Essar buys stakes from BP in pipeline, terminals for UK refinery2 min read . Updated: 06 Feb 2019, 05:33 PM IST
- Industry officials estimate the size of the deal at around Rs. 900 crore
- Essar Oil UK runs an oil refinery at Stanlow near Liverpool
Ahmedabad/Mumbai: The Ruia-promoted Essar Oil UK, part of the Essar group, has acquired stakes in strategic assets from BP Plc in the UK. The acquisitions include a 11.5% stake in the United Kingdom Oil Pipeline (UKOP), a 45% share in the Kingsbury Terminal and a 100% interest in the Northampton Terminal, Essar Oil UK said.
Though the company did not disclose the transaction value citing privileged information, industry officials aware of the deal estimated it to be around $120-130 million (approximately ₹900 crore).
“The transaction gives us the ability and infrastructure to move products from the Stanlow refinery to other destinations, boosting our logistics infrastructure," said S Thangapandian, CEO, Essar Oil UK on a call.
Essar Oil UK runs an oil refinery at Stanlow near Liverpool. It had acquired the Stanlow refinery in 2011 and has invested over $850 million to turn it around.
BP, as part of its asset rationalizing strategy, sold the stakes to Essar Oil. The company had been seeking buyers for these assets since July 2016.
While in the terminals BP has sold its entire sake to Essar Oil, the 650 kilometre UKOP pipeline is now shared among BP, Royal Dutch Shell, America’s Valero, France’s Total and Essar Oil.
The BP assets are being acquired by two wholly owned subsidiaries of the company, Essar Midlands Limited and InfraNorth Limited.
Post this transaction, Essar’s investments in the UK stand at $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 currently 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 three years.
The company recently faced pressure on its gross refining margin (GRM) at $8.5 per barrel, down from $10.5 per barrel in November 2018 due to weak gasoline demand. Essar Oil said it expects the gross refining margins to improve in April, when the summer season kicks in. GRM is realisation from processing each barrel of crude oil.
“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.