Mumbai: The operator of India’s newest refinery, Essar Oil Ltd, plans to increase capacity to 1 million barrels a day (mbd) and expects to tie up a $4.5 billion loan for the expansion in the “next few weeks,” Naresh Nayyar, managing director, said in Mumbai on Friday.
Organic expansion: Essar’s oil driling rig in operation.
Domestic refining capacity will be increased to 750,000 barrels a day by 2010 from 250,000 barrels, he said. The rest will be added overseas in three to four years.
The refiner aims to narrow the gap with Reliance Industries Ltd, which is using record profits to build the world’s biggest refinery complex. Essar’s Jamnagar refinery started last year, almost a decade after it was first planned, as the group’s steel unit faced losses because of falling prices of the commodity.
Reliance has built a plant in the same city that’s three times larger than Essar’s and will almost double capacity again with a new facility. Reliance Petroleum Ltd, a unit of Reliance Industries, is building a 580,000 barrel-a-day refinery adjacent to the 660,000 barrel-a-day plant owned by its parent.
Essar will sell as much as 60% of fuel from its refineries in India after adding capacity, Nayyar said.
“ Indian fuel demand is rising and we hope the government will change its pricing policies,” Nayyar told analysts and reporters. The refiner currently sells 65 % of fuel to state-run refiners including Indian Oil Corp., the nation’s largest. Essar had to shut more than 90% of its 1,250 fuel stations because it couldn’t match the prices charged by state- run refiners. It plans to invest $290 million on exploration.