ONGC scripts sharp turnaround in fortunes of its subsidiaries, as OPaL reports 1st profit

New Delhi: India's top oil and gas producer Oil and Natural Gas Corporation (ONGC) has scripted a sharp turnaround in fortunes of its subsidiaries with its petrochemical unit reporting its first ever profit, a top official said.

ONGC Petro additions Ltd (OPaL), the venture ONGC floated for downward integration and expansion into petrochemical field by utilizing its naphtha stream from Hazira and Uran and C2+ components from imported LNG, has been steadily seeing operational profit or EBITDA improvement since 2016-17 but the lopsided capital structure with high-debt servicing cost and high depreciation during the initial period of capitalisation led to incurring net losses. "During the first half of the current fiscal (April to September), OPaL made a profit after tax of Rs 18 crore," ONGC CMD Subhash Kumar said.

Kumar, who pivoted the turnaround story with his finance background, said OPaL is in the process of exiting from the SEZ which would improve the profitability by Rs 800 crore per annum and about Rs 600 crore of more profits will be added if the government were to approve a proposal for the company becoming a unit of ONGC or is merged with it.

ONGC during 2002 to 2006 conceptualized several joint ventures to diversify in other than exploration and production (E&P) business with an objective of value addition, downstream integration and monetisation of its own stranded gas assets. These projects - OPaL, ONGC Mangalore Petrochemicals Ltd (OMPL) and ONGC Tripura Power Company (OTPC) were successfully implemented and are now operating at full capacity.

ONGC as promoter played lead role in selection of LSTK/PMC contractors, execution of various feedstock and off-take agreements, resolution of various complex techno- commercial, regulatory and taxation issues crept during execution and commissioning of these projects. Besides resolving operational, financial and regulatory issues, it let the joint ventures be headed by professional domain expert best from the industry.

Kumar said as per ONGC 2040 Strategy, going forward 70 per cent revenue is expected from refinery and petrochemical business and 10 per cent profit will be contributed from non-oil and gas sector, and so the role of these non-E&P JVs will continue to play a crucial role in the Group. ONGC holds 49.36 per cent stake in the 1.1 million tons per annum capacity OPaL, GAIL has 49.21 per cent and GSPC the remaining 1.43 per cent.