Essar Oil to triple capacity in 3yrs

The company drops delisting plan.

Essar Oil will spend about $6 billion (Rs 24,000 crore) to more than triple its refining capacity in three years, and that it had shelved a plan to delist the company's shares from the stock market.

The company, owned by Mumbai-based Ruias, plans to expand capacity from the current 10.5 million tonnes per annum to 34 million tonnes per annum by 2010.

Last month, Essar Oil said it will build a new 3,60,000 barrel per day (bpd) refinery next to its existing plant at Vadinar in Gujarat, that would help raise its capacity to 6,80,000 bpd by 2010.

The Vadinar refinery, started in November 2006 at an investment of about Rs 12,000 crore, has an installed capacity of 10.5 million tonnes per annum and is operating at a capacity of about 7.5 million tonnes.

"The expansion is planned in a phased manner," Managing Director Naresh Nayyar said. "Our existing refinery will come to full capacity within a month and thereafter we need to de-bottleneck and start a delayed coker unit which will take the capacity to 16 million tonnes."

"After that a separate unit will be set up to expand the capacity by another 18 million tonnes," Nayyar said.

The expansion will enable handling a wide range of crudes from light to heavy and take advantage of the market differential between heavy and light crudes conforming to Euro IV and V environmental norms.

Basic engineering design for the expansion has been completed and the equipment will incorporate the latest in technology from renowned international suppliers.

Essar was in talks with local and foreign banks to raise $4 billion in debt by March 2008 to fund the expansion, Nayyar said.

Essar Oil, which said in January it planned to delist from the Bombay Stock Exchange, will not proceed with that plan.

Explaining the reasons for dropping the delisting plans, Nayyar said the company felt that the business environment and market circumstances had changed since its earlier decision.

"We want to stay listed because we are expanding. It gives an option for future fund-raising, if required," he said.

The company said it plans to raise another $2 billion by issuing its owners global depository receipts on a preferential basis at an effective prices of Rs 200 a share to meet part of the requirement of funds for the expansion.

Ahead of the announcement, Essar Oil shares closed 22 per cent higher at Rs 192.35 at the Bombay Stock Exchange on Friday, after touching a record Rs 209.90 in intra-day trading. The share closed last week at Rs 78.59.