The Hindu Business Line : ONGC awaits consultants report for Kakinada project

The details
The refinery size should be at least 15 million tonnes to make it viable.
The original proposal is for a 7.5-mt per annum refinery with an investment of over Rs 7,500 crore.

New Delhi , Nov. 11

ONGC's plans to invest in Kakinada Special Economic Zone and to develop an export-oriented refinery in Kakinada, Andhra Pradesh, may not be a closed chapter as yet.

Though the preliminary reports about the feasibility of the project were not optimistic, the company is now awaiting the consultant's final report on techno-economic viability of the project, before taking a final decision in the matter.

According to a senior ONGC official , the preliminary report on market dynamics revealed that setting up a small refinery was not viable. "However, we are waiting for the final technical report from Engineers India Ltd and the market feasibility study from the international consultant before taking a decision."

"The first consideration for setting up a refinery is commercial viability and we are having a close look at it for the Kakinada project," he added.

As per the preliminary study, the refinery size should be at least 15 million tonnes (mt) to make it viable, whereas the original proposal was for a 7.5-mt per annum refinery with an investment of over Rs 7,500 crore. "We are also looking at optimising costs," he said.

Conceding that Kakinada location-wise was strategic, the official said that as per initial market report under the current scenario - availability of crude, pricing, market conditions and likelihood of refinery clutter on the East coast - it was felt that the refinery in its present capacity could only be marginally viable.

He said the evaluation reports would help the company to analyse the feasibility of the refinery and SEZ project.

ONGC, along with its subsidiary Mangalore Refinery and Petrochemicals Ltd (MRPL), had inked two separate MoUs with the State Government and infrastructure lender during September last year. The first MoU was signed between the Andhra Pradesh Government , Infrastructure Leasing & Financial Services Ltd (IL&FS) and Kakinada Seaports Ltd (KSPL) to promote the Kakinada SEZ through a special purpose vehicle called Kakinada Special Economic Zone Ltd. The second related to setting up of an export-oriented refinery through a joint venture of ONGC-MRPL, the Andhra Pradesh Government and IL&FS.

If the proposed project were shelved, it would be a major setback to the State Government on both the political as well as social front. More than 4,000 acres has already been acquired and conveyed to the Kakinada SEZ. The process of acquisition of the balance 6,000 acres is about to be completed shortly.

During his visit to Delhi earlier this month, the Andhra Pradesh Chief Minister, Dr Y.S. Rajasekhara Reddy, in his meeting with the Petroleum Minister, Mr Murli Deora, requested him to ask ONGC to keep its commitment on investments in the projects.

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