ONGC Partners Mitsui in Joint Venture, Expands into Ethane Shipping Business

In order to enter the specialised ethane shipping market, ONGC would acquire a 50% share in two joint ventures with Mitsui OSK Lines (MOL) of Japan. Japan. ONGC and MOL will hold equal interest in the joint ventures, which will each own a very large ethane carrier (VLEC). According to PTI, the ships, which would cost roughly $370 million in total, will begin transporting ethane from the US to ONGC Petro Additions Ltd (OPaL), the company's petrochemical division, in the middle of 2028. The organisations, Bharat Ethane One IFSC and Bharat Ethane Two IFSC, would have their headquarters in GIFT City, Gujarat.

MOL will run the Indian-flagged vessels, while ONGC will purchase 200,000 equity shares of INR 100 each in both businesses. Since Qatar is anticipated to switch to selling "lean" gas—which excludes ethane and propane—the action will assist ONGC in securing ethane supplies. To meet OPaL's feedstock requirements, ONGC intends to import about 800,000 tonnes of ethane per year starting in 2028. With its current operations of ethane carriers for Reliance Industries and LNG vessels for Petronet LNG, MOL contributes substantial shipping experience. South Korean shipyards will construct the new vessels.

Ongoing developments in ONGC

The largest dual-feed cracker in India is run by OPaL and uses gaseous feedstocks such as butane, propane, and ethane in addition to naphtha. A gas extraction plant in Dahej with an annual processing capacity of 4.9 million tonnes of LNG was previously purchased by ONGC for INR 1,500 crore. Through the integration of MOL's shipping experience with ONGC's sourcing capabilities, the new venture is anticipated to enhance ONGC's petrochemical supply chain.

ONGC Eyes $500 Million Dividend Payout

Global broking firm Jefferies has stated that ONGC may be about to unlock $500 million in long-pending dividends from its Venezuelan upstream project, pointing to a possible boost to the state-run explorer's balance sheet and sentiment should a US-led restructuring of the Latin American country's oil sector succeed. Jefferies points out in a note that ONGC has not received its portion of the more than US$500 million in dividends from the production at San Cristobal.

According to the broking, ONGC may be able to recoup these owed sums as a result of the US intervening, which would be advantageous for a potential US takeover of Venezuela's oil sector and the corresponding lifting of sanctions. Given that ONGC achieved a consolidated net profit of INR 571 billion in FY24 with a free cash flow to firm (FCFF) of INR 473.6 billion and a double-digit FCF yield, Jefferies contends that the recovery of these dues would occur on top of strong current cash creation. It notes that the company currently trades below book, with an earnings yield of 18.1% and a price-to-book ratio of 0.9 times for FY24—metrics that allow for re-rating should Venezuelan cash flows be released.