ONGC to take 26% of KRPL to public

NEW DELHI: ONGC will tap the capital market with a public issue later this fiscal to part-finance its Rs 18,000-crore refinery-cum-petrochemical project. The 15-million-tonne refinery complex will be built to cater to the demand for high-grade fuel in the European and other Western markets.

According to a senior ONGC official, although the project had been conceived as an MRPL venture, it would eventually be transferred to ONGC. The project will be developed through a separate SPV, Kakinada Refinery & Petrochemicals (KRPL). IL&FS, which has picked up a 26% stake in the SPV, will exit the project and offload its stake to the public.

ONGC’s initial announcement to build a 7.5-million-tonne refinery had run into rough weather after the company found the proposal commercially unviable in the current capacity. ONGC was directed by the PMO to relook at the proposal following several representations from the state government.

The company now plans to double the refinery within an SEZ that would be developed in collaboration with Andhra Pradesh Industrial Development Corp and Kakinada Sea Ports. While ONGC would have a majority stake and management control, the proposed JV would be a non-PSU joint venture.

Based on the business model of Reliance Petroleum’s Jamnagar refinery, the Kakinada refinery too would use imported crude and produce high-margin Euro-III and Euro-IV petroleum products. “We have appointed Engineers India (EIL) to conduct another feasibility study that includes doubling the capacity of the proposed refinery to 15 million tonnes per annum (MTPA),” a senior ONGC official told ET.

Earlier, EIL had done a feasibility study to set up a 7.5-MTPA refinery in Kakinada with an investment of Rs 12,000 crore. The earlier EIL feasibility report was not encouraging. However, doubling the capacity with a little more investment makes economic sense, he added. EIL is expected to submit the feasibility report by June. The works on the project is expected to start by August 2007.