ONGC gets nod for Dahej extraction unit

The board of Oil and Natural Gas Corporation Ltd (ONGC) has approved a proposal to set up a C-2 (methane) extraction plant at Dahej in Bharuch. The board has also approved an investment of Rs 900 crore in the first phase of the project.

The project, along with the C-3 (propane) extraction plant, will be set up in the upcoming special economic zone (SEZ) in Dahej. The zone will be developed by the Gujarat Industrial Development Corporation (GIDC) along with ONGC.

The companies had signed a memorandum of understanding (MoU) in September for the project. A special purpose vehicle (SPV) will also be formed to develop the SEZ.

"Our foray into the petrochemicals business will be kicked off with the C-2 extraction plant. A Rs 900 crore investment in the first phase has been approved, while another Rs 900-1,000 crore will be invested in the second phase which will involve propane cracking.

"As soon as the company for the SEZ is formed in which ONGC will hold a 26 per cent stake, construction work at the plant will begin. ONGC will also construct a jetty at the SEZ," said Subir Raha, chairman and managing director, ONGC.

Once agreed by both the companies, the new company may be named Dahej SEZ Company.

The C-2 and C-3 plants are expected to be commissioned in the next 18 months, but it also depends on the progress of the SEZ. According to state government officials, the SEZ should be ready by next year.

The Ahmedabad-based Adani Group has already responded to an invitation of expression of interest from GIDC for a third-party developer or co-developer with GIDC in the project which is at present under consideration of the corporation and the state industries department.

"We have already shown keen interest in being a co-developer or even a third-parry developer in the Dahej SEZ project. We hope the government will consider our proposal favourably," said an Adani group source.

Adanis are at present developing another SEZ in Mundra with an initial investment of Rs 3,000 crore.

Once formed, the new company will be responsible for the development of the necessary infrastructure for development of the SEZ.

According to the MoU, GIDC and ONGC will work together to look for a third-party developer. In the future the third-party may be offered a majority share in the new company, said a state government official.

While ONGC is planning to ship naphtha from the newly-acquired Mangalore Refinery and Petroleum, the company may source both the C-2 and C-3 plants in Dahej.

ONGC has also signed a MoU with the state government-owned Gujarat State Petroleum Corporation Ltd (GSPCL) for exploration and development of coal bed methane apart from another joint venture proposed on Thursday for the gassification of coal in north Gujarat.