Rosneft to double Essar refining capacity

Move to place oil company in direct competition with RIL-BP consortium

August 21, 2017 09:28 pm | Updated 09:30 pm IST - MUMBAI

Double barrel:  Essar Oil chairman Tony Fountain (R) and Jonathan Kollek, non-executive director.  Shashi Ashiwal

Double barrel: Essar Oil chairman Tony Fountain (R) and Jonathan Kollek, non-executive director. Shashi Ashiwal

Rosneft, along with the consortium of Trafigura and UCP, the new promoters of Essar Oil, plans to double the refining capacity of Essar Oil to 40 million tonnes per annum (mtpa) in phases and almost double the retail outlets to 6,000, said a source in the know of the development.

The move will place Essar Oil yet again in direct competition with Mukesh Ambani-led Reliance Industries (RIL), as RIL along with its partner BP Plc., is planning to scale up its retail presence to take up the opportunity of de-regulation of petroleum retail market in India.

Retail outlets

“The plan is to take the retail outlets to 6,000. This a rapidly growing market. Given this growth, we can compete in any market,” said Tony Fountain, the newly-appointed chairman of Essar Oil. Mr. Fountain was the chief executive for refining and marketing at Indian conglomerate Reliance Industries Ltd. from January 2012 to February 2016. He is the UCP nominee on the board of Essar Oil.

Talking about expansion of Vadinar refinery, Mr. Fountain said, “Clearly, we think there are opportunities for investment. But, we want to start from scratch as we plan to bring some more people with expertise. That’s why we pass on the action to a new committee to provide us the strategy for action plan.” RIL operates the world’s largest refining complex with a capacity of 60 mtpa near Essar’s 20 mtpa Vadinar refinery.

“Essar Oil already has government licence to increase its capacity to 40 mtpa. So, the new promoters do not need government approval to increase the capacity,” the source told The Hindu .

While announcing a joint investment of ₹40,000 crore in June, RIL chairman Mukesh Ambani and BP Plc. chief Bob Dudley expressed desire to jointly tap the fuel retail market.

RIL and BP Plc. are partners in oil and gas exploration, but no such tie-up exists in the petroleum fuel retailing business. Interestingly, BP Plc. also owns about 20% stake in Rosneft.

RIL, with 1,253 operational retail outlets covering all key highways, has seen 82% year -on-year growth in diesel and 51% growth in petrol with four-fold increase in its customer base in the last one year.

RIL had garnered a 12% market share in fuel retailing in 2005 within one year of starting operations, but saw its share slip to less than 0.5% in 2014, by when it had shut most of its fuel retail outlets due to spiralling crude oil prices.

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