State-owned Oil and Natural Gas Corp (ONGC) will sell its 46 per cent stake in a $1-billion petrochem project in Karnataka to its subsidiary Mangalore Refinery and Petrochemicals Ltd (MRPL).
"ONGC-Mangalore Petrochemicals Ltd (OMPL) has lot of synergies with MRPL and so it makes better economic and business sense that this project be merged with MRPL," a top source said here.
ONGC holds 46 per cent stake in OMPL which is building a Rs 6,400-crore Aromatic Complex in Mangalore Special Economic Zone. MRPL has 3 per cent stake while the balance 51 per cent equity is yet to be allocated.
The Aromatic Complex, being set up on 442 acres of land acquired in Mangalore Special Economic Zone, is totally integrated with the adjacent MRPL refinery.
MRPL refinery will supply feed stock naphtha to OMPL which will convert it into Paraxylene and Benzene. Paraxylene is the main building for production of polyester fibres and PET bottles while benzene will produce industrial chemicals.
"OMPL and MRPL have too many synergies, and plant configuration will be most optimal if they are merged," the source said, adding that for last one and half years, the option of merging OMPL with MRPL is being explored and now consultancy firm Deloitte has been appointed to come up with a fair valuation of OMPL.
ONGC will sell its 46 per cent stake in OMPL to MRPL at market value, the source said.
The Aromatic Complex, which will produce 0.9 million tonnes per annum of Paraxylene and 0.3 million tonnes of Benzene besides small amounts of LPG, fuel gas and hydrogen, is expected to be commissioned by August, a good one year behind schedule.
The source said global giants like Kuwait Petroleum may be roped in as a strategic partner for the remaining equity.
MRPL in a statement said, "At present, MRPL holds only 3 per cent equity in OMPL and is examining the possibility of acquiring more stake in OMPL."
ONGC holds 71.63 per cent stake in MRPL, which operates a 15 million tonnes a year refinery at Mangalore. Hindustan Petroleum Corp Ltd (HPCL) has 16.96 per cent while the rest is with public.
The source said the merger of OMPL with MRPL will happen after the petrochemical complex is commissioned.
Besides the aromatic complex, OMPL also had plans to build an Olefin complex which would be taken up at a later stage.