Essar completes refinery expansion, hikes capacity to 20 MT

Mumbai: Essar Oil today announced completion of its Rs 10,000 crore expansion project at the Vadinar refinery in Gujarat, taking the annual capacity to 20 million tonnes, four months ahead of schedule.

"Completion of the optimisation project marks the end of the capex cycle and we are now geared to enjoy significant upside in margins," Ruias-promoted Essar Oil, which is the country's second largest private refiner, said in a statement.[caption id="attachment_332930" align="alignleft" width="380" caption="Increasing capacity. Reuters"][/caption]

The Vadinar refinery accounts for about 10 percent of the country's refining capacity, it added.

"We are very happy to announce the completion of our optimisation project much ahead of the schedule. With this commissioning, our capex cycle has now come to an end and we are fully geared to deliver the value of our investments to all our stakeholders," Essar Oil managing director and chief executive Lalit Gupta said in the statement.

The company has invested over Rs 10,000 crore to expand capacity to 20 MT, or 405,000 barrels per day, which will improve complexity to 11.8.

This takes the total investment into the Vadinar facility to around Rs 24,000 crore, the company said, adding that the capital cost at Vadinar refinery is only half the global average for capacity creation.

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Prior to expansion, the facility had 10.5 MT capacity and by March 2012, this rose to 18 MT, involving an investment of Rs 9,100 crore. The optimisation project, involving an additional Rs 1,700 crore capex, took the total capacity to 20 MT and investment to around Rs 24,000 crore.

Essar Oil set up the refinery at a capital cost of $12,746 per barrel, which is about half the global average.

With this, the refinery can process over 80 percent of ultra heavy and heavy crude and produce higher grade products like Euro IV and Euro V-compliant petrol and diesel to cater to the domestic and international markets.

"Our operating costs are amongst the lowest worldwide and with the completion of the optimisation project we have significantly moved up in the refining value chain," Essar Oil, director for refinery business, C Manoharan said.

The refinery can now process much heavier crude. The share of ultra heavy crude will go up to 60 percent, and as a result, the overall share of heavy and ultra heavy crude will touch 80 percent of the refinery's total crude basket, he said.

The company has long-term crude sourcing contracts with global suppliers, including several national oil companies from Latin America.

Close to 80 percent of its production will now be of valuable light and middle distillates and over 50 percent diesel and petrol will be Euro IV and and Euro V-compliant.

The company also said it will be targeting newer markets like Australia, New Zealand and Northwest Europe in addition to the subcontinent markets for exports.

However, it will continue to market a majority of its products in the domestic market only, the company added.

PTI