Essar Oil Ltd, which grossed an annual turnover of over Rs 50,000 crore in 2011-12, would complete Phase I of the ongoing expansion project at the Vadinar oil refinery in 2012, Mr Shashi Ruia, Chairman, said on Friday.

Addressing the company’s 21st annual general meeting here, he said the refinery was operating well above its nameplate capacity of 10.5 million tonnes per annum (mtpa). It achieved a throughput of 14.76 mt in 2010-11, a capacity utilisation of over 140 per cent, the highest-ever it achieved. After Phase I expansion, its refining capacity will be increased to 18 mtpa.

As on June 30, almost 92 per cent of the work on expansion project was completed. The optimisation project, about 56 per cent completed by now, would further enhance the capacity to 20 mtpa. “We are confident that the project will be completed fully by September 2012,” he added.

Completion of Phase I expansion will also enhance the complexity of refinery from 6.1 to 11.8, enabling it to increase proportion of heavy and ultra-heavy crude that it processes, produce a higher proportion of middle and light distillates and improve gross refining margin (GRM).

Corporate debt restructuring

Also, Mr Ruia said the company has, on July 11, after deliberating the status of Essar Oil’s exit from corporate debt restructuring (CDR), decided to expedite the process to enable the exit before March 31, 2012. Additionally, to further optimise the finance cost, the board of directors has also given ‘in-principle’ approval to explore possibilities of raising foreign currency loans to the extent of $1.5 billion, instead of rupee loans, for its ongoing projects.

In the first quarter, ended June 30, 2011, the refinery achieved a throughput of 3.62 mt and produced a current price GRM, inclusive of sales tax benefit, of $7.38/ barrel.

Reports Rs 469-cr quarterly profit

On financial performance, Mr Ruia said the company clocked revenues of Rs 16,478 crore during the quarter ended June 30 this year, an increase of 37 per cent. It reported a profit after tax in the quarter at Rs 469 crore against a loss of Rs 70 crore in the corresponding quarter of the last fiscal.

Essar Oil recently commissioned the natural gas pipeline to the refinery and partly replaced fuel oil with gas, resulting in cleaner emissions. The refinery has also started processing Mangala crude from Cairn India’s Barmer oilfield in Rajasthan. This would improve crude supply security and allows it to benefit from lower logistics costs and taxes.

Exports

Exports from the Vadinar refinery in Q1FY12 increased to 32 per cent compared with 27 per cent in the corresponding quarter last fiscal, primarily because of the drop in the domestic sales of fuel oil that is being displaced by natural gas in the Indian market. Post the Phase I expansion, it will be able to reduce fuel oil production and manufacture an increased proportion of higher value products.

Retail sales

About the retail sales business, Mr Ruia said the company, taking advantage of a level-playing field in petrol retailing in 2010-11, notched up 155 kt of petrol sales, the highest it has ever achieved. “We continue to expand our retail network, though now at a slower pace, pending a decision on the deregulation of diesel. As on June 30, the company had 1,639 retail outlets.”

Mr Ruia said the company has forged alliance with alternative fuel and non-fuel retailers in segments such as auto gas, auto components, lubricants and services. It is also introducing Auto LPG and CNG pumps in its outlets through tie-ups with local gas marketers such as Aegis Logistics, Sabarmati Gas, Gail India, Adani Gas and Gujarat State Petroleum Corporation. CNG stations have been commissioned at four outlets in Gujarat, while an Auto LPG pump has been commissioned in Thane district in Maharashtra.

Raniganj CBM block production

Speaking about the exploration and production business, he said that as on June 30, the test production at Essar Oil’s Raniganj coal bed methane (CBM) block was 33,000 standard cubic metres per day, which is being sold through truck mounted cascades. The production has been deliberately controlled since the block is awaiting some approvals before beginning commercial sales. The company has completed the supporting infrastructure to enable delivery of gas to customers and also tied up with local customers from the Durgapur Industrial Estate.

“We have continued production of crude in small quantities in the Mehsana block and are now looking to augment the production by developing some of the proven wells in this block,” he said, adding timely execution of this project and the development of the CBM block in Raniganj were the key to Essar Oil’s future profitability.

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