After Reliance Industries, the Essar group, too, is going for a mega refinery expansion. The board of directors of Essar Oil Limited — belonging to the Ruias — has approved plans to increase the capacity of the refinery at Vadinar, Gujarat, from 10.5 million tonnes per annum (220,000 bbls per day) to 34 mtpa (700,000 bbls per day). The expansion is being carried out at a cost of $6 billion (Rs 24,000 crore).In another significant move, the company has decided to drop the plan to delist its shares from the exchanges. In order to meet part of the requirement of funds for the expansion project and other corporate purposes, including refinancing of existing debt of the company, the board also approved the issue of GDS to the promoters and promoter group on a preferential basis, up to a maximum of $ 2 billion (Rs 8,000 crore). The issue will be at an effective price of Rs 200 per share for the underlying equity shares, subject to receipt of shareholders’ and regulatory approvals as may be required. Meanwhile, the promoters have informed the company that they no longer intend to proceed with the delisting of the equity shares of the company from the stock exchanges. “One reason could be that its share price has shot up by 144 per cent in the last one week to Rs 192.35. Shareholders won’t sell back the shares at a price less than the market price. Secondly, the company will need funds to finance the huge expansion. If it delists its shares from the public, the company won’t be able to go for a public issue in the near future,” said an analyst. The current installed capacity of the refinery is 10.5 million tonnes per annum (220,000 bbls per day), made at an investment of approximately $3 billion (Rs 12, 000 crore). The refinery was commissioned in November 2006 and has been operating at approximately 7.5 million tonnes. The fluid catalytic conversion unit (FCCU) and diesel hydro de-sulphuriser unit (DHDS), which will be fully operational shortly, will enable the refinery to reach its full capacity ie, 10.5 million tonnes. These units will enable the company to process heavier crudes and meet the stricter international emission norms. “The company will be expanding its capacity progressively to 34 million tonnes per annum by 2010. The first stage of expansion will involve de-bottlenecking and the addition of more sophisticated bottom upgrading units such as delayed coker,” the company said. The second phase of expansion will see a new set of distillation units, including addition of all secondary units and another coker. The basic engineering design for the expansion has been completed. The equipment will incorporate the latest in technology from well renowned international suppliers. With the expansion, the refinery will be able to handle a wide range of crudes from light to heavy and take advantage of the market differential between heavy and light crudes. The Nelson Complexity Index of the refinery after the expansion to 34 million tonnes per annum will be approximately 12.8. The Nelson Complexity Index measures the ability of the refinery to upgrade the crude to best quality and maximum quantity of value added refined products. The refinery will produce high quality petro-products meeting the most stringent environmental norms i.e. Euro IV and Euro V internationally.RUIAS’ gamble•Capacity to increase from 10.5 mtpa to 34 mtpa•Ruias to subscribe Rs 8,000 crore pref issue of GDS•Company not to delist its shares from bourses•Expansion to be completed by 2010
