Hormuz crisis lifts ONGC oil business, squeezes petrochemical unit as feedstock costs surge

New Delhi: Higher oil prices sparked by the Hormuz crisis may have lifted the fortunes of Oil and Natural Gas Corporation's (ONGC)'s oil exploration business, but its petrochemical unit is facing adverse conditions as feedstock prices go through the roof, a senior ONGC official said. "The feedstock is linked with international prices of gas and naphtha. With the Hormuz crisis happening, our calculations may have gone wrong," the official told ET.

The Dahej complex runs on natural gas and naphtha, both linked to international prices. Naphtha prices have nearly doubled from around $600 to more than $1,100, while gaseous feed supplies to its Dahej plant have stopped completely, leaving the company exposed on both key inputs. "As and when gaseous feed starts, the plant will be normalised," the official added without indicating when gaseous feed supplies would resume.

ONGC Petro additions Ltd (OPaL) swung to a negative EBITDA of Rs 57 crore in the June quarter of FY27, from a positive EBITDA of Rs 1,207 crore in FY26, a deterioration of Rs 1,264 crore. The company which had guided for EBITDA of Rs 2,000 crore this financial year, is now uncertain about when the plant can be normalised.

OPaL is particularly exposed because it buys naphtha from the open market and does not yet have infrastructure to import ethane, a cheaper alternative feedstock for crackers. That leaves it at a disadvantage against larger competitors.

Queries sent to ONGC remained unanswered until the time of going to press.

Rival Reliance Industries Ltd's (RIL) oil-to-chemicals business posted a record quarterly EBITDA of Rs 17,010 crore, up 17.2% year-on-year, helped by ethane-based cracking economics in its petrochemical complex and its dedicated ethane import infrastructure built over years.

Indian Oil Corporation Limited (IOCL) petrochemicals business also remained profitable, with EBITDA of Rs 216.85 crore, supported by captive naphtha from its refineries at Panipat, Koyali, Barauni and Mathura.

OPaL, meanwhile, has gone from expecting a strong year to starting it in the red and is now trying to fix the structural cost disadvantage. It plans to exit the C2 and C3 product lines from its Special Economic Zone unit, a move expected to add about Rs 1,000 crore to annual EBITDA. It has also signed an MoU with Japan's Mitsui to build ethane carriers and bring cheaper imported feedstock into India, but this will be built by FY29-30. "We will be bringing ethane from the international market. With that, our feedstock cost will come down," the official quoted earlier added.

The pressure on OPaL adds to the strain elsewhere in ONGC's downstream portfolio. It's another arm, Hindustan Petroleum Corporation Limited (HPCL), reported a Rs 12,265 crore quarterly loss, though ONGC's own upstream business benefited from higher crude prices.