Essar Oil refinery gets the go ahead - Views on News from Equitymaster

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Essar Oil refinery gets the go ahead

Nov 30, 1999

The committee appointed by financial institutions to look into the viability of the refinery being implemented by Essar Oil has reiterated that the work should not be delayed any further. The refinery is over 67% complete. This has been reported by a leading national daily. The committee has stated that the cost of the refinery is reasonable and in line with the investments made by public sector units. Infact the committee has stated that the cost, Rs 74 bn, is suitable for a 9 MMTPA refinery, whereas actual refinery capacity (installed) is much higher at 10.5 MMTPA (12 MMTPA actually).

The decision is likely to come as a big boost to the Essar group that has been facing a cash crunch for some time now. The group is also looking for a strategic partner for the refinery and is considering giving a 26% stake to the same. This is expected to bring in fresh resources into the company that will help in its completion.

The Essar refinery lacks a retail distribution network and this will likely be a stumbling block as the sector heads into an environment of excess capacity. Inviting a domestic oil major, with a retail distribution network, would definitely benefit the company.

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