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Essar mulls stake purchase in Zambian refinery

Essar mulls stake purchase in Zambian refinery
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First Published: Sun, Jan 10 2010. 10 10 PM IST
Updated: Sun, Jan 10 2010. 10 10 PM IST
Lusaka, Zambia: India’s Essar Group plans to acquire a majority stake in Zambia’s state-owned Indeni Refinery, which has a capacity to refine around 1 million tonnes per annum (mtpa) of crude. South Africa’s Sasol Ltd is among the companies vying for the same stake.
Essar plans to enter the fuel retailing business in Zambia and supply petroleum products to countries in the vicinity by acquiring the refinery, located in Ndola, 420km north of the capital Lusaka.
Total SA of France had a 50% stake in the refinery which was recently acquired by the Zambian government.
“The Zambian government has to take a decision whether they want to divest the refinery along with the 1,300km Tazama pipeline that brings crude from Dar es Salaam port in Tanzania,” said a person aware of the development who did not want to be identified.
Essar plans to use the refinery, one of the few inland refineries in Africa, to supply petroleum products to the Democratic Republic of Congo, Malawi, Zambia and even East Angola.
Currently, the liquefied petroleum gas (LPG) produced at the refinery goes to Kenya by road. Essar plans to take petroleum products instead of LPG to Mpulungu harbour in north Zambia, which is located on lake Tanganyika, and then supply it to countries such as Libya, Kenya, Tanzania, Burundi and some East African countries by ship as the lake connects all these countries.
An official at the Indian High Commission in Lusaka, who didn’t want to be named, confirmed Essar Group’s interest in the refinery.
An Essar Group spokesperson, in an email reply to queries from Mint, said: “As a group we keep on looking for opportunities in the sectors that we are in. However, we do not comment on any specific proposal.”
Essar Group has a presence in Africa’s refining sector with its Mombasa refinery acquisition in Kenya. The group has a 14 mtpa refinery at Vadinar in Gujarat which it plans to expand to 34 mtpa.
Analysts say that with a significant number of Indian firms picking up stakes in hydrocarbon blocks in the region, a refinery arrangement would be an asset to the value chain.
The firm that gets the refinery will have to invest around $100 million (Rs458 crore) for refurbishing and augmenting refining capacity as its current configuration allows separation of only diesel and LPG. The government of Zambia is expected to take a decision on the stake sale by March.
“Since India is looking at Africa for acquiring equity in hydrocarbon blocks, I wouldn’t be surprised if more such opportunities are not pursued by Indian companies,” said a senior official in the Indian government who did not want to be identified.
Africa is estimated to have around 10% of the world’s oil reserves. Indian hydrocarbon firms such as ONGC Videsh Ltd and Oil India Ltd are present in the hydrocarbon sector in the continent, where they are seeking more acquisitions.
utpal.b@livemint.com
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First Published: Sun, Jan 10 2010. 10 10 PM IST