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Mr Prashant Ruia

Our Bureau

Mumbai, July 31 Essar Oil, through its arm Essar Energy Overseas, has picked up a 50 per cent stake in Kenyan Petroleum Refineries through the acquisition of stakes from Shell, British Petroleum and Chevron.

The Kenyan Government will hold the balance 50 per cent in this four-million-tonne refinery located in Mombasa.

While there were no details on the cost of acquisition, Mr Prashant Ruia, Chief Executive, Essar Group, told presspersons in a conference call that the refinery would be upgraded by adding secondary units at a cost of $400-450 million. In the process, the capacity would increase to five million tonnes. The company would also pay the Kenyan Government $2 million for not exercising the buyback option of shares owned by Shell, BP and Chevron.

Mr Ruia said the investment in Kenyan Petroleum would be on a debt-equity basis. Funds would be raised through project financing from international lenders and the Kenyan market.

“Kenya has an annual demand of five million tonnes of petroleum products but only 1.5 million tonnes are produced. The petroleum market is not regulated and margins are high,” he said, adding that the company planned to retail fuel in the country as well as in other East African markets.

The refining margin is $2.5 a barrel, which could increase in the near future. “This acquisition marks Essar’s entry into overseas refining and is a step towards realising its vision of global refining capacity of one million barrels per day,” said a company release

Essar Oil has a 14-million-tonne refinery in Vadinar, Gujarat, whose capacity will be increased to 16 million tonnes by 2010 and then to 34 million tonnes by 2011.

“This is an excellent addition to our oil assets and fits well with the group’s strategy of building and becoming a global oil and gas player. This will further enhance our presence in the growing African market,” said Mr Shashi Ruia, Chairman, Essar Group.

The Mombasa refinery is the only one of its kind in Eastern Africa. It produces liquefied petroleum gas, petrol, diesel, kerosene and fuel oil. These are sold in the local market and also exported to neighbouring Tanzania, Uganda, Burundi and Rwanda.

More Stories on : Petroleum | Overseas Investments | Overseas Investments

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