Viability Concerns Force Oil Ministry to Keep Close Watch on Four Projects

Oil Minister Dharmendra Pradhan has questioned the wisdom of investments of thousands of crores

cleared by the UPA government and said state firms spent $5 billion for a stake in a gas project in

Mozambique even though it was well known that the outlook for the LNG market was bearish.

Pradhan told ET that the oil ministry is concerned and worried about four such projects whose viability

has become “challenging“ and was closely monitoring them.

These include Petronet LNG’s Kochi terminal, which has suffered because it doesn’t have pipelines to

take the gas to major consumers; the Imperial deal in which ONGC acquired very costly assets in Russia

but oil production turned out to be trickle; and ONGC Petroadditions Ltd, which planned to build a

petrochemical plant but its cost jumped from ` . 7,000-8,000 crore to about . 27,000 crore in a decade.`

The Mozambique project involves ONGC and Oil India, which obtained cabinet approval to buy 10%

interest in the venture from Videocon. Another 10% was purchased by ONGC from Andarko in the

project, which was expected to bring liquefied natural gas (LNG) to India.

A government announcement in October 2013 said the deal was consistent with the “strategic

objective“ of acquiring “high quality international assets“. However, the price of LNG has crashed from a

spot market peak of $20 per unit to about $4. Pradhan said that with so many LNG projects being built

around that time, the fall in prices, and its impact on the viability of the investment should have been

anticipated.

“It will have to be seen how viable it is now. LNG trend hasn’t changed suddenly. LNG activity was about

to rise, LNG price was expected to fall. Then, the agreed price mechanism for the project is a challenging

one,“ he said.

Petronet’s Kochi terminal, he said would have been viable if the pipelines were built. “Petronet terminal

is a viable project, but its evacuation plan that should have been made, especially for Kerala. If the

pipeline had come to Mangalore, the terminal would have been viable. The pipeline to Mangalore still

doesn’t exist due to Kerala government. This is hurting Kerala’s economy, Kerala’s citizens, Kochi port.“

NGS INDIA