Essar proposes 6 mn tonne refinery in Uganda

Ruias-owned Essar Oil Ltd has proposed to set up a 6 million tonne refinery in Uganda even as it plans to invest $1 billion in more than doubling capacity of its Kenya refinery.

"There has been a big oil find in Uganda. To process it, they will need a refinery. We have suggested to the Ugandan government that we can set up that refinery," said L K Gupta, the new CEO and Managing Director of Essar Oil.

If accepted by Uganda, this would be the second refinery of Essar Oil in Africa. In July 2009, the firm had acquired 50 per cent stake in Kenya Petroleum Refinery Ltd which operates in Mombassa.

Essar has a 14 million tonne refinery at Vadinar, Gujarat and had recently acquired a 296,000 barrels per day Stanlow refinery in UK.

The Mombasa refinery had a capacity of 3.7 million tonne but was operating at 1.6 million tonne only.

The company plans to invest $1 billion in revamping and expanding the operating refining capacity to 4 million tonne by 2015-16.

Gupta said the proposal was only at discussion stage and nothing has been finalised as yet. "We are in talks. Nothing has been firmed up yet."

Detailed feasibility for the expansion would be ready by April 2012, he said, adding that the refinery is dependent on unreliable grid power which has seen 100 disruptions in past two years.

A captive power plant would be set up as part of the expansion, he said.

Gupta said Essar, which is expanding Vadinar capacity to 20 million tonne by next year, is looking at exporting fuel from India into Africa.

Essar Petroleum (East Africa) Ltd has been set up for import of crude and products, he said.

East Africa is deficit in refining capacity and relies on imports to meet its demand.

As for Vadinar refinery, Gupta said that in the second phase its capacity would be expanded to 34 million tonne.

Essar operates over 1,300 petrol pumps in India and another 300 are in various stages of commissioning, he said, adding that the company does not intend to expand its retail network aggressively unless the government deregulates diesel prices.

The company and other private retailers like Reliance Industries are unable to compete with state-owned firms like IOC who get subsidy from government for selling fuel below cost.