ONGC to invest up to ₹6,000 crore in its petrochemicals arm OPaL via CCDs

by Gaurav Grover 2021-11-19 12:03:25

A senior executive said the State-run oil and natural gas company (ONGC) will invest up to ₹6,000 crore in petrochemicals arm ONGC Petro additions Ltd (OPaL) to meet its equity requirements.

"We already got compulsorily convertible debentures (CCDs) in OPaL. We would convert them into equity worth ₹6,000 crore," said a senior ONGC official.

OPaL's net profit for the second quarter stood at ₹1.19 billion. The company is a joint venture promoted by ONGC and GAIL (India) Limited, and co-promoted by Gujarat State Petroleum Corp. Ltd (GSPC).

OPaL has set up a 1.1-MMTPA (million metric tonne per annum) greenfield petrochemicals complex at the Dahej SEZ in Gujarat.

ONGC had been planning to induct a strategic partner in OPaL for many years, but due to lack of interest from investors, the plans were shelved.

Till 2019, ONGC was in talks with Saudi Basic Industries Corporation (SABIC) and Saudi Aramco for selling a 26% stake in OPaL.

The stake sale process did not go ahead; Therefore, ONGC decided to make OPaL a subsidiary. The company now plans to merge OPaL with itself.

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"The merger of Opal with the oil and natural gas company is an option and deliberations are ongoing," the official added.

As of December 2020, ONGC has injected capital in the form of guarantees (₹ 3,365 crore) and provided support for CCD (₹ 7,778 crore), taking ONGC's stake to 92% in OPaL and the company plans to increase its stake in OPaL.

OPaL, which has a $ 4.5 billion petrochemical project, began operations in 2016-2017 and is working to increase production in phases. The OPaL complex is home to India's largest single-site double-feed cracker. The company primarily manufactures polymer, a chemical compound used in many products, from textiles to plastics.

OPaL's petrochemical complex is part of the forward integration plans of ONGC.

The majority feedstock for OPaL is currently being sourced from ONGC. The ONGC processing plant at Hazira and Uran meets the requirements for naphtha.

"Due to the increasing demand for petrochemicals, we see an increase in the petrochemical contribution (in the main line of ONGC). We can eventually integrate OPaL into ONGC. This is still in progress," said an Indian Oil and Natural Gas official.

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