Essar's refinery starts, finally

Essar Oil's 10.5-million-tonne-per-annum (Mtpa) refinery at Vadinar in Gujarat went onstream today, with its first product, LPG, expected to roll out by tomorrow.

The Rs 10,825-crore refinery will begin production with an initial capacity of 7.5 million tonne and ramp up to full capacity by March 2007, a company press release said.

Essar plans to raise the refinery's capacity to 12 Mtpa in a year and to 16 Mtpa subsequently. The capacity would then be doubled by replicating the existing units, a company executive said.

The refinery will process different types of crude, including heavy and sour crude oil varieties. "This gives us the significant advantage of flexibility in refining and purchase in international markets, given that the demand for refining of heavier crude oil varieties is growing," he said.

The company has already imported four cargoes of 4 million barrels of crude oil and a fifth cargo of 2 million barrels is expected on November 25-26. Three more cargoes have been ordered. For now, the refinery will process sweet crude from Algeria, Yemen, Nigeria, and West Asia.

With the commissioning of the refinery, nearly half of the group's revenues are expected to accrue from the refining business, starting next year. The business is expected to generate about Rs 50,000 crore in revenue by the next fiscal, when the refinery will be operating at full capacity.

The company expects its basket of petroleum products to fetch around $60 a barrel. These include middle distillates such as high-grade kerosene oil and high-speed diesel, which constitute over 60 per cent of India's domestic consumer demand.

The plant will also produce LPG and lead-free petrol of various octane levels for the domestic market and high-octane lead-free petrol for export.

The Vadinar refinery was nearly 60 per cent complete when it was flattened by a cyclone in 1999. Work on the project was stalled for a few years and began again in March last year. It was targeted for completion by January next year.

While 35-40 per cent of the refinery's products will be exported, it will also feed the company's 900 retail outlets. By March next, the number of Essar Oil retail outlets is expected to go up to 1700.