Japan's Mitsui to operate ONGC's ethane carriers; equity structure under discussion

Japanese shipping firm Mitsui O.S.K. Lines will operate two very large ethane carriers for Oil and Natural Gas Corporation (ONGC) to import petrochemical feedstock for a subsidiary of the state-owned company, sources said.

ONGC has entered into a partnership to build, own and operate two very large ethane carriers (VLECs).

The two firms are currently discussing equity structure of the joint venture, two sources with direct knowledge of the matter said.

Mitsui is likely to own majority stake in the ships that would be built in Korean shipyards, they said adding the exact equity structure would depend on ONGC's appetite.

The specialised ships, with an estimated cost of USD 370 million for the pair, are intended to secure the petrochemical feedstock for ONGC Petro Additions Ltd's (OPaL) Dahej facility, with ethane imports beginning around mid-2028.

Sources said it would take about two-and-half-years to build the VLECs.

Mitsui and its partners currently own and operate four liquefied natural gas (LNG) ships for Petronet LNG Ltd, India's biggest LNG importer, and six ethane carriers for Reliance Industries Ltd.

The ONGC board is to decide on the exact partnership arrangement, they said.

ONGC plans to import ethane starting in mid-2028 to compensate for the altered composition of LNG sourced from Qatar, according to a tender that the state-owned firm floated in March this year for selecting a partner for building the VLECs.

India imports 7.5 million tonne per annum of LNG from Qatar. Under the deal, QatarEnergy supplies 5 million tonne a year of LNG that contains methane (used to produce electricity, make fertiliser, converted into CNG or used as cooking fuel) as well as ethane and propane -- feedstock to make LPG and petrochemicals -- on a firm basis and the rest on best endeavour basis.

This contract is coming to an end in 2028 and the revised contract signed last year envisages QatarEnergy supplying 'lean' gas (one that is stripped of ethane and propane).

ONGC had spent about Rs 1,500 crore in setting up a C2 (ethane) and C3 (propane) extraction plant at Dahej in Gujarat. The C2/C3 so extracted was used as a feedstock in its petrochemical subsidiary, OPaL.

With the changed composition of LNG, the company is now looking at importing ethane.

OPaL "is having a mega grassroot petrochemical complex and having the largest standalone dual feed cracker in Southeast Asia. Plant is having a dual feed cracker i.e. a mix of Naphtha and C2 (Ethane), C3 (Propane) & C4 (Butane) as feedstock," the tender document had said. "ONGC plans to source and supply 800,000 tonne per annum of ethane to secure the feedstock for OPaL, from May 2028 onwards.

And to ship this ethane, it has formed a joint venture with Mitsui to build VLECs that could ship the feedstock.

ONGC will be responsible for sourcing ethane. It will hire the VLECs from the joint venture for the shipping of ethane.

ONGC built the C2/C3 extraction unit at Dahej in Bharuch district of Gujarat in 2008-09. However, its subsidiary OPaL could build the petrochemical plant only in 2017. It sold the C2-C3 compounds extracted from the imported LNG from Qatar, to Reliance Industries-owned IPCL till its plant to convert them into polymers came up.

C2-C3 plant has a handling capacity of 4.9 million tonnes per annum of LNG. OPaL plant comprises 1.1 million tonne a year of ethylene capacity dual feed cracker, along with associated units and polymer plants, to manufacture HDPE, LLDPE, PP and Styrene Butadiene Rubber.