India's Essar Oil to Double Design Capacity of Vadinar Refinery by 2012

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Researched by Industrial Info Resources (Sugar Land, Texas)--Essar Oil Limited (BSE:500134) (Jamnagar, Gujarat), India's second-largest private oil-refining company, recently announced plans to expand the capacity of its Vadinar refinery in Gujarat another 2 million tons to 20 million tons per year by September 2012. The new expansion plan has been finalized, influenced by the increasing demand for petroleum products across the country. Further, a detailed project review has revealed that there are several opportunities to de-bottleneck the refinery and expand capacity at very competitive costs.

The company plans to invest about $382 million to implement the expansion plan, which would involve the optimization of six refinery units: the delayed coker unit (DCU), the diesel hydrotreater (DHDT), the diesel hydro-desulphurization unit (DHDS), the fluid-catalytic-cracking unit (FCCU), the sour-water stripping unit (SWSU), and the vacuum gas-oil hydrotreater (VGO-HDT).

"There has been a significant growth in Indian demand for petro products in the last few years, and we see the trend continuing over the next few years," said Naresh Nayyar, the CEO and managing director of Essar Oil. "Augmenting our refining capacity by an additional 2 million tons per annum will help us capture this growing demand at a very competitive capital cost. Based on our internal studies, the optimization project is expected to result in a very strong economic performance for the refinery."

Essar Oil plans to implement a two-phase expansion plan, under which the company's refining capacity would be enhanced to 34 million tons per year by 2015, with an investment of $4 billion. Vadinar refinery is already undergoing Phase I of a major capacity expansion, whereby the refinery capacity will be enhanced to 18 million tons per year from the existing design capacity of 10.5 million tons per year. However, the refinery has consistently been producing 14 million tons per year of refined products. Phase I is progressing according to schedule, and about 72% of the project was completed as per records of October 31, 2010. Except for two units that are likely to be delayed by a quarter, mechanical completion of the rest of the project is expected by March 2011. Mechanical completion of the two delayed units also will be completed by June 2011.

The refinery currently processes about 64% of heavy and ultra-heavy crude oil, and 36% of light sulfur crude. With the completion of the expansion project, the refinery will be capable of processing almost 90% of heavy and ultra-heavy crude oil.

Among Essar Oil's other targets is the plan to have at least 1,700 operational retail outlets by March 2011. About 200 petrol outlets are under construction, while 1,375 outlets already are fully functional.

Essar Oil is also developing the Raniganj coal-bed methane (CBM) block in West Bengal and commercial sales are scheduled to commence by December this year. The company owns about 2,700 square kilometers. Nayyar said that the test production of 18,000 standard cubic meters per day is under way. Another project the company is involved in West Bengal is the development of a city gas distribution pipeline network in the Asansol-Durgapur area.

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