Essar Oil to raise $750m for Vadinar expansion

Capacity expansion of refinery to 16 MT from 7.5 MT now is likely by 2010

MUMBAI: Essar Oil plans to raise up to $750 million overseas through issue of FCCBs, GDRs, ADRs or any other financial instrument on a preferential basis to fund the expansion of its refinery at Vadinar.

A decision to this effect was taken at the company's board meeting held on Thursday.

The money raised would constitute the equity portion of the total fund requirement of $1.2 billion for the complete expansion of refinery capacity from the current 10.5 million tonnes per annum (mtpa) to the targeted 16 mtpa by end-2010, a company official said.

The official said Essar Oil would seek approval of its shareholders by passing an enabling resolution to raise the money during its annual general meeting scheduled for September 29.

Essar Oil's Vadinar refinery currently operates at 7.5 mtpa. The company had shut the refinery in July for integrating the last two secondary processing units. It is now reopened but would reach its full capacity by October this year. The upgradation of the refinery is being done to manufacture petrol and diesel grades that comply with Euro-III and Euro-IV norms.

Once the additional facilities are operational, the refinery would be processing 320,000 barrels per day (bpd). It currently churns out LPG, naphtha, diesel, vacuum gas oil, jet fuel, kerosene, fuel oil and petrol from crude and exports almost 70% of the produce.

Besides expansion of the existing refinery, it also plans to build another refinery at a special economic zone at Vadinar. The new refinery would match the capacity of its earlier counterpart and would have a capacity of 320,000 bpd or 16 mtpa.