27 May 1996 00:00 [Source: ACN]
INDIA's Oil and Natural Gas Corp (ONGC) is proposing to make its entry into petrochemicals with a US$785.2m aromatics complex at Hazira in Gujarat State.
The company, India's main oil and gas producer, has applied for government approval for the project. It is looking to set up a joint venture involving Bharat Petroleum Corp Ltd (BPCL) and an unnamed foreign partner which will hold the majority stake.
The proposed aromatics complex is planned to produce:
It is expected onstream within two years of receiving government approval.
The complex will located next to ONGC's Hazira gas processing complex which is being expanded. The expanded complex will produce 1.3m tonne/year of aromatics-rich naphtha which will serve as feedstock for the complex.
Discussions are at an advanced stage with BPCL. The ONGC project planning team has sought formal permission from the board of directors to finalise an MoU between the three partners for the formation of the joint venture. It has also applied for permission to secure the services of Engineers India Ltd to undertake a detailed feasibility study.
ONGC proposes that it and BPCL will each hold a 24% stake in the project. The remaining 52% portion will be offered to the foreign collaborator and the Indian public.
ONGC has not yet named the prospective foreign partner. BPCL has strong ties with Shell and indicated last year that it expected to pursue future hydrocarbon projects in India with the Anglo/Dutch oil major (ACN 20 Nov 1995, p18). However, a senior Shell source denied any knowledge of the discussions or proposed complex.
The aromatics project is expected to benefit from its location adjacent to ONGC's gas processing plant at Hazira.
The project's pre-tax internal rate of return on equity is estimated at between 42.14% and 52.69%, depending on the price of PX, according to an agenda note to be presented at a forthcoming board meeting. Payback is expected in 2.4-3.4 years. Debt-to-equity ratio is anticipated to be 2:1.
ONGC produces natural gas liquids during the fractionation of natural gas at its gas processing complex.
A portion of the natural gas liquids offtake goes to the Kawas gas turbine power project for fuel, and a portion is exported through Indian Oil Corp. Facilities are being added to the gas processing complex for extraction of kerosene from natural gas liquids.
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