Essar Oil plans $100 mn ECB

Essar Oil is in the final stages of negotiations to raise $100 million (about Rs 407 crore) through external commercial borrowings (ECB) for expansion and upgradation of its crude refinery in Khambalia, Gujarat.

ICICI Bank is the principal facilitator for the fund-raising exercise.

"A proposal is still under negotiation between Essar Oil and ICICI Bank for raising $100 million through ECB. This would be used for capacity expansion and technology upgradation at our refinery," said company officials. The company, however, declined to divulge further details of the deal.

The $100 million to be raised through ECB would be part of the investment that Essar Oil would need to expand capacity at its refinery from the existing 10.5 million metric tonne per annum (MMTPA) to 16 MMTPA over the next two years, said an Essar company official.

The company would invest part of the money in upgrading technology at the refinery, as well. The refinery was commissioned in 2006 and is running at a current capacity of 7.5 MMTPA.

The refinery is expected to run at full capacity by July this year. It processes crude in excess of 150,000 barrels a day. The $2.26 billion refinery has a current approximate output capacity of 5.5 MMTPA of high speed diesel and 2.2 MMTPA of gasoline. However, with the capacity expansion, the company would produce larger volumes of other fuels such as liquified petroleum gas, jet fuel, kerosene, fuel oil and bitumen. Essar's Khambalia refinery had been designed to primarily handle a crude mix of Arabian Light and Heavy in a 70:30 ratio. However, additional flexibility was provided for processing a variety of crude mixes from sweet-light crude to heavy high sulphur sour and bituminous crude.

Financial closure for initial funding of the grass root refinery had been achieved earlier. While $1.5 billion were raised through debt, the remaining investment was made by the promoters.