Essar Oil shares gain on bidding for Shell refineries

Essar Oil shares gain on bidding for Shell refineries
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First Published: Tue, Aug 18 2009. 10 55 PM IST
Updated: Tue, Aug 18 2009. 10 55 PM IST
New Delhi: Essar Oil Ltd gained in Mumbai trading on Tuesday, on speculation its bid to acquire the UK’s second largest refinery from Royal Dutch Shell Plc. would enable the company to boost earnings by selling fuels in Europe.
India’s second largest non-state refiner advanced 3.9% to Rs134.90, the first gain in three days. The stock has added 55% this year, compared with the 56% increase in the Bombay Stock Exchange’s benchmark Sensex index.
Essar Oil bid for the Stanlow plant in England to add capacity in Europe and gain access to markets and pipelines, a person familiar with the matter said, declining to be identified because the information is confidential. Shell also received bids from the Indian company for its two German refineries in Hamburg and Heide, the Financial Times reported, without citing anyone.
“They are probably looking to get entry into marketing of fuels in Europe, considering the company is expanding its capacity in India,” said Niraj Mansingka, an analyst with Edelweiss Capital Ltd in Mumbai.
Essar Oil operates a 10.5 million-tonne-a-year refinery in Gujarat and plans to spend $1.56 billion (nearly Rs7,600 crore) to expand annual capacity to 16 million tonnes (mt) by December 2010, according to a website presentation. The Mumbai-based company will increase capacity to 34 mt in a second phase, spending an additional $4.44 billion. It had bought a 50% stake in Kenya Petroleum Refineries Ltd last month.
Building a refinery and distribution network in Europe would be too expensive for Essar Oil, the person familiar with the Stanlow bid said.
Essar Oil managing director Naresh Nayyar didn’t answer phone calls.
Shell had said earlier this month it may sell Stanlow to reduce costs and cut spending. Declining profit margins have prompted refiners to temporarily close plants, seek the sale of others and slow operating rates.
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First Published: Tue, Aug 18 2009. 10 55 PM IST