MUMBAI: State-owned Oil and Natural Gas Corporation Ltd (ONGC) has picked Japan’s Mitsui O.S.K. Lines, Ltd (MOL), the world’s second largest fleet owner, to form a joint venture for owning and operating two very large ethane carriers (VLECs) costing some $370 million for hauling ethane to the Dahej, Gujarat-based petrochemical plant run by its subsidiary ONGC Petro additions Ltd (OPaL), multiple sources said.“ONGC will be signing a binding agreement with Mitsui O.S.K. Lines today to form the joint venture,” a person familiar with the plan said, asking not to be named. Mitsui O.S.K. Lines, the world’s top owner of liquefied natural gas (LNG) carriers, was picked through an expression of interest (EoI) process run by ONGC in which more than 30 top global ship owners participated.
MOL owns and runs 797 ships including 97 LNG carriers.
ONGC, India’s biggest oil and gas explorer, will hold at least 26 per cent stake in the joint venture company with the option of increasing the stake to 50 per cent while the remaining equity will be held by the JV partner, per the EoI document. The JV will own and run two very large ethane carriers to start with.
ONGC plans to source and supply 800 Kilo Tons Per Annum (KTPA) of ethane, mostly likely from the United States, the biggest ethane market, to secure the feedstock for OPaL’s dual feed cracker plant capable of using a mix of Naphtha and C2 (Ethane), C3 (Propane) an C4 (Butane), from May 2028.
One VLEC can transport some 98,000 cubic metres or 50 KTPA and costs as much as $185 million to build from scratch in the current market.
The proposed joint venture company “will select the shipyard and enter into an agreement” with the shipbuilder for constructing the VLECs, per the EoI.
“The joint venture company will be tasked with securing international and domestic funding, including debt financing, for the VLECs, as well as avail government grants, subsidies, and any other incentives for the VLECs, as applicable,” ONGC wrote in the EoI document.
ONGC currently supplies ethane to OPaL which it extracts from the “rich” LNG sourced from RasGas, Qatar by Petronet LNG Ltd (ONGC is an equity partner in Petronet LNG) on a 25-year contract which will end in May 2028.
In the new LNG sourcing contract signed in 2024, RasGas will supply “lean” LNG (devoid of ethane and propane).
This is the main reason for sourcing/importing 800 KTPA of ethane because ONGC will not be able to extract ethane from the “lean” LNG supplied by Qatar. “So, the Dahej plant requiring ethane will have to be shut down if the feedstock is not sourced or made available to OPaL in time,” the source said.
The joint venture deal will boost MOL’s presence in India where it is the fourth biggest Indian ship owner by fleet size, running 13 ships registered under the Indian flag, ten of them in the Domestic Tariff Area (DTA) and three in the Gujarat International Finance Tec-City (GIFT City).
The crude oil and gas carriers are deployed with the state-owned energy companies such as Bharat Petroleum Corporation Ltd (BPCL).
MOL also holds stakes in four LNG carriers run jointly with state-run Shipping Corporation of India Ltd (SCI) and two other Japanese ship owners for hauling LNG from RasGas.
MOL plans to add more ships to the Indian fleet as and when its partners need more vessels to transport their energy raw materials or finished products, a senior official said in June.
With India, South Asia and the Middle East region becoming a key part of the regional strategy enshrined in MOL’s management plan named ‘Blue Action 2035’, MOL will look at “collaborations” with India’s state-run firms to expand, Capt Anand Jayaraman, Executive Officer, South Asia and Middle East, said at a media interaction on June 17 in Mumbai.
“We already have a collaboration with one of the large conglomerates. We are also looking at possibly collaborating with the public sector undertakings if at all it is possible because it’s a win-win for both,” he stated.
“For MOL, this region is very much in the focus because we want to be part of the India growth journey. It makes it obvious that we need to focus more on India and the Indian Ocean region. India is a rapidly growing economy in the world, and we expect this to continue for the next couple of decades at least. So, we want to be present here and be part of the journey of the country’s growth,” Capt Jayaraman added.
