Essar Oil posts Rs 469 cr profit in Q1

Essar Oil today reported a net profit of Rs 469 crore for the first quarter ended June 30 on the back of higher refining margin.

The company had registered a net loss of Rs 70 crore for the same period in the year-ago period.

Essar Oil earned $7.38 on processing every barrel of crude oil in the April-June period of current fiscal, 27% more than $5.79 per barrel gross refining margin (GRM) it earned in the same period in the previous year, company CEO Naresh Nayyar told a conference call.

"For the past several quarters, we have been consistently reporting profits that have been driven by record refinery throughput and a healthy uplift in GRM," he said.

Sales rose 37% to Rs 16,478 crore from Rs 12,048 crore in Q1 of FY10-11.

Vadinar Refinery processed 3.62 million tonnes of crude oil, a significant over 135% capacity utilisation.

He said phase I expansion project, which will raise the refining capacity from 14 million tonne per annum to 18million tonne a year and complexity from 6.1 to 11.8, is 92% complete.

"We are now very close to completing our refinery expansion project, which will enhance the refinery's complexity to 11.8. This would have a strong positive impact on our refining margins," he said.

Mechanical completion is being targeted for 3rd quarter of the calendar year, he said, adding Vadinar will take 35-day shutdown beginning September 18 to tie in the new units.

"With completion of phase I, we will have 375,000 barrels per day refining capacity at Vadinar. Added to this, we have a 80,000 bpd refinery in kenya and 300,000 bpd refining capacity at the just acquired UK's Stanlow refinery. Further, we plan to expand Vadinar by another 360,000 bpd in Phase-II. With that we will achieve our vision of owing one million bpd refining capacity," he said.

It is investing $1.8 billion in the phaseI expansion of Vadinar, and is acquiring Stanlow refinery for $350 m.

Nayyar said, "Optimisation project to enhance refinery capacity to 20 million tonne a year is on track 56% project has already been completed and mechanical completion is targeted by September 2012."

Essar Oil, he said, has a total of 1,639 petrol pumps. Petrol and diesel at its outlets is priced higher than its dominant public sector competition, which get government subsidy for selling fuel below cost.

The company was increasing focus on non-fuel retailing at its outlets. Also, it has commissioned 4 CNG retailing units.

"We are looking at tapping the opportunity of retailing auto LPG and CNG in Essar Oil outlets through tie-ups with Aegis Logistics, Sabarmati Gas, GAIL India and Adani Gas."

Nayyar said Essar would start commercial sale of gas produced from coal seams, called coal bed methane (CBM), shortly.  "All supporting infrastructure for delivery of gas to customers has been completed."