This is probably an indication of how difficult it is for Indian public sector companies to put together a petrochemical project. ONGC has announced yet another delay to its cracker complex at Dahej, Gujarat, from mid-2010 to February 2012.
The project, which has been in the pipeline for many years, appeared to have gathered speed in 2007 when ONGC set up a joint venture to carry it forward. ONGC had also announced plans to recruit a strategic partner.
And although there has reported been considerable interest from local (Gail, GNFC, Reliance) and international (Sabic, Qatar Petroleum, Basell) players, ONGC has still not been able to tie up a partner. This in turn has affected overall progress.
Also construction companies bidding for the project had asked for extra time. Bids are now expected to be submitted next month.
ONGC also announced yesterday that it would drop a dedicated hdPE unit and an SBR unit from the Dahej project. This would bring down the total project cost by 26% to Rs.124.4bn. The project would have an internal rate of return on 15.4%.
The decision to drop the hdPE and SBR units seems a sensible one given India’s emerging demand and supply balances.