Reuters

Singapore/New Delhi: Iran’s state oil refining firm and the Essar Group are expected to start building a 3,00,000 barrels per day refinery in southern Iran early next year, sources close to the deal said.

The facility, estimated to cost $8-$10 billion (Rs32,000-40,000 crore) and which would be the first foreign-invested downstream project in sanctions-hit Iran, will boost the OPEC member’s stagnant refining sector that is struggling with petrol shortages.

Once finalized, it will be Essar’s first overseas refinery development and will provide a foothold to the family-owned Indian business house in Tehran, where it is also trying to build a steel plant and acquire exploration assets.

The proposed plant at the southern port town of Bandar Abbas, will process heavy crude such as Soroush and Iran Heavy to be allocated by the Iranian authorities.

“We have completed the feasibility study and now we are working on the project financing, and we have targeted starting on the construction phase next year,” a Tehran-based source from the National Iranian Oil Refining and Distribution Company said.

The refinery could take three to four years to build, the source added.

Essar, owned by the Mumbai-based Ruias family, will take a 60% equity stake in the project with Iran taking the rest, said sources.

“The priority of the new refinery will be to meet domestic gasoline and diesel requirements, and we will export the surplus products,” said an India-based source familiar with the deal.

Ravi Ruia, Essar Group’s vice-president responsible for the firm’s overseas venture and his officials are now in Iran to take the issue forward.

“If discussions are finalized, then work can begin early next year,” the Indian source said.

An Essar spokesman declined to comment on Ruia’s visit and the company’s interest in Iran.