The Hindu Business Line : ONGC-MRPL combine may opt for naphtha as feedstock

Failure in breaking a long-term LPG supply deal may force the ONGC-MRPL combine to depend on naphtha as feedstock for the proposed petrochemicals complex at Mangalore and drop plans for C2-C3 extraction and captive power plant.

According to sources, the ONGC group's more than an year long effort to enter into an arrangement with Qatar Petroleum (QP) for annual supply of five million tonne of rich LNG (with 18-20 per cent rich gas content) is far from reaching any conclusive stage.

"We are negotiating with Qatar Petroleum for almost one and a half years now without much success," an ONGC official said.

Qatar has already sold its LNG capacities till 2009 and will have to invest in a new five mt train (unit for gas liquification) to make fresh supplies to MRPL by 2009-2010. Such investments (costing roughly $1 billion) are made only based on committed supply agreements.

Though he maintained that the group is continuing its search for LNG in Qatar, Oman and Australia, the official hinted that pricing of LNG vis-à-vis viability of the petrochemicals project has become a major stumbling block in breaking a deal.

Viability

Since 80 per cent of LNG consists of methane, which is used in power generation, the project could be viable only if LNG is priced at around $5 per mmbtu. "If LNG is not available at a viable price range, we may have to opt for naphtha as the only feed-stock and drop plans for C2-C3 extraction and captive power plant as well," an official said.

As per the alternative plan for the petrochem project, which is currently under review, MRPL may augment capacities to 30 mt by setting up a new 15-mt refinery at Mangalore to ensure adequate supplies of feedstock.

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ONGC-MRPL combine may opt for naphtha as feedstock