 "Essar Energy bullish on the E&P segment")
"With the new gas price regime kicking in from April 1st, 2014, Gas price is expected to be much better from current $4.2 per mmBtu. We see this as a welcome reform which would boost investments in the E&P sector, followed by ramp up in production, curb expensive imports, promote exploration and increase government revenues. Your company has reserves and resources of nearly 1.7 billion barrels of oil equivalent," said Shashi Ruia – Chairman, Essar Oil on the company's annual general meeting.
Ruia added that with the government demonstrating its intention to fully decontrol auto fuels, the private oil marketing companies can look forward to a level playing in the near future. "We are now at a stage to begin planning the next phase of retail network growth," he said.
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"We have converted $821 million worth of rupee debt into US dollar. This not only lowers our interest, since dollar debt is available at 5-6 percentage points lower than rupee debt, but also takes out the forex fluctuation risk out of our balance sheet," he said.
During the year, Essar received Phase III environment clearance for the Raniganj CBM block, allowing it to undertake full field development of the block, excluding forest area. Essar Oil can now drill upto 650 wells, of which over 160 wells have already been drilled and current production is in excess of 100,000 mscmd, which will be scaled up to 3 million scmd by next year.
Essar's refinery, India’s second largest single location refinery and amongst the most complex globally,processed, 19.76 million metric tonnes (MMT), against 13.50 MMT processed in FY12. As a result, in FY13, Essar Oil reported highest ever revenue at Rs 96,797 crore, which is 53% higher than Rs 63,340 crore reported in FY12.
Till date, Essar has invested over Rs 24,000 crore in Vadinar refinery complex during the year, which took its capacity to 20 million metric tonnes per annum (MMTPA) from 18 MMTPA.
GRM for the full year stood at $7.96/bbl, higher by 88% of $4.23/bbl of FY12.
"We did all this without losing sight on safety of our operations," he said.
Essar Oil is undertaking a series of low capex and short gestation optimization projects across its refinery and marketing value chain under the banner of Optima Plus, which upon completion would provide a GRM uplift of about $1-1.5 per barrel over a period of next three years. These projects include setting up one more Hydrogen Manufacturing Unit and a conversion of existing VGO into more valuable distillates.
With refinery capacity reaching 20MMTPA, the annual requirement of crude oil has also increased to 140-150 million barrels.
Essar Oil has secured long term crude supplies by entering into agreements with various national oil companies in Latin America and Middle East. Its crude basket is well diversified and today is more biased towards heavy and ultra heavy variety, which are normally available at a discount to the benchmark crudes. Against 72% of the crude processed being of heavy and ultra heavy variety in FY12, in FY13 it was 86%.