Ahmedabad: Essar Oil Ltd, India’s second largest private refiner, has completed expanding its Vadinar refinery in Gujarat to 20 million tonnes per annum (mtpa), or 405,000 barrels a day, from 18 mtpa, investing Rs 1,700 crore.
The expansion and optimization of the facility will allow Essar Oil to process cheaper but heavier crude varieties, especially from Cairn India’s Mangala fields in Rajasthan, and earn a higher margin from refining.
A file photo of an Essar Oil refinery
The share of ultra heavy and heavy crude will go up to 80% of the refinery’s total crude basket. Essar Oil has already entered into long-term crude sourcing contracts with global suppliers, including several national oil companies in Latin America.
Inclusive of the latest expansion, Essar Oil has invested Rs 25,000 crore in the facility, Lalit Gupta, managing director and chief executive, said on Tuesday.
It is also setting up a 500 megawatts (MW) coal-fired power plant to supply electricity to the Vadinar refinery and lower its refining cost by $1 a barrel, he said.
Essar requires about 300MW of power a year for the facility. It already runs two gas-fired turbines that can each supply 110MW a year to it. But the company uses costly imported gas to run the turbines as the refinery has not been able to procure gas from domestic sources.
In terms of product yield, the refinery now has the flexibility to produce higher value, high-quality products, including gasoline (petrol) and gas oil (diesel) conforming to Euro IV and Euro V emission norms.
Nearly 80% of its production will now be of valuable light and middle distillates, and more than half of the production of gas oil and gasoline will meet Euro IV and Euro V specifications.
Essar Oil is targeting new markets such as Australia, New Zealand and north-west Europe as well as countries in the Indian subcontinent for exporting these fuels, although it will continue selling a majority of the products in the domestic market.
On plans to enter the petrochemical business, Gupta said the company had proposed to set up a petrochemical complex with a polypropylene unit but it had no plans now for any further expansion at Vadinar.
The company in 2007 signed a pact with the Gujarat government to expand the capacity of the Vadinar facility to 36 mtpa in two phases.
“Currently, we are focusing on stabilizing this project and once we are satisfied with the results we will go back to the drawing board,” Gupta said.
He added that Essar Oil has asked parent Essar Energy Plc. to convert Rs 1,396 crore of foreign currency convertible bonds into equity to increase the net worth of the Indian firm.
Gupta also said Essar Oil will issue fresh equity to raise Rs 3,000 crore mainly to meet the liability arising out of sales tax deferment to the Gujarat government and to retire a part of the Rs 13,500 crore debt on its books