The state-run exploration company plans to hold 46% in the petrochemicals venture ONGC Mangalore Petrochemicals (OMPL). Another 3% is to be held by ONGCs subsidiary Mangalore Refinery and Petrochemicals (MRPL). The plan is to offer a 25% stake in OMPL to the public and find a partner/s for the remaining 26% stake.
OMPL was incorporated in December 2006. Earlier this year, ONGC had mandated ICICI Securities and Deloitte Touche Tohmatsu to find investors for the aromatic complex designed to produce 0.9 million tonnes per annum (mtpa) of paraxylene and 0.3 mtpa of benzene. Feedstock for the complex would be supplied by the MRPL refinery situated adjacent to OMPL.
When contacted, bankers handling the deal refused to divulge the valuation of the OMPL stake on offer.
We have seen a strong response to the expression of interest (EoI) floated to sell stake in OMPL. We expect to bring in investors by the end of this financial year by when we should also kick off operations at OMPL, said an ONGC official, confirming the development. The official refused to comment on the valuation.
ONGC chairman Sudhir Vasudeva had said at MRPLs September AGM that he expected OMPL to ship its first products by January-end. The complex is coming up in 442 acres in the Mangalore Special Economic Zone.
A deal with ONGC for the OMPL stake will come in handy for oil suppliers in West Asia looking at closer links in large Asian markets, with the US markets reducing its dependence on crude oil imports.
As for ONGC, the idea is not just to raise funds but also induct strategic investors with knowledge in the oil and gas sector into the venture.
Apart from OMPL, ONGC is promoting another petrochemicals plant at Dahej in Gujarat. The Dahej plant is being developed through a joint venture company ONGC Petro-additions Limited (OPaL) in which ONGC holds 26%. Like in the case of OMPL, ONGC is also looking to sell stake in the project through a strategic sale as well as an IPO. Saudis Aramco, the worlds largest oil company, is among investors who have expressed interest in the project.
Aggregate demand for petrochemicals in India is likely to increase from 35 mmt in 2012 to 37 mmt in 2013 and further to 42 mmt in 2014. The growth will be led by demand from the automobiles, packaging, agriculture and infrastructure sectors.
ONGCs Perspective Plan 2030 involves a plan to diversify into downstream ventures and aims to achieve 30% of group revenue from non-E&P (exploration and production) businesses. The diversification plan involves investments in alternate energy, LNG capacity and petrochemicals. It is also prompted by falling profits in the core business of crude oil sales, owing to rising subsidy burden.
As part of the diversification strategy, ONGC, along with Mitsui and BPCL is also considering setting up a 2.5 mmtpa LNG regassification terminal at Mangalore. It has also signed an MoU with BPCL for city gas distribution. ONGC has also signed an MoU with Chambal Fertilizers and Chemicals and the government of Tripura for a 1.3 mmtpa capacity urea fertiliser plant in Tripura.