Oil to account for half of Essar group's turnover

Refinery to be commissioned by Nov; group hopes Rs 50000 cr sales by FY '08

Essar group is set to see a fundamental change. Its 10.5 million tonne refinery at Vadinar, to be commissioned in November, will generate about half of the group's expected revenue of Rs 50,000 crore in the next financial year (2007-08), and nudge out steel as the flagship business of the group, company officials said.

By 2007-08, nearly Rs 25,000 crore of Essar Group's turnover will be contributed by the new oil business while the steel business will contribute about Rs 12,000 crore. Shipping will account for about Rs 6,000 crore and other businesses like power and construction are expected to contribute the rest.

The 10.5 million tonne refinery is already in pre-commissioning mode, having received its consignment of crude, a Saharan sweet crude blend. It is negotiating with Vitol for the second consignment which is expected to arrive later this month.

A senior company executive said, "With crude oil arriving at the refinery we can start the pre-process processes and we expect it will take around a month to stabilise these processes. By January the refinery will be fully operational." The fluid catalytic cracker and the diesel hydro desulfurizer is expected to be commissioned around January.

Essar Oil expects its basket of petroleum products to fetch around $ 60 per barrel. These include middle distillates such as high grade kerosene oil and low sulphur high speed diesel, which form over 60 per cent of India's domestic consumer demand. It will also produce LPG and lead-free petrol of various octane levels for the domestic markets and high-octane lead-free petrol for export.

The refinery will produce 5.5mmtpa of diesel and 2.2mmtpa of petrol. Essar Oil also plans to open over 17,000 retail outlets for its fuels and oil products across the country, in two years' time. When complete the Vadinar refinery can produce up to 10.5 and 12 million tonne of processed products per year and its can be ramped up to 14 mtpa. The refinery will also process different varieties of crude including heavy and sour crudes. "This gives us the significant advantage of flexibility in refining and purchase in international markets given that the demand for refining capcity for heavier crudes is growing," said the executive.

The refinery is fully integrated with its own dedicated 120 mw power plant, port and terminal facilities. It includes an single body mooring capable of handling vessels up to 350,000 DWT with a capacity of 25 MTPA, tankages with interconnecting pipelines of 20 mtpa capacity, a marine product dispatch capacity of 12 mtpa, rail-car and truck loading facilities.

The Vadinar refinery has been on the anvil since 1996 but has been delayed due to variety of reasons, including environmental clearances and equity contributions.