Essar Oil ties up $920 mn to fund refinery expansion

Ruias-owned Essar Oil has tied up $920 million to fund the expansion of its Vadinar refinery in Gujarat to 16 million tonnes, CEO Naresh Nayyar said.

“We have received approval for the debt from ICICI Bank, IDBI and SBI and we hope to sign loan agreements sometime next month,” he told PTI from Mumbai.

The Vadinar refinery, situated five kilometres away from Reliance Industries’ twin refineries in Jamnagar district, currently operates at 133 per cent of its nameplate capacity of 10.5 million tonnes a year.

“The expansion will cost us $1.6 billion or Rs 7,810 crore. Of this, Rs 4,600 crore is debt and the rest equity,” he said, adding that the expansion would be completed by December 2010.

“We are on track for mechanical completion by December 2010. Overall, 35 per cent of the project work has been completed till date,” he said.

The company will in Phase II add a new 18-million-tonne-a year processing unit at an investment of close to $4.4 billion by December 2011. “Phase II would be taken up later. Currently we are concentrating on Phase I expansion,” he said. Nayyar said the financial closure (or tying up funds) for phase I of the refinery expansion will be completed with the signing of the loan agreement next month.