ONGC-MRPL to shelve plans for C2-C3 extraction?

18-Sep-06

Despite a year's efforts, the ONGC-MRPL combine has met with failure in securing a long-term LPG supply deal, forcing it to shelve plans for C2-C3 extraction and captive power plant. ONGC's effort to enter into an arrangement with Qatar Petroleum (QP) for annual supply of 5 million tons of rich LNG (with 18-20% rich gas content) has not reached any conclusive stage, despite a year long endeavor. The combine will now have to opt for naphtha as feedstock for the proposed petrochemicals complex at Mangalore. Qatar's LNG capacities have been sold till 2009. A new five mt train (unit for gas liquification) could cost an estimated US$1 billion if Qatar is to make fresh supplies to MRPL by 2009-2010. Such investments are made based on committed supply agreements. ONGC's search for LNG continues in Qatar, Oman and Australia, but the pricing of LNG vis-à-vis viability of the petrochemicals project could prove to be a major stumbling block. The project could be viable only if LNG is priced at around US$5 per mmbtu as 80% of LNG consists of methane, which is used in power generation.