In another sign of the growing demand for water treatment plants in water-starved India, Essar Oil Ltd is setting up a water desalination project as part of the expansion of its Vadinar refinery in Gujarat and has commissioned General Electric Infrastructure India to undertake a study on how this can be done.
Located on the west coast, the refinery will have access only to sea water and needs a desalination plant to generate the water required for distilling crude into petroleum products. Essar plans to more than treble the capacity of its refinery at Vadinar from 10.5 million tonnes per annum (mtpa) to 34mtpa by 2010 at an investment of $6 billion.
“Water treatment plant that is being set up by Essar is for our captive use for our refinery expansion programme. After the study is completed we will know what will be the costs involved along with the water desalination project capacity,” said an Essar Group spokesperson who confirmed the development.
The study will be conducted by GE Water and Process Technologies, a unit of GE Infrastructure, which is a leading global supplier of water treatment, waste water treatment and process systems solutions.
A GE spokesperson declined comment on the issue.
The competition for water treatment business in India is growing with firms such as Hyderabad-based IVRCL Infrastructures and Projects Ltd, South Korea’s Doosan and Vivendi Water Systems of France evincing interest in the space.
GE has also bid to set up a Rs800 crore water desalination project in Gujarat’s Kutch region as part of a consortium with IVRCL Infrastructures and Projects, Toyo Engineering Corp. of Japan and Cethar Vessels of Tamil Nadu. The project is to be awarded by Gujarat infrastructure development board, which is yet to take a decision on it.
Analysts say industrial customers, such as upcoming refinery projects in India, present a growing market for companies in the business of setting up desalination plants.
“The expansion is a very positive move for Essar as it will give them a competitive advantage in the refining space. However, we do not see it (the completion of the expansion) possible by 2010 as the time period is very ambitious. While the major expenses to the tune of 70% will be for units such as hydro cracker, the remaining expenses will be for projects such as water desalination,” said Rohit Ahuja, an analyst at JM Financial Ask Securities Pvt. Ltd.
The Vadinar refinery was commissioned in November 2006 and has been processing around 7.5mt of crude a year. With the expansion, the refinery will be able to handle a wide range of crude types, from light to heavy. That will enable the firm leverage the price differential between the two to its advantage; heavy crude is cheaper than light crude.