Essar Oil lines up Rs1,700 cr for Vadinar refinery expansion

MUMBAI: Essar Oil, the country’s second-largest private refiner, on Wednesday said it will expand its refinery capacity by 2 million tonnes a year at Vadinar in Gujarat with an investment of Rs1,700 crore. The company will scale up its capacity to 20 million tonne by 2012, the company said in a regulatory filing.

The move is a part of Ruia family-promoted company’s two-phase expansion plan for scaling up its capacity to 34 million tonne by 2015 that would require an investment of $4 billion. Managing director Naresh Nayyar said higher capacity would help the company meet growing demand at a very competitive capital cost. “Based on our internal studies, the optimisation project is expected to result in a very strong economic performance for the refinery,” Mr Nayyar said.

Essar Oil is currently implementing a project to expand its capacity from 14 million tonne to 18 million as part of the phase-I expansion. As on October 31, 2010, 72% of phase-I has been completed and is on track for mechanical completion by March 2011, with the exception of two units that are delayed by a quarter, the company said.

The oil refinery arm of London Stock Exchange-listed Essar Energy said the expansion of 2 million tonne will be achieved through optimisation of some of the refinery units. The move follows a detailed project review that identified several opportunities to de-bottleneck the refinery and revamp some of the units at an extremely competitive capital cost.

The optimisation project entails the revamp of six refinery units, including fluid catalytic cracking unit, diesel hydro desulphurisation unit, sour water stripping unit, diesel hydrotreater, vacuum gas oil hydrotreater and delayed coker unit, the company added.