Helping an Oil Refiner in India Develop a New Petrochemicals Strategy

One of India’s leading oil companies was facing a fundamental change in its core business: the shift away from traditional fuels toward electricity, natural gas, and other low-carbon energy sources for mobility. In response, the company wanted to aggressively expand into the faster-growing petrochemical market. But first it had to determine which particular segments of that market to target and develop a sound plan for moving into each.

BCG helped the client chart a new course in petrochemicals, identifying specific segments in the value chain that would yield the best returns based on the growth potential of those segments, as well as the company’s cost competitiveness and ability to adapt to future market challenges or risks. BCG also developed a detailed investment plan for adapting the company’s facilities and infrastructure to the new business along with developing the necessary in-house capabilities to succeed.

A Roadmap to Competitive Advantage

In India, petrochemical demand is expected to grow at an annual clip of 9% from 2015 through 2025—more than double the annual growth rate for traditional refining products over the same period.

But the petrochemical market is vast and fragmented, with potential customers existing across a diverse set of industries, from automotive to pharmaceuticals to construction. Consequently the first strategic step for BCG was an in-depth analysis of the options based on factors including market profitability and compatibility with the company’s assets. That work identified three promising value chains for the client to target, with differentiated strategies for each.

The next step was to determine exactly what the company needed to do to win in these segments. This included assessing the specific grades of products required to compete in the target industries, the necessary investments in facilities, the potential synergies with the company’s existing refineries, and the specific configurations of plants needed to maximize returns. BCG also determined the investments required to adapt the company’s capabilities, including in R&D, engineering, sales and marketing, and other functions, to serve the petrochemical market.

Based on this analysis, BCG created a detailed economic model for the new business, one that factored in the required capital expenditures, projected costs and revenues for the business, and modeled a variety of scenarios to help the company understand the range of potential outcomes.

Based on this robust investment plan the client was able to develop a new strategy for pushing into petrochemicals with discipline and focus.

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