On the back of record refinery throughput and higher crude oil prices, Essar Oil Ltd (EOL) has reported a 78 per cent growth in its net profit for the quarter ended March 31, 2011. Net profit for the quarter stood at Rs 321 crore as against Rs 180 crore in the corresponding quarter last year.

The performance was reflected in the annual financial results of the company as well. Annual net profit for 2010-11 stood at Rs 654 crore, a 23-fold increase over Rs 29 crore in the previous fiscal.

“This is a strong financial result driven by record refinery throughput of 14.76 million tonnes per annum and a healthy uplift of over 80 per cent in gross refinery margins (GRMs). Demand for petroleum products in India is expected to continue to grow sharply and we remain focused on delivering our key projects, which in 2011 includes the first phase of our Vadinar refinery expansion,” said Mr Naresh Nayyar, EOL's CEO and Managing Director.

Essar Oil's revenues for the quarter under review went up 24 per cent to Rs 14,846 crore as against Rs 11,942 crore in the corresponding quarter last year. The company's annual revenues increased 25 per cent to Rs 53,119 crore, from Rs 42,402 crore in the previous fiscal.

For the quarter, current price GRM for the refinery business increased to $8.15 per barrel as against $5.37 per barrel in the corresponding quarter last year. During the fiscal, current price GRM went up by 87 per cent to $6.91 per barrel as against $3.70 per barrel in the previous fiscal.

Refinery

The Vadinar refinery processed a record 14.76 million tonnes crude oil during the fiscal, 9.3 per cent more than 13.50 million tonnes of crude oil processed in 2009-10. The refinery also processed about 1.33 million tonnes of Mangala crude between June 2010 and March 2011.

Coal Bed Methane

Mr Nayyar said in the conference call that the Government has fixed a basic sale price of $5.25 per mBtu plus $1 mBtu in transportation cost for the gas Essar Oil is producing from its Raniganj Coal Bed Methane (CBM) block in West Bengal.

At Raniganj, Essar Oil's first CBM block under development, 33 wells are producing about 35,000 standard cubic meters per day of gas.

He said that the company will drill 500 wells to help output plateau of 3.5 mscmd in three years.

Commercial sales from the block are scheduled to begin in a few months after the statutory approvals, said Mr Nayyar. Essar Oil is investing about $500 million for producing gas from below coal seams, called CBM.

Marketing

The company said in a statement that deregulation of petrol prices in India in June 2010 increased the competiveness of its retail fuel outlets. However, increasing oil prices, with a resultant impact on diesel prices, have adversely impacted the Government of India's roadmap toward diesel deregulation.

The company is increasing non-fuel retailing activities in its current portfolio of retail outlets to provide an additional source of revenue for its franchisees.

It has forged alliances with alternative fuel and non-fuel retailers in segments such as autogas, auto components, lubricants and services. EOL is also in talks with retailers in the food and beverages, agro products, telecom and banking/finance segments to set up points of sale at its outlets.

Essar Oil's shares were down nearly four per cent on the NSE at Rs 134.60.

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