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Updated: January 25, 2010 16:14 IST

Essar to expand Vadinar refinery capacity to 18 million tonnes

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A file photo of Essar Oil CEO Naresh Nayyar
The Hindu
A file photo of Essar Oil CEO Naresh Nayyar

Ruias-owned Essar Oil today said it will expand the capacity of Vadinar refinery in Gujarat to 18 million tonnes, 12.5 per cent more than planned earlier, but within the original project cost of Rs 7,810 crore.

The nation’s second biggest private oil refiner will expand the 210,000 barrels per day (10.5 million tonnes a year) refinery to 18 million tonnes by March 2011, Essar Oil CEO Naresh Nayyar said.

“We plan to do minor modification in a secondary unit to convert it into a Crude Distillation Unit (CDU) to raise overall capacity to 18 million tonnes,” he said.

Under the original expansion plan, the capacity of existing 10.5 million tonnes CDU - the primary unit that processes crude oil - was to be raised to 16 million tonnes. .

“By converting the visbreaker into CDU another 2 million tonnes capacity would be added,” he said.

Essar is planning mechanical completion of the expanded unit by March 2011.

The company had earlier announced a target of 320,000 bpd (16 million tonnes a year) by December 2010. In Phase-II of the expansion, it plans to add a new 18 million tonnes a year refinery to take the total refining capacity of Vadinar to 36 million tonnes.

Visbreaker converts heavy ends of crude into fuel oil.

Nayyar said the company is likely to tie-up funds for the USD 4.4 billion Phase-II expansion project by June this year.

“Of the project cost, USD 1.6 billion would be equity and USD 2.8 billion debt. The debt would mostly be domestic loans,” Nayyar said.

Of the Phase-1 project cost, promoter equity was Rs 2,000 crore, internal accruals gave Rs 1,210 crore and debt portion was Rs 4,600 crore.

While most of the debt for Phase I would be rupee loans, Phase II may see a USD 700 million foreign loan.

After the expansion, the refinery will stop producing low-value fuel oil (FO). Margins of FO, which account for 25 per cent of the fuel produced by the Vadinar refinery, currently are negative.

Nayyar said Essar plans to increase the number of petrol pumps to 1,500 during this fiscal from 1,252 at present.

Vadinar, he said, was currently operating at 14 million tonnes, a capacity utilisation of more than 133 per cent of the rated capacity. The refinery has a design capacity of 10.5 million tonnes per annum and has operated at above 100 per cent capacity right from the start of commercial production in May 2008.

Nayyar said the refinery was geared to meet the new auto-fuel specifications in the Indian market which will be effective from April 2009. Euro-III specification diesel production has already started while Euro-III petrol and Euro-IV diesel output would start by the end of current quarter.

The company is augmenting its tankage and evacuation infrastructure, in line with the expansion, debottlenecking and upgradation of the existing units. As part of that, the refinery added a second products berth at Vadinar, thus enhancing its capability for domestic coastal and exports evacuation and improving operational flexibility.

In the first phase expansion, the refinery will attain a Nelson Complexity Index of 11.8 from current 6.1 and will be able to process heavier crude oil of 24.8 degree API and 3.0 per cent Sulfur content, which will help Essar earn higher refinery margins. In the second phase, the refinery will have a complexity of 12.8 and will be able to process even heavier crude oil of 24 degree API.

Post Phase-I implementation, the refinery will produce Euro-IV and V grade products, the second phase will produce Euro-V, US Specs and CARBS grade products. The new units are designed to maximise distillates. Also, the expanded refinery will be one of the most energy efficient refineries in the world having full bottoms conversion facilities.

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