ONGC’s Ethane Import Plans for 2028

The Oil and Natural Gas Corporation (ONGC) announced plans to import ethane starting in mid-2028. This decision comes in response to the altered composition of liquefied natural gas (LNG) sourced from Qatar. Currently, India imports 7.5 million tonnes of LNG annually from Qatar, which includes various hydrocarbons essential for energy and chemical industries.

LNG Supply and Composition Changes

ONGC’s existing contract with QatarEnergy supplies LNG that contains methane, ethane, and propane. Methane is primarily used for electricity generation and as a cooking fuel. The current contract, which ends in 2028, will transition to a supply of ‘lean’ gas, stripped of ethane and propane. This change necessitates ONGC to seek alternative sources for ethane.

Ethane Extraction and Utilisation

To manage the transition, ONGC has invested approximately Rs 1,500 crore in a C2 (ethane) and C3 (propane) extraction plant located in Dahej, Gujarat. The extracted ethane and propane are used as feedstock for ONGC’s petrochemical subsidiary, ONGC Petro additions Ltd (OPaL). This facility is for producing various petrochemical products.

Future Plans for Ethane Supply

ONGC plans to import 800,000 tonnes of ethane annually to ensure a steady supply for OPaL starting in May 2028. The company is actively seeking joint venture partners to construct very large ethane carriers (VLECs) to facilitate the shipping of ethane. This partnership aims to enhance operational efficiency and secure funding for the construction of these vessels.

Joint Venture and Shipping Strategy

The tender released by ONGC outlines the need for partners with experience in operating VLECs or similar carriers. ONGC will be responsible for sourcing the ethane while the joint venture will focus on the construction and management of the shipping fleet. The deadline for expressions of interest is set for March 27, 2025.

OPaL’s Petrochemical Capacity

The ONGC Petro additions Ltd (OPaL) facility is notable for being the largest standalone dual feed cracker in Southeast Asia. It has the capacity to produce 1.1 million tonnes of ethylene annually, along with other associated units for polymer production. This capacity is crucial for meeting domestic and international demand for petrochemical products.

Historical Context of Ethane Production

ONGC established its C2/C3 extraction unit in Dahej in 2008-09. However, OPaL’s petrochemical plant was only completed in 2017. Initially, the extracted C2-C3 compounds were sold to Reliance Industries until OPaL’s polymer conversion plant became operational. This historical context marks the evolution of ONGC’s capabilities in the petrochemical sector.

Economic Implications

The import of ethane is expected to boost India’s petrochemical industry. It will ensure a stable supply of feedstock for domestic production. This move aligns with India’s broader energy security strategy and aims to reduce dependence on fluctuating global markets.

Questions for UPSC:

1. Critically analyse the impact of LNG composition changes on India’s energy security.
2. What are the challenges faced by ONGC in establishing partnerships for VLECs? Discuss.
3. Estimate the significance of ethane in the production of petrochemicals and its economic implications.
4. Point out the historical developments in India’s petrochemical industry and their influence on current policies.

Answer Hints:

1. Critically analyse the impact of LNG composition changes on India’s energy security.

1. The shift to ‘lean’ gas will reduce the availability of ethane and propane, critical for petrochemical production.
2. Dependence on Qatar for LNG poses risks; diversification of sources is essential for energy security.
3. Increased imports of ethane are necessary to maintain supply for domestic industries, impacting self-sufficiency.
4. Changes may lead to higher costs for petrochemical production, affecting market prices and energy costs.
5. Long-term contracts and partnerships will be vital to stabilize supply and manage geopolitical risks.

2. What are the challenges faced by ONGC in establishing partnerships for VLECs? Discuss.

1. Finding partners with the necessary expertise in operating and managing very large ethane carriers (VLECs) is challenging.
2. Securing funding for the construction of VLECs may be difficult due to market volatility and investment risks.
3. The competitive landscape in the shipping industry could hinder collaboration with experienced players.
4. Regulatory and compliance issues may arise in the construction and operation of new vessels.
5. Logistical challenges in coordinating the shipping and supply chain for ethane imports could complicate partnerships.

3. Estimate the significance of ethane in the production of petrochemicals and its economic implications.

1. Ethane is a primary feedstock for producing ethylene, a key building block in petrochemicals.
2. Stable ethane supply ensures consistent production of polymers and chemicals, supporting domestic industries.
3. Increased ethane imports can enhance India’s competitiveness in the global petrochemical market.
4. Economic growth in the petrochemical sector can lead to job creation and technological advancements.
5. Dependence on ethane imports may expose the economy to global price fluctuations, affecting profitability.

4. Point out the historical developments in India’s petrochemical industry and their influence on current policies.

1. Establishment of the C2/C3 extraction unit in 2008-09 marked the beginning of investments in petrochemicals.
2. Completion of OPaL’s petrochemical plant in 2017 demonstrated advancements in domestic production capabilities.
3. Initial reliance on external sales to companies like Reliance Industries brought into light the need for self-sufficiency.
4. Government policies have evolved to encourage investment and partnerships in the petrochemical sector.
5. Historical developments have shaped current strategies focused on diversifying feedstock sources and enhancing production capacity.