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State-run Oil and Natural Gas Corp is planning to enter gas-based urea production in a big way through a joint venture with Chambal Fertilisers & Chemicals Ltd.
The explorer has proposed to form a 50:50 joint venture with the KK Birla group firm that would develop a 1.3-million-tonne fertiliser plant in Tripura through a special purpose vehicle (SPV).
The Tripura Government will pick up a 10 per cent stake in the SPV, while the holding of the ONGC-Chambal JV is yet to be firmed up, according to sources.
The idea behind the proposed equity structure of the fertiliser project is to keep the doors open for developing more such projects – in India or overseas – for the ONGC-Chambal JV in participation with local partners.
The logic is simple. The gas availability scenario is undergoing a change, following the shale gas revolution in the US. ONGC wants to capitalise on a potential drop in gas prices in India or abroad in producing urea. The model, which sources prefer to describe as a ‘concept’, will be put to test at the estimated ₹5,000-crore Tripura project.
Based on the final capital outlay of the fertiliser project, sources say the ONGC-Chambal combine may include more partners, or keep the options open for an initial public offering.
The name of either the mother JV or the Tripura project is yet to be firmed up.
Meanwhile, the proposed JV had a hiccup on location of the Tripura plant.
While the State Government offered 800 acres in Kailashahar in Unkoti district – closer to ONGC’s rich gas find at Khubal – in the hilly and forested North Tripura, Chambal expressed discomfort with the location.
The company feared that the levelling cost of the undulated land would impact the project viability.
The Tripura Government, however, turned down Chambal’s request for alternative land to avoid farm land acquisition. Reference was drawn to Mangalore Chemicals and Fertilizers (MCF) to underscore that projects could be set up on undulated land.
A communication in this regard was issued by the chief secretary of Tripura last week. Sources in ONGC, however, referred to the development as a minor issue.
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