ONGC likely to offload 34% in Dahej project

The oil and gas major ONGC is likely to offload 34 per cent equity in its special purpose vehicle ONGC Petro-additions (OPaL) formed for the upcoming Rs 13,500-crore petrochemical project at Dahej.

The company has started talks with Japanese majors Mitsui and Mitsubishi, that have expressed an interest in the project.

According to sources, ONGC is keen to have both the Japanese firms as partners in the project.

ONGC currently holds 95 per cent stake in OPaL, with Gujarat State Petroleum Corporation (GSPC) holding the remaining 5 per cent stake.

The company may also offload part of its stake through the IPO route, industry sources said.

The debt-equity ratio of the Dahej project has been set at 2.55:1.

The higher debt portion has helped ONGC to plan the Rs 13,500-crore project, with a small contribution from its own kitty.

The public hearing for the petrochemicals project is slated for the third week of July.

The ethane, propane and butane (C2, C3 and C4) for the Dahej petrochemical project will be provided by Petronet LNG, and naphtha will come from ONGC's Hazira complex.

The use of naphtha as feedstock would help ONGC to curtail the distress sale of naphtha in the open market.

However, the high amount of volatility in naphtha prices, coupled with a sharp movement in crude prices worldwide, is likely to pose a challenge for ONGC, said industry sources.

The use of LNG as feedstock may also become a challenging task for ONGC. The company will have to chalk out a long-term strategy for the supply of LNG at competitive prices.