ONGC's worries over setting up a refinery in Rajasthan are far from over, with the issue now gaining political overtones. After its commitment in 2005, the company is now looking for ways to make an uneconomical project viable.
Indications are it may nominate Mangalore Refinery and Petrochemicals Ltd (MRPL) for the project, which is unlikely to materialise before five years. Engineers India Ltd too, may acquire some equity, apart from the State Government.
Discussions are still on between the State Government and ONGC and there is no formal agreement yet, sources told
A refinery in Barmer, Rajasthan, will not be viable currently, the sources said, as the region already has other refineries — Bina, Koyali, Mathura, Panipat. The country currently has refining capacity of about 212 million tonnes (mt), while the requirement is approximately 140 mt.
Rajasthan awaits action
While ONGC is undecided, the Rajasthan Chief Minister, Mr Ashok Gehlot, recently said his Government had in principle accepted ONGC's proposed package for a refinery in the State. The State Government is awaiting a response from ONGC, which said it would revert after consulting oil marketing companies for a marketing tie-up.
In 2005, ONGC explored the possibility of setting up a well-head refinery near Barmer. It conducted a feasibility study based on prevailing market conditions in October 2006. The study showed the need for financial assistance to make the project bankable.
Panel suggests equity participation
The State Government on August 19, 2009, constituted a committee under Mr S.C. Tripathi, former petroleum secretary, to study the prospects for the petroleum sector in Rajasthan. The committee recommended equity participation by the State Government up to 26 per cent of project cost, bankable marketing tie-up with oil marketing companies, and concession of $1 per crude barrel from Cairn India.
ONGC engaged SBI Caps for a financial appraisal of the project with the revised configuration suggested by the committee. It called for some concession beyond the committee's recommendation to make the refinery viable.
The Rajasthan Government has accepted the committee's recommendations, including discount for oil marketing companies on refinery gate price and assistance on crude purchases. It offered interest-free loan for 15 years, from fiscal 2016-17 to 2030-31, for repayment in equal annual instalments over 16 years — from 2031-32.