Becomes first Indian firm to acquire an overseas refinery stake
NEW DELHI: Essar Energy Overseas Ltd, a subsidiary of Essar Oil Ltd, may become the first Indian company to buy a stake in an overseas refinery.
It has entered into an agreement to acquire 50% of Kenya Petroleum Refineries Ltd, a 4 million tonne refinery in Mombasa, Kenya.
Essar did not disclose the price paid for the stake citing confidentiality clauses, but said it will spend $400-$450 million to upgrade the refinery by adding secondary units.
Essar has entered into an agreement for acquisition of 50% stake from The Shell Petroleum Company Ltd, Chevron Global Energy Inc and BP Africa Ltd.
An approval from the Kenyan government is awaited.
“Subject to certain conditions, the acquisition is expected to complete in early 2008,” said a company statement.
The Government of Kenya holds 50% of KPRL and has a pre-emption right over the sale of stake by the three petroleum majors.
The Mombasa refinery is the only refinery in East African region and currently produces LPG, gasoline, diesel, kerosene and fuel oil.
Indian Oil Corporation and Reliance Industries Ltd have also reached understanding for overseas refineries projects but so far there has been no acquisition.
Naresh Nayyar, chief executive of Essar Energy Holdings Ltd, said, “The refinery offers lot of opportunity since it is the only refinery in that region and caters to the surrounding market.”
KPRL’s products are sold into the Kenyan market and exported to neighbouring countries including Tanzania, Uganda, Burundi and Rwanda.
Demand for petroleum products in these markets is estimated at 5 million tonne.
The company statement said the acquisition fitted into Essar’s strategy of achieving refining capacity of one million barrels per day.
As far as overseas operationsare concerned, it already has three exploration and production blocks in Madagascar and one in Nigeria.
KPRL currently produces liquefied petroleum gas, unleaded premium gasoline, regular petrol, automotive gas oil, industrial diesel, fuel oil and special products like bitumen and grease.
It has two refinery complexes with distillation, hydrotreating, catalytic reforming and bitumen production units.
It uses crude oil from the West Asia and transports it by sea to Kipevu Oil Jetty in Kilindini Harbour (3 km from the complex at Changamwe) and then carried by pipeline to the refinery.
