Vadinar plant expansion to help Essar process variety of crude
New Delhi, Apr 4, 2011 (PTI) Essar Oil”s expansion of its Vadinar refinery in Gujarat to 18 million tons this year will help the firm turn wider variety of crudes into fuel, lifting its margins, JP Morgan said in a research note on the company.
Essar is expected to complete the first phase of its refinery expansion project in Q2 of 2011-12 fiscal, with capacity rising from about 14 million tons currently to 18 million tons.
Post the expansion to 18 million tons (and then to 20 million tons in FY13/14), Essar Oil”s refinery Nelson Complexity Index will rise to 11.8 (from 6.1) with addition of significant secondary processing capacity – enabling it to capitalise on structurally strong diesel spreads.
“More importantly, the complexity of the refinery will rise from 6.1 to 11.8, significantly boosting Essar Oil”s ability to process tougher crudes, and achieve a more desirable product slate,” it said.
Widening light-heavy crude differentials would benefit the firm going forward, aiding it to earn a greater premium over benchmark regional gross refinery margins (GRMs).
“We expect Essar Oil GRMs to average USD 8.5 per cent over FY12-13, as the company benefits from added high value product sales and takes advantage of light-heavy crude differentials,” it said.
An increase in Nelson complexity allows a refinery to process a wider variety of crudes, and allows the refiner the opportunity to optimise its product slate, increasing production of higher value light and middle distillates.
“With an increase in complexity from 6.1 to 11.8, Essar Oil will optimize production of diesel and gasoline – leading to an increase in GRMs from the average of USD 5-6 per barrel in the past to about USD 8.5 a barrel post the expansion,” JPMorgan said.
Essar”s Vadinar refinery currently processes about 30,000 barrels per day of crude from Cairn India”s Mangala field in Rajasthan. “Post the refinery expansion, the refinery would be able to process 60,000 bpd of Mangala crude. This would allow the company to save on transportation costs and taxes adding about USD 0.5-1 per barrel to GRMs.”
The company expects to commence commercial sales of coal bed methane (CBM) gas from the Raniganj field in West Bengal this month. “At a plateau production of 3.5 million standard cubic meters per day for 12 years, we estimate an NPV of USD 270 million for this asset,” JP Morgan said.
“We upgrade Essar Oil to Overweight, with a March 2012 price target of Rs 160,” it added.
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Essar defers shutdown of Vadinar refinery
Mar 28, 2011 By OGJ editors
HOUSTON, Mar. 28, 2011 — Essar Energy will defer a 35-day shutdown related to expansion of its 300,000 b/d Vadinar refinery in Gujarat, India, to keep products flowing to Asian markets jolted by unrest in the Middle East and the earthquake and tsunami in Japan.
Privately owned Essar, Mumbai, said it received requests from its major state-owned Indian customersBharat Petroleum Corp. Ltd., Hindustan Petroleum Corp. Ltd., and Indian Oil Corp. Ltd.to sustain operations through the scheduled shutdown period in May and June. Of particular concern, the company said, is supply of gas oil.
The shutdown now will occur in September and October, after Indias monsoon season. Essar said timing of first-phase expansion to 375,000 b/d of distillation capacity wont be affected. The project includes upgrades of the crude, vacuum distillation, visbreaker, and fluid catalytic cracking units and installation of vacuum gas oil hydrotreating, diesel hydrotreating, delayed coking, and isomerization units.
Last November the company said it would boost distillation capacity further to 415,000 b/d via optimization of new and existing units (OGJ, Nov. 15, 2010, Newsletter).
Ramp-up of the new units is to begin in the third quarter. Most of the increased production will be on stream in the middle of the fourth quarter.
A second, as-yet unscheduled phase of expansion would add 375,000 b/d of distillation capacity.
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