The Hindu Business Line : Essar Oil plans Rs 4,000-cr LNG terminal in Gujarat

Snapshot
HPCL discussed Essar’s proposal in its latest board meeting
Essar had earlier shown interest in being part of the Adani-GSPC consortium but pulled out
Essar is expanding Vadinar refinery capacity to 34 mt

Amit Mitra

Mumbai, Dec. 4 Essar Oil Ltd, part of the Essar conglomerate, is planning to expand its business portfolio by dipping into the growing LNG terminal business in India.

The company has put up on its drawing board a proposal to set up a Rs 4,000-crore LNG terminal in Gujarat, even as it is going full steam in the expansion of its oil refinery and marketing businesses.

Sources said Essar is in talks with Hindustan Petroleum Corporation Ltd (HPCL) for a possible equity participation in the project. HPCL has also discussed the Essar proposal in its latest board meeting, the sources added.

While the outcome of HPCL’s board meeting on the proposed joint venture is not known, sources said that the oil PSU’s stake in the project could be about 30 per cent.

An Essar spokesman declined to comment on the LNG proposal, however adding that “We as a group keep looking for growth opportunities.”

Second Attempt

This is Essar’s second attempt at entering into the LNG business. Earlier this year, it had shown interest in being part of a consortium with the Adani Group and Gujarat State Petroleum Corporation to set up a Rs 10,000-crore re-gassification LNG terminal at Mundra in Gujarat — the 10 million tonne terminal was proposed to be set up alongside the Mundra port to facilitate movement of LNG carriers to the terminal. Later however, Essar pulled out of the project.

Other PSU companies, such as IOC, ONGC and GAIL, have also proposed to set up LNG terminals at Ennore, Mangalore and Dabhol respectively, while existing players like Petronet LNG are ramping up their capacities.

Company projects

Essar Oil is at present into oil refining, marketing and distribution and exploration and production. Its 10.5-mt refinery at Vadinar, which commenced production from May 1, is being expanded to 34 mt in two phases by 2010. In the first phase, it will expand its refinery capacity to 16 mt by revamping, modifying and adding new process units, while in the second phase it will set up similar units to add a further 18 mt capacity.

The refinery expansion is estimated to involve an investment of $6,000 million, with the promoters of the company to infuse capital of $2 billion in two tranches and the remaining, about $4.5 billion, to be raised through ECB and rupee loans. The company has in-principle commitment from lenders to the tune of $4.3 billion.

The LNG terminal proposal is a logical addition to the company’s expansion plans in the oil terminal and port sectors. Essar, through one of its group companies, is setting up a 10.5-mt capacity oil terminal at a cost of Rs 2,800 crore at Vadinar, which is expected to be completed by July 2010.

The company is also setting up of a Rs 750-crore, all-weather deep draft port at Hazira for import of iron ore, pellets, coal and limestone, apart from export of finished steel products, apart from an integrated terminal facility at Salaya, near Jamnagar.