Oil & Natural Gas Corporation announced on Monday, January 6, that it has signed joint venture agreements and capital contribution agreements with Japan's Mitsui OSK Lines Ltd (MOL) to establish two joint venture entities in GIFT City, Gandhinagar. This strategic partnership marks ONGC's expansion into specialized maritime logistics for petrochemical transportation.

Joint Venture Structure and Investment

The partnership involves the creation of two companies: Bharat Ethane One IFSC Private Ltd and Bharat Ethane Two IFSC Private Ltd. Each entity will receive an equity subscription from both partners, establishing a balanced ownership structure.

Fleet and Operations

Each joint venture entity will own and operate a very large ethane carrier (VLEC) under the Indian flag. The specialized vessels are designed to transport ethane from the United States to supply feedstock for ONGC Petro Additions Limited (OPaL), a subsidiary of ONGC.

Strategic Significance

This initiative represents ONGC's strategic entry into business diversification and growth. The deployment of VLECs for ethane transportation allows ONGC to capitalize on emerging opportunities in energy logistics while strengthening integration across its value chain.

Mitsui brings significant experience to the partnership, currently owning and operating four liquefied natural gas (LNG) ships for Petronet LNG Ltd, India's biggest LNG importer, and six ethane carriers for Reliance Industries Ltd.

Market Context

ONGC plans to import ethane starting in mid-2028 to compensate for the altered composition of LNG sourced from Qatar. This strategy addresses the growing demand for petrochemical feedstock, with ethane serving as a crucial component in ethylene production for various plastic manufacturing processes.

Shares of Oil and Natural Gas Corporation ended at ₹238.05, down by ₹3.41, or 1.41%, on Monday, January 6.

Oil & Natural Gas Corporation (ONGC) reported an 18% year-over-year increase in standalone net profit for the second quarter ended September 30, 2023, driven by higher oil and gas prices. The state-owned oil explorer also declared an interim dividend of ₹6 per share and recently entered into a strategic partnership with Japan's Mitsui O.S.K. Lines Ltd. for ethane transportation.

Financial Performance

Segment Performance

The offshore segment continued to be the major contributor to ONGC's revenues and profits, accounting for nearly 70% of total revenue.

Strategic Joint Venture Development

ONGC signed Joint Venture Agreements and Capital Contribution Agreements with Mitsui O.S.K. Lines Ltd. (MOL), Japan, to subscribe equity shares in two joint venture entities - Bharat Ethane One IFSC Private Limited and Bharat Ethane Two IFSC Private Limited, both registered in Gift City, Gandhinagar.

Each joint venture company will own and operate one Very Large Ethane Carrier (VLEC) under the Indian flag, deployed for transporting ethane from the United States to meet feedstock requirements of ONGC Petro additions Limited (OPaL).

Dividend Declaration

The ONGC board declared an interim dividend of ₹6.00 per equity share (120% of face value) for FY 2023-24. The total payout amounts to ₹7,548.00 crore, with the record date set as November 14, 2023.

Other Strategic Investments

ONGC approved an investment of up to ₹421.50 crore in its wholly-owned subsidiary ONGC Green Limited, demonstrating the company's commitment to renewable energy expansion. The ethane shipping venture aligns with the Maritime Amrit Kaal Vision 2047, emphasizing national self-reliance and maritime infrastructure development.