GMR likely to set up ONGC’s proposed refinery in Kakinada

Investment could exceed original estimate of Rs 31,000 cr

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Refinery plans

The project to be implemented by Kakinada Refinery and Petrochemicals in which ONGC has a 46 per cent stake, Kakinada Sea Port – 51 per cent and State Government – 3 per cent.

ONGC seeks Rs 16,000 crore sops from the State Govt to make project viable.

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Hyderabad, May 28 After UK-based Hinduja Group, Reliance Industries (RIL) and Essar Oil, Oil and Natural Gas Corporation’s (ONGC) proposed refinery at Kakinada, has found a new suitor in GMR Group.

According to sources in the Chief Minister’s Office, GMR could emerge as the prime contender for setting up the refinery in the port town.

“Though it is not yet finalised, the refinery’s capacity could be around 20 million-tonnes-per-annum (MMTA) as against the original plan of 15 MMTA. The investment could also be much higher than the original estimate of Rs 31,000 crore,” the sources said. The project to be implemented by Kakinada Refinery and Petrochemicals, where ONGC has a 46 per cent stake, Kakinada Sea Port 51 per cent and the rest of the three per cent with the State Government.

ONGC had in the past maintained that the refinery was not financially feasible unless the Andhra Pradesh Government gave more incentives. It had sought incentives worth Rs 16,000 crore from the State Government over eight years to make the refinery financially viable.

Tax exemption

The company wanted exemption from sales tax on the sale of petroleum and petrochemical products, free power and water supply during the construction phase, and road and rail connectivity.

Earlier this month representatives from RIL, Hindujas and Essar Oil had discussions with State Government officials for a stake in the Kakinada refinery for the refinery which is being proposed in a special economic zone (SEZ) being developed by ONGC in Kakinada. It is also learnt that GMR officials had 2-3 rounds of discussion with authorities in the State Government.

“The State Government is keen that the project takes off quickly as it will also help in the proposed petroleum, chemical and petrochemical investment region (PCPIR),” the official said.

Originally, a 7.5-million-tonne refinery was envisaged at Kakinada. But Engineers India Ltd did not find the size techno-economically feasible and so the capacity was doubled.The estimated cost of setting up the 15 million-tonne refinery with high complexity configuration was at Rs 25,000 crore.

Besides, Rs 600 crore was needed to build a single-point mooring and the sub-sea pipeline for transportation of crude oil to the project site.

Source: Business Line