India’s privately owned Essar Oil intends to invest 16 billion rupees (US$239.8 million) to double the capacity of its 20 million tonne per year (400,000 barrel per day) Vadinar refinery in Gujarat State.
Essar’s managing director and CEO, Lalit Kumar Gupta, said last week that the expansion should lift gross refining margins (GRM) by an additional US$1.50 per barrel of crude by 2019.
“We have already invested 4 billion rupees [US$59.9 million] during a 28-day planned shutdown of the refinery in September-October last year. A further 12 billion rupees [US$179.9 million] will be invested to make additional upgrades in the various refinery units over the next two to three years,” Gupta said. He added that the project would be funded internally, given the company generates US$1 billion in EBITDA.
However, Gupta said that a final investment decision (FID) would only be made after a strategic investor was in place. Essar has agreed to sell a 49% stake to Russia’s Rosneft, with the deal expected to close this year.
Essar’s head of refinery, C Manoharan, said: “Post the shutdown, we have been able to modify our crude blend to process higher quantities of ultra-heavy and high [total acid number] TAN crudes, and increase the production of high-value distillates. This has enabled Essar Oil to improve its crude and product mix significantly.”
Over the next two to three years, the company intends to upgrade its naphtha hydro treater (NHT), isomerisation unit, continuous catalytic reformer (CCR) units and further sulphur recovery facilities to improve its margins.
According to Gupta, the expansion of these units will halve Essar’s naphtha exports to one cargo a month and raise annual gasoline output by 10-15% from 3-3.5 million tonnes at present. This is in line with Essar’s strategy to meet India’s rapidly rising fuel demand.
Gupta said Essar’s fuel exports would sharply drop in fiscal 2018-19 as it ramps up domestic sales and turns some of its naphtha into gasoline. Essar Oil has 2,470 fuel stations and exports about 45% of its refined fuels output. According to Gupta, the plan is to expand its retail network to more than 5,000 stations by 2017, shrinking exports to 25% of its production in the process.
Essar is looking for fuel storage depots at Rajasthan, Maharashtra and Uttar Pradesh to add to facilities in Mumbai, Kochi and Kakinada, the CEO added.