Riding on back of high refining margins, Essar Oil on Monday reported a big jump in its bottom line posting a net profit of Rs.273 crore in the third quarter ended December 31, 2010, against a loss of Rs.266 crore in the year-ago period.
The company earned $7.21 on refining every barrel of crude oil in the October-December quarter as against a gross refining margin (GRM) of $1.56 a barrel in the year-ago period, the company said in a statement here.
“The strong financial performance has been driven by increased refinery throughput and a recovery in global oil demand, which has led to an improvement in refining margins,” Essar Oil Managing Director Naresh Nayyar said in the statement.
On the other hand, the company said it had also re-engaged in discussions to buy Royal Dutch Shell's three European refineries but refused to put a timeline for conclusion of the deal.
“We have re-engaged to buy Shell's Stanlow refinery in North-West England and the Heide and Hamburg units in Germany,” Mr. Nayyar said during a conference call.
Essar had first evinced interest in buying Shell's refineries in 2009 and talks broke down last year. The three refineries have a combined capacity of around 23 million tonnes.
At present, Essar Oil operates a 14 million tonnes refinery at Vadinar in Gujarat, which it plans to expand to 20 million tonnes by September 2012. It had in 2008 acquired 50 per cent stake of Kenya Petroleum Refineries Ltd (KPRL) which operates a four million tonnes a year refinery at Mombasa.
Mombasa refinery
Mr. Nayyar said the proposal to revamp the Mombasa refinery was pending with the board of KPRL. Products from the Mombasa refinery, in which the Kenyan government has a 50 per cent stake, are sold in the Kenyan market and exported to neighbouring countries, including Tanzania, Uganda, Burundi and Rwanda. Demand for petroleum products in these markets is estimated at five million tonnes annually.
The company's Vadinar refinery processed 3.73 million tonnes of crude oil in the quarter as against 3.51 million tonnes in the third quarter of the previous fiscal.
The 14 million tonnes a year refinery is being expanded to 18 million tons by June this year.
Post-expansion, the refinery will be able to process nearly 90 per cent heavy and ultra-heavy crude as the unit's complexity would be enhanced from 6.1 to 11.8. These factors will significantly increase GRMs. Further, the company plans to raise refinery capacity by two million tonnes by September 2012.
