Essar Energy completes Vadinar refinery expansion

abarrelfullabarrelfull wrote on 29 Mar 2012 13:16
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Essar Energy plc [LSE: ESSR], the India-focused integrated energy company, today announced that Essar Oil Ltd has completed the $1.81 billion expansion of its Vadinar refinery in India with the successful commissioning of the Delayed Coker Unit (DCU), the final unit to be completed.

Vadinar, in Gujarat state, is now India’s second largest single-location refinery, with an annual capacity of 18 million metric tonnes per year (MMTPA), or 375,000 barrels per day (bpd), up from 14.7MMTPA/300,000 bpd previously. The refinery also now has a complexity of 11.8, up from 6.1 previously, which makes it among the world’s most complex refineries.

The capacity expansion and complexity enhancement gives the Vadinar refinery the capability to process a much greater proportion of lower cost heavy and ultra heavy crude oils. The proportion of ultra heavy crude, previously around 20% of the total, will go up to 60% and the combined share of heavy and ultra heavy crude will go up to 80%. The company has already entered into long-term crude sourcing contracts with global crude suppliers, including several national oil companies from Latin America.

Vadinar now has the flexibility to manufacture higher value products, including gasoline
(petrol) and gasoil (diesel) conforming to Euro IV and V specifications, which are
increasingly required in both domestic Indian and international markets. Close to 80% of
total production will now be higher value light and middle distillates, with 50% of the gasoil and gasoline now meeting Euro IV and Euro V specifications. Essar Oil is targeting export markets such as Australia, New Zealand and north-west Europe, in addition to other countries in the Indian subcontinent. However Essar Oil will continue to market a majority of its products in the domestic market.

The Vadinar refinery benefits from a fully integrated infrastructure including India’s only captive coal fired power plant, the Vadinar P2 power project, which is now nearing completion and will provide power and process steam. The refinery also has a port, pipelines and tankage with multi modal product despatch facilities through rail, road, and sea, giving it a unique cost advantage.

Prashant Ruia, interim chairman of Essar Energy, said: “We are delighted to announce the completion of the refinery expansion programme. This expansion will greatly improve our product offering, margins and competitiveness. Our capital expenditure programme is now nearing an end. We have invested close to $5 billion to date in the refinery complex and our cost per complexity barrel is one of the lowest in the industry.”

Naresh Nayyar, chief executive officer of Essar Energy, said: “After starting commercial production at Vadinar just four years ago, we are proud of achieving a size and scale that can match the best in the world. It underlines our commitment to building a world-class, integrated, low-cost energy company that is focused on India’s energy growth story.”

LK Gupta, managing director and chief executive officer of Essar Oil, said, “The timely completion of our expansion is a testimony to the untiring commitment of the Essar Oil team as well as teams from other Essar Group companies who worked seamlessly under highly demanding conditions to bring this dream project to life.”

The refinery expansion project was implemented using Essar Group’s in-house capabilities, notably the construction and overall project management which was handled by Essar Projects.

The DCU, which is among the world’s largest units of its type, is a key addition to Vadinar because of its ability to convert bottom-of-the-barrel vacuum residue into valuable products such as gasoil, gasoline, and vacuum gas oil. It has capacity of 7.5 MMTPA, and is licensed by CB&I Lummus. The DCU is the world’s largest unit designed by Lummus and also the most advanced to be used in any refinery worldwide, giving the company a higher flexibility to process heavy and ultra heavy crude and produce high value products.

Alongside the expansion, an optimisation project is also underway at the Vadinar refinery that will further increase the capacity to 20 MMTPA (405,000 bpd) by September 2012.

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