ONGC to invest Rs 900 crore in Dahej gas extraction unit

Oil and Natural Gas Corporation (ONGC) has firmed up its plan to invest Rs 900 crore in developing a rich gas extraction plant that will produce LPG and petrochemical feedstock naphtha among others, in Dahej, Gujarat.

Subir Raha, chairman and managing director, said the company board has given a go-ahead for the project.

"A detailed feasibility report (DFR) is being prepared at the moment. Following this, we will proceed with actual groundwork. It will take 24 months to build the plant from the zero date," Raha said in Kolkata on Thursday.

ONGC will source the rich gas from Petronet LNG Ltd (PLL). The company is one of the lead promoters of PLL with 12.5 per cent stake. The other lead promoters in PLL are Indian Oil Corporation (IOC), GAIL and Bharat Petroleum (BPCL).

Raha said the capital expenditure will be met by internal accrual. "We have no plans to take joint venture partner for the project at this moment," Raha informed.

The capacity of the rich gas extraction plant will be 0.5 million tonne. The LNG terminal at Dahej will have capacity of 5 million tonne. Of this, rich gas (C2 and above) content will be 10 per cent. ONGC will also pay a royalty to PLL for the gas.

ONGC has got into the project keeping in mind the opportunities in LPG and petrochemical sector, Raha said.

Of the entire 5 m tonne LNG volume, GAIL will take up three million tonne, IOC 1.5 million tonne and BPC 0.5 million tonne. "We expect extraction to be a profitable venture," Raha noted.

ONGC has a rich gas extraction plant at Hazira, Gujarat where indigenously produced offshore gas is processed. After taking out LPG and feedstock, the lean gas is pumped to HBJ pipeline.

Petrochemical business is expected to peak in next few years given that per capita consumption of petrochemical is 1.8 kilogram compared with 37 kilogram worldwide.

The feedstock security for petrochemical could be a worrying factor given that oil and gas producing countries are increasingly extracting value themselves, preferring to export only lean gas.

Roadshows after Feb 17

The roadshow for ONGC public offer will start after February 17 after it files prospectus with the RoC.

The roadshow will take place in 25 cities in India. It will also go to Singapore, Hong Kong, Boston, New York, Los Angeles and London.