q: I would like to know your thoughts on the role of new energy pathways—hydrogen, sustainable fuels, carbon management, circular feedstocks and electrification are emerging as important pillars of this transition. Which pathway do you believe will have the greatest impact on India's energy and industrial future?
A: If I were to say that new alternative fuel sources which are able to generate industrial gases which allow you to create products, I think one area which has got a significant opportunity over the next few years or a decade is the opportunity to use our own domestic fuels like coal, the generated petcoke from refinery bottoms, and convert them into useful, very powerful chemicals and products.
So coal gasification, for example, as you might know, has been recently given ₹37,500 crore in terms of support, and I think petcoke similarly. So all these residual fuels and endowments we got can be translated into very useful complementary products and replace a lot of the products that we otherwise import or are dependent on outside. So that is one transformation that I see. The second, of course, to some degree, will be clean electricity, which will be substituting or complemented to some degree in terms of some of the processes like the cracker processes, maybe to some degree some of the petrochemical processes; they might be aided. But they are not going to be fundamentally enabled. They are complementary. But alternative routes like coal gasification, petcoke gasification are certainly transformers. Hydrogen I think, is far off. Green hydrogen, as it is said, has got a long way to go in terms of the economics and scale. It is just the nature of the technology. So I think in the interim, one should look at how to use hydrogen using coal, for example, or petcoke from refineries and translate that into hydrogen, and with carbon capture, that is much cheaper, much better, and then make a case for it. But hydrogen, in my opinion, is important, but it does not have the impact that we think it could have given the nature of the economics and the nature of the fuel itself.
Q. India must simultaneously ensure energy security, economic growth and environmental sustainability. How can in your view policymakers and industrial leaders strike the right balance among these priorities in the years ahead?
A. Energy security is a function of how you design your energy ecosystem, as I call it, and most of the energy security has got to do with the energy ecosystem around hydrocarbons because that is a major part of our consumption basket of energy. We are dependent on imported hydrocarbons, gas, and fuel. We cannot wish it away. It will remain for a long time. So the question then becomes: how do I design a secure system which is resilient so that I can source crude or gas from multiple different options, not one single option like Hormuz or not just Russia, but other places, Canada for example. How do I diversify my basket in the most effective manner? How do I build my refinery system that can take that diversity? All refineries cannot take those diverse fuels. That is a problem in Europe, for example. So my refinery basket needs to be diversified. The assets need to be diversified that way.
"If I combine that, you will see that even if there is uncertainty around the world because of the diversity, I am able to manage security even in an uncertain world. That is one key thing."
Secondly, I think we need to do is complement our domestic endowments and resources like coal as a complement, not a substitute, to what we already have in terms of a diversified basket of oil and refining. Finally, I think to some degree you want to look at how electrons can substitute some molecules. Electric Vehicles (EV) is one example where electrons can substitute petrol molecules. But it is still a long way away. It takes time for EVs to gain traction. It takes time to build infrastructure for powering and charging. It will be slow, but it is a compliment. So the three combinations allow you to engender energy security, create a balance between the different elements of energy, create macroeconomic security, and prevent imbalance. Those are some of the practical ways to look at it.
Q: As global markets increasingly reward low-carbon products and supply chains what steps should India take to strengthen its position as a competitive hub for energy, chemicals manufacturing and technology innovation?
A: We must look at a path towards sustainable, clean production of different kinds of chemical and energy commodities. But that does not mean that we try to make everything zero carbon at any cost. That does not work. We have to look at a balanced practical mechanism where we create clean products with minimal carbon dioxide emissions, and the world comes to us for these clean products produced with minimal emissions at the right cost.
I think that is the area that we need to develop, which we are already doing, to become a hub for manufacturing different kinds of clean products with the lowest emissions, not necessarily zero emissions, because the world rewards products with low emissions that are also cost-effective. If you say that I am going to make it zero carbon, but the cost of that is ten times higher than it would otherwise be, then it is very difficult to support it. Being able to send that message out and have the right infrastructure and policy to create a hub for clean products which are economically competitive and allow everybody else to come in and utilise our infrastructure and resources and enable us to be competitive in world markets becomes probably a defining principle of how we shape clean energy systems in the most practical and pragmatic manner.
Q: Looking ahead to 2035, what does success look like for the Indian downstream sector?
A: Ten years from now our downstream consumption in terms of the different kinds of petrochemical products and LDPE, the whole combination, is definitely going to increase. We are one of the lowest consumers on a per capita basis of petrochemical products. I think around 10 kilograms per person, which is really low. So that has to go up. That is a big opportunity in terms of downstream petrochemical production. I think there is also a big opportunity in terms of looking at substitutes by using the bottom of the barrel to create products which can substitute for petrol. For example, methanol engines and methanol production can be derived from the bottom of the barrel of the refineries, which can create methanol and DME and all kinds of downstream applications for industrial activities or transport activities.
So downstream is going to multiply significantly over the next period to 2035. The other thing that is going to happen is that we need to be cognizant of the fact that there is also a lot of capacity being added in China, as well as capacity in India, so there will be international trade. Being able to have the right kind of downstream products in this space is very important so that the marginal value is preserved. To create that kind of downstream, it requires much more thinking in terms of what kind of refinery assets you need to have, what kind of feedstock supply sources you need, and how to bring it all together.
I think the whole artificial intelligence ecosystem that can be used to define that planning, execution and operation can be a defining moment, along with, of course, human judgment, to make this happen as you go further.
