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A look at ONGC-VI - Views on News from Equitymaster

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A look at ONGC-VI

Oct 17, 2007

In the previous articles we profiled the upstream assets of ONGC. In this article, we shall look at its downstream assets. ONGCís downstream assets include:

  1. Refineries held through subsidiaries-MRPL

  2. Petrochemical complexes through joint ventures-OPal & OMPL

  3. LNG terminals through joint ventures-Petronet LNG

Mangalore Refinery & Petrochemicals Ltd. (MRPL)

How? ONGC holds a 72% stake in MRPL. MRPL in turn has a 46% stake in the proposed Kakinada Refinery & Petrochemicals Ltd. (KRPL)-a joint venture with IL&FS and KSPL (51%) and APIIC (3%).

When? ONGC acquired controlling stake in 2003.

Why? As part of the companyís vertical integration strategy.

Where? The refinery is located at Mangalore, Karnataka.

How much? The current capacity of MRPL is 9.69 million metric tonnes per annum (MMTPA). It is implementing an upgradation-cum-expansion project to increase the capacity to 15 MMTPA with an estimated investment of Rs.80 bn. The project is expected to be completed by the FY11. KRPLís proposed refinery was initially planned with a capacity of 7.5 MMTPA. The project is not financially viable at this capacity hence is slated to go up to 15 MMTPA. A feasibility study is currently underway.

Who? MRPL sources most of its crude from the National Iranian Oil Company and Saudi Aramco. It sells most of its products to HPCL.

ONGC Petro-additions Ltd. (OPaL)

How? OPaL has been approved for implementation jointly by ONGC & GSPC holding 26% & 5% equity respectively, with balance equity to be tied with strategic investors and public offering.

When? Not commenced.

Why? As part of the companyís vertical integration strategy.

What? It will be a grass root integrated petrochemical complex.

Where? The proposed site is at the Dahej SEZ, Gujarat

How much? An estimated investment of Rs. 135 bn.

ONGC Mangalore Petrochemicals Limited (OMPL)
How? ONGC has a 46% stake in OMPL while MRPL holds 3% and Banks and Financial Institutions hold the balance 51%.

When? It was incorporated in December 2006.
Where? Mangalore, Karnataka

Why? As part of the companyís vertical integration strategy.

What? The aromatics complex will manufacture Paraxylene (used to make bottles, fibers or film) from MRPL's Aromatic Stream (hydrocarbons having one or more benzene rings).

Where? The project is proposed at Mangalore, Karnataka.

How much? Total estimated investment in the Project is Rs. 49 bn.

Petronet LNG ltd (PLL)

How? ONGC has a 12.5% equity stake in PLL.

When? It was set up in April 1998.

Why? There has been a spurt of discoveries of natural gas in India of late. However, a few years back, the prospects of natural gas from domestic sources looked bleak. Hence PLL was set up to import natural gas from the Middle East.

What? Gas can be transported in bulk through pipelines or in containers in liquid form and regasified later. PLL was set up to take the 2nd option.

Where? The existing terminal is at Dahej, Gujarat and proposed one at Kochi, Kerala.

How much? The Dahej Terminal is operating at its optimum capacity and is currently meeting 25% of India's total gas supplies. The Company has started expansion of Dahej terminal up from 5 MMTPA to 10 MMTPA and also setting up LNG Receiving and Re-gasification Terminal of 5 MMTPA at Kochi. 5 MMTPA of LNG is equivalent to 20 million standard cubic meters per day (MMSCMD) of natural gas.

In the next article, we shall profile the non-hydrocarbon assets and important financial assets of the company.

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