The jury is till out on whether the merger of ONGC Mangalore Petrochemicals Ltd with MRPL will provide for better synergy or will it be too unwieldy.
Pros
8There are those who argue amalgamation to be beneficial. The key feedstock (naphtha and aromatics streams) for the operations of OMPL is sourced from MRPL, which would be met captively post the amalgamation while providing flexibility to the management in sourcing of crude so as to maximise the yield depending upon the market dynamics and crack spread available for the respective products. With the amalgamation, the plants of MRPL and OMPL can be operated at optimum utilisation to allow for maximization of Gross Refining Margin (GRM) and maximisation of combined margins.
Cons
8The counter view is that MRPL will be remain vulnerable to exposure in the movement in crack spreads between naphtha and aromatic streams and the finished products which are cyclical in nature, as well as to import duty differentials between finished products and feedstock, and exchange rate movements.
8Owing to depressed crack spreads as the capacity additions are currently out pacing demand, coupled with inadequate feedstock from MRPL which was in the midst of its own capacity expansions, OMPL reported sizeable losses in its first year of operations.
8The company’s cost structure is also elevated because of usage of liquid hydrocarbons as a fuel for process requirement and power generation instead of natural gas which was envisaged at the time of conceiving of project.
The market for petrochemicls is highly competitive and MRPL will find the going tough in this market, which is dominated by big players such as RIL.
For more details visit indianpetroplus.com
Pros
8There are those who argue amalgamation to be beneficial. The key feedstock (naphtha and aromatics streams) for the operations of OMPL is sourced from MRPL, which would be met captively post the amalgamation while providing flexibility to the management in sourcing of crude so as to maximise the yield depending upon the market dynamics and crack spread available for the respective products. With the amalgamation, the plants of MRPL and OMPL can be operated at optimum utilisation to allow for maximization of Gross Refining Margin (GRM) and maximisation of combined margins.
Cons
8The counter view is that MRPL will be remain vulnerable to exposure in the movement in crack spreads between naphtha and aromatic streams and the finished products which are cyclical in nature, as well as to import duty differentials between finished products and feedstock, and exchange rate movements.
8Owing to depressed crack spreads as the capacity additions are currently out pacing demand, coupled with inadequate feedstock from MRPL which was in the midst of its own capacity expansions, OMPL reported sizeable losses in its first year of operations.
8The company’s cost structure is also elevated because of usage of liquid hydrocarbons as a fuel for process requirement and power generation instead of natural gas which was envisaged at the time of conceiving of project.
The market for petrochemicls is highly competitive and MRPL will find the going tough in this market, which is dominated by big players such as RIL.
For more details visit indianpetroplus.com
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