ONGC and BPCL were to hold 49 per cent of the equity in the venture, while the balance was to be offered to financial institutions and public. The foreign-exchange component in the plan was Rs 830 crore. At one point, it seemed as if the partners would shelve the idea of going ahead till ONGC began discussions with some Japanese companies as potential alternatives.

However, there was no progress after that and Engineers India (EIL) was recently commissioned to do a feasibility study of the plan. It, therefore, seemed that the project would be revived as per the original plans with ONGC and BPCL as partners.

However, with the recent "marriage"between IOC and ONGC through the recent 10 per cent crossholding deal coupled with the intention to work together in a range of petro-related activities, BPCL may no longer be considered as a partner for the paraxylene plan.

This is because ONGC is exploring the option of teaming up with IOC for the latter's own petrochemicals project planned in Panipat. If it decides to go ahead, teaming up with BPCL would be tantamount to competing with an IOC-promoted project where ONGC is the second partner. "This would be an awkward situation for ONGC and hence it makes sense to rope in IOC for the Hazira project," sources said.

However, the revised thinking is that it makes little sense to go for two petrochemical projects unless there are better alternatives to paraxylene. And if this state of uncertainty continues, ONGC would even have reservations teaming up with IOC for its Panipat petrochemicals project.

"The industry is in such bad shape that ONGC would be better off concentrating on its key strengths ofexploration and production. The recent crossholding with IOC and GAIL translated into an outgo of over Rs 2,000 crore and ONGC would do well to consider other investments in petro-related activities carefully," sources said.

According to them, the course of action for the Hazira project will be clear only after EIL submits its findings. It is after this that work will resume all over again while drawing up a revised cost structure and possibly seeking more viable options to paraxylene. In this case, ONGC, the lead company, will take at least 26 per cent while offering Indian Oil up to 24 per cent in the plan.

The paraxylene project initially involved manufacturing 2.75 lakh tonnes of paraxylene, 55,000 tonnes of othoxylene, three lakh tonnes of benzene, 2.4 lakh tonnes of naphtha and 2.22 lakh tonnes of raffinate. There were separate units planned for recovery of paraxylene and aromatics as also a naphtha-splitter unit.

The project was so planned that it would be self-sufficient in all departmentsexcept for raw water and fuel gas which would be sourced from ONGC's gas terminal situated nearby. It was high on the priority list of the upstream major as it translated into a serious foray into the downstream sector.