Essar acquires stakes in BP’s oil terminals, pipeline to expand in UK

  • In addition to expanding fuel retail network, Essar Oil UK will bid for new airports, says CEO Thangapandian
  • Wholly owned Essar Oil’s UK arms Essar Midlands, InfraNorth will buy stakes

Essar Oil UK, part of the Ruias’ Essar Group, on Wednesday said it has acquired stakes in two terminals and one pipeline from BP Plc to expand its business in the UK.

The acquisition includes an 11.15% stake in the United Kingdom Oil Pipeline (UKOP), a 45% share in the Kingsbury Terminal and 100% in the Northampton Terminal, Essar Oil UK said.

Though the company did not disclose the transaction value, industry officials familiar with the deal estimated it to be around $120-130 million (approximately 900 crore).

Essar Oil UK already runs an oil refinery at Stanlow near Liverpool. “The transaction gives us the ability and infrastructure to move products from Stanlow refinery to other destinations boosting our logistics infrastructure," said S. Thangapandian, chief executive officer, Essar Oil UK on a call.

Essar Oil acquired the Stanlow unit in 2011 and has since invested over $850 million in the refinery to turn it around.

BP had put these assets on the block in July 2016 to rationalize its portfolio. While BP has sold its entire stake to Essar Oil in the terminals, the 650km UKOP pipeline will now be co-owned by BP, Royal Dutch Shell, Valero, Total and Essar Oil. Two wholly-owned Essar Oil UK subsidiaries—Essar Midlands Ltd and InfraNorth Ltd—will buy the stakes from BP.

Essar said with this deal, its UK investments have touched $1 billion. “The acquisition will allow Essar to maintain its presence in a very competitive UK Midlands region and grow that current footprint. In addition to expanding our fuel retail network, we will be bidding for new airports where we are not present. Our access has been more into Liverpool, Leeds and Manchester. Post this deal, we will be looking at airports around Kingsbury and Northampton where we can reach," added Thangapandian.

The company which operates around 67 fuel retail outlets across England and Wales, plans to grow its network to 400 retail sites over the next five years. Essar Oil supplies over 16% of the UK’s road transport fuel demand and 20% in direct sales of aviation fuel, which the company plans to take to 50% in two-three years. The company which saw its gross refining margin (GRM) under pressure recently, at $8.5 per barrel, (down from $10.5 per barrel in November 2018) due to weak gasoline demand, said it expects improvement in April, when the summer season kicks in. GRM is realization from processing each barrel of crude.

“I think summer will be the season for us to look forward to. Once the customer comes in, gasoline offtake starts and we do expect gasoline to improve which means the GRMs will improve," added Thangapandian.

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