GMR enters Kakinada refinery project

Hyderabad: Ending speculations on whether ONGC and its subsidiary Mangalore Refinery & Petrochemicals Ltd (MRPL) will establish a greenfield refinery project in Kakinada, Andhra Pradesh, the oil major decided to withdraw from the venture, paving the way for infrastructure major GMR Group to enter the project.

The management of ONGC and MRPL informed the board of directors of Kakinada Refinery & Petrochemicals Ltd (KRPL) and Kakinada Special Economic Zone (KSEZ) that “they have decided to withdraw from the two projects with immediate effect.”

ONGC’s proposed equity participation through its subsidiary MRPL was 46 per cent in KRPL and 26 per cent in KSEZ.

GMR will now hold 51 per cent stake in KRPL, IL&FS and Kakinada Sea Port will have 46 per cent and Andhra Pradesh Industrial Infrastructure Ltd (APIIL) the remaining three per cent.

In an official statement ONGC said, “The management of ONGC and its subsidiary has been considering ways and means to establish a greenfield refinery in the SEZ at Kakinada. There have been various issues affecting the steering of projects of KRPL and KSEZ. Considering these various factors, the management felt that it will be appropriate not to continue as equity partners in these two projects.”

As the initially envisaged 7.5 million tonne per annum refinery was found not feasible, the company had decided to double the capacity. The estimated cost of setting up the 15 million tonne refinery with high complexity configuration was Rs 25,000 crore.

The board of KRPL met twice today, first when the ONGC Chairman and Managing Director, Mr R.S. Sharma, announced the decision to exit and the second meeting where GMR was inducted as the new partner with 51 per cent stake.

When contacted by Business Line, a GMR official said, “We have submitted an expression of interest (EOI) to acquire 51 per cent stake in the proposed refinery at Kakinada in Andhra Pradesh. The move is in line with the Group’s business intent to grow in the oil, gas and refinery sectors and bring in world class technology, which would bring value.”

The Kakinada project has, in the past four years been attracting players like Hindujas as well. The Hindujas though had orally approached ONGC to come in as partner, no formal communication was made. KRPL is the special purpose vehicle (SPV) set up for implementing the 15 million tonne per annum refinery cum petrochemical project.

Market was abuzz on the reasons for ONGC exiting the project including lack of tax sops of up to Rs 16, 000 crore over eight years being extended by the State Government. However, sources said, ONGC wanted to focus more on its core activity of exploration and production of oil and gas.