ONGC's Kakinada refinery to produce Euro-3 fuels

Oil and Natural Gas Corporation (ONGC)-promoted export-oriented refinery project at Kakinada is going to be the first ever refinery in the world to be built along with bio-fuel processing facilities, which will produce Euro-3 grade diesel and gasoline.

Announcing this after signing an MoU with the Andhra Pradesh government and other equity partners in the project here, Subir Raha, chairman, ONGC, said that they will set up a network on farming of Jatropha and sweet sorghum as part of the refinery project.

The diesel and gasoline produced in the refinery will have an appropriate mix of bio-fuels, produced from these two crops, he said.

Termed by chief minister Y S Rajasekhara Reddy as the first major project to come up in the state in the last ten-year period, the Rs 5,500-crore refinery project will be a predominantly export-oriented facility though it also will also cater to the domestic requirements.

Proposed to be set up with a capacity of 7.5 million tonnes annually, Kakinada refinery is going to be ONGC's nodal refinery for the country in the entire eastern coast as Kakinada port will emerge as a major port facility in the coming days, the ONGC chief said.

The refinery project will be completed within 36-40 months time from the date of achieving financial closure. Work on the project is expected to commence by this year-end. Pepco has been assigned to bring a ready-built refinery equipment from Europe, which will be re-erected at Kakinada. About 1,000 acres of land has been earmarked for the refinery.

This project will also act as the anchor industry for the port-based Special Economic Zone (SEZ) to be jointly developed in 10,000-acre by ONGC with other players for which a separate MoU was signed in the presence of the chief minister. The investment for the development of SEZ is projected anywhere between Rs 1,500 crore and Rs 3,000 crore.

In the refinery project, ONGC and its subsidiary and the designated promoter of the project, Mangalore Refinery and Petrochemicals Limited (MRPL), will hold 20 per cent and 26 per cent equity respectively while IL&FS will hold the majority stake of 51 per cent. While ONGC and MRPL will have a similar equity participation totalling 46 per cent in the SEZ project, the 51 per cent stake will be jointly held by IL&FS and Kakinada Seaports Limited (KSPL), which manages Kakinada deep water port.

The state government will hold a nominal 3 per cent equity in both the projects through the Andhra Pradesh Industrial Infrastructure Corporation (APIIC). The chief minister nominated APIIC managing director B P Acharya as the escort officer for both the projects till their completion.

While IL&FS and KSPL are yet to finalise their respective shares in the 51 per cent stake offered by ONGC in SEZ project, KSPL is also understood to have given an option for equity participation in the refinery project as well, sources close to the development said.

Rajasekhara Reddy said that ONGC had offered to give remunerative prices to farmers who grow Jatropha and sweet sorghum. It may be recalled that the state government has also entrusted the Andhra Pradesh Forest Development Corporation to cultivate jatropha and other bio-fuel crops in one lakh hectares across the state.