ONGC withdraws from Rs 9,000 cr project

09-Oct-06

Mangalore Refineries & Petrochemicals Ltd (MRPL), Oil & Natural Gas Corporation's (ONGC) refining subsidiary, has decided to exit from the Rs 9,000 crore twin projects- the Kakinada SEZ and the 7.5 mtpa export-oriented refinery project in Andhra Pradesh. ONGC has sought the Centre's support in facilitating MRPL's withdrawal from these projects. This follows ONGC's exit from the proposed 7.5 mtpa refinery at Barmer in Rajasthan, making it ONGC's second exit from a refinery project within a month. MRPL and its partners Kakinada Sea Ports, IL&FS and the Andhra Pradesh Industrial Infrastructure Corp had formed a special purpose vehicle (SPV), Kakinada Refinery and Petrochemicals Ltd (KRPL), to set up the refinery. MRPL had also picked up 26% in another SPV called Kakinada Special Economic Zone Ltd. (KSEZ) where the refinery was to be located. MRPL has invested Rs 10 crore as its share towards land acquisition for the SEZ project and another Rs 5 crore to carry out feasibility studies for the refinery. The ongoing and planned expansions of existing refineries by HPCL, Vizag, Cochin, Chennai and the upcoming refinery of IOC at Paradip are leading to a a saturation of refining capacity on the east coast. This coupled by the limited market potential of the region could be the main reason for ONGC's exit.