ONGC's petrochem foray gets govt nod

The government has given the green signal to Oil and Natural Gas Corporation's (ONGC) petrochemical plans but has discouraged India's largest oil and gas producer from foraying into fuel retailing.

Petroleum Secretary MS Srinivasan said the company had been permitted to set up units to manufacture petrochemicals from residue from its refineries and by using natural gas.

"ONGC is setting up petrochemical complexes to gain from the high margins on petrochemicals," he said.

The Rs 4,900 crore aromatic complex and oilfield complex that ONGC planned to set up adjacent to its subsidiary, Mangalore Refinery and Petrochemicals Ltd (MRPL), and the Dahej petrochemical complex in Gujarat were natural extensions to getting the maximum value out of refinery produce and natural gas respectively, he said.

On fuel retailing, he said selling petrol and diesel was a losing proposition and compensation in the form of oil bonds for selling fuel below the cost of production was only available to public sector oil retailers "" IOC, HPCL, BPCL and IBP.

"No such compensation mechanism is available to new players in this business, including ONGC," he said, adding that the company board would take an appropriate decision, keeping the economics of the business in view.

Petroleum Minister Murli Deora had earlier this month told Parliament that ONGC had deferred its plan for development of petrol pumps.

ONGC had been granted the licence to sell petrol and diesel and the company had envisaged setting up 1,100 petrol pumps but now the government was keen that it focus on exploration and production and not enter into a losing business.

ONGC had one petrol pump in Mangalore and had identified 45 locations "" from Dehradun to Ahmedabad "" for retail outlets, a company official said.

ONGC and its subsidiary, Mangalore Refinery and Petrochemicals Ltd (MRPL), had plans set up petrol pumps as part of its plans to diversify into downstream fuel retailing, petrochemicals and liquefied natural gas imports to become an integrated oil and gas company with a turnover of $50 billion within the next few years, he said.

Srinivasan said ONGC would not be held back from setting up petrochemical units where it had refineries or a gas source but any new refinery that it planned would have to be purely based on economic considerations.

"We have to do economic evaluation of all refinery projects," ONGC Chairman and Managing Director R S Sharma said.

Besides expanding 9.69 million tonne MRPL to 15 million tonne, ONGC had plans to set up new refineries at Barmer in Rajasthan and Kakinada in Andhra Pradesh.

It also wants to set up a new 15 million tonne export-oriented refinery adjacent to the expanded MRPL.

The company had no issues with MRPL expansion but plans for all the three new refineries would have to be vetted again, Srinivasan said, adding that ONGC's Rs 13,000 crore project to extract petrochemicals from imported LNG at Dahej in Gujarat was also acceptable to the government.