ONGC's Kakinada refinery not viable: report

The Oil and Natural Gas Corporation's (ONGC) proposed greenfield refinery at Kakinada in Andhra Pradesh, for which the company had marked an investment of about Rs 22,000 crore, has been found commercially unviable in a pre-feasibility report. A detailed feasibility report on the 15-million tonne refinery is expected to be finalised later this month.

The company had earlier found its other proposed greenfield refinery at Barmer in Rajasthan to be unprofitable, too.

"Initial studies by Consultants Engineers India Ltd (EIL) have shown that a refinery in Kakinada is not commercially viable. There will be no profitability in the refinery unless heavy fiscal benefits are given," a senior ONGC official said, adding that Hindustan Petroleum's upcoming 15 million tonne per annum (mtpa) refinery in Vishakapatnam would clutter the market. 

ONGC'S REFINERIES              (in million tonne)
Location	Current capacity	Capacity after expansion
Mangalore	9.69	15
Tatipaka	0.50	1
Kakinada (proposed)	15.00	""
Barmer (proposed)	7.50	""

ONGC's proposed Kakinada refinery is proposed to be an export-oriented one. "The feasibility of exporting products is also being studied. The report expected this month will give the final picture," the official said.

The oil and exploration company's other refinery project, the expansion of the 9.69 mtpa Mangalore refinery to 15 mtpa, is going ahead. A special purpose vehicle "" Kakinada Refineries and Petrochemicals Ltd "" has already been formed, in which Mangalore Refineries and Petrochemicals (MRPL) is proposed to have a 46 per cent stake, while IL&FS and Kakinada Sea Ports Ltd will have 51 per cent stake. The state government will take the balance 3 per cent equity. MRPL is a subsidiary of ONGC.

With the refinery's viability being called into question the petroleum, chemicals and petrochemicals investment region (PCPIR) planned at Kakinada may not take shape. Each PCPIR has to be anchored around a refinery, which will supply the feedtsock for the chemicals and petrochemicals industries in the region.

"If the final feasibility report finds the refinery commercial unviable, we will work out a separate plan for the PCPIR," the ONGC official said.

Apart from Andhra the task force on petroleum, chemicals and petrochemicals investment regions has identified Haldia in West Bengal, Mangalore in Karnataka and Paradip in Orissa for setting up of petrochemical hubs.

While the central government would provide infrastructure linkages like rail, road, port, airport and telecom connectivity in the PCPIRs, the state government concerned would provide power, water, roads, sewage and effluent treatment linkages, besides health infrastructure.