Essar Oil Limited (EOL), Vadinar
EOL aims at doubling its retail outlets to about 3000 in next 3-4 years

"Essar Oil has partnered with best-of-breed technology vendors in setting up the processing units, some of which are the largest facilities they have set up. Its Crude Distillation Unit (CDU) has the tallest crude column at 90 mts and provides excellent swing capabilities in terms of crude intake."

Essar Oil operates India's second largest single location refinery in Vadinar, Gujarat, with a nameplate capacity of 20 MMTPA. Vadinar Refinery is one of the most complex refineries in the world with a Nelson Complexity Index of 11.8. This means that the refinery is capable of processing a high proportion of Heavy and Ultra Heavy Crudes and yet produces Euro IV and Euro V grade fuels.

Industry Scenario
While global refining industry continues to face several challenges in terms of weak demand and new capacity addition, India is expected to witness stable growth for petroleum products for many years to come on the back of factors like strong GDP growth, industrialisation, growth of nuclear families, urbanisation, rising aspirations and consumption. Indian refining capacity, at 217 mmtpa, is fairly balanced compared to actual demand after adjusting for fuel & loss, higher capacity utilisation and export oriented refinery. At 5 percent PA expected growth rate, India's surplus capacity will get absorbed in about next four - five years. Future expansion, unless they are brownfield, are going to be extremely challenging given the issues relating to land acquisition, environmental clearance etc. Hence, India may turn to a products deficit market with expectation of reasonable growth in demand in about next five years.

Vadinar Super Site
Vadinar Refinery commenced commercial production in 2008 with a capacity of 10.5 MMTPA and complexity of 6.1. Soon afterwards the company undertook a massive Expansion and Optimising Project, which took the capacity to 20 MMTPA and complexity to 11.8. Since it began commercial production, Vadinar Refinery has been operating above its nameplate capacity.

In FY13-14, which was the first full year operation of fully expanded capacity, Vadinar Refinery processed 20.23 MMT of crude, of which 93 percent was of heavy and ultra heavy variety. These grades normally have a price advantage as all refineries are not able to process such grades. Yet, 84 percent of the refinery's product slate consisted of valuable light and middle distillates, demonstrating full benefit of increased complexity. For the full year, Essar Oil reported revenues of Rs1,07,190 crore, becoming one of India's top 10 companies by revenues. It reported a CP GRM of USD 7.98 /bbl for the full year.

All this is achieved with strict adherence to health, safety, and environmental norms. Essar Oil is committed to sustainable form of development and adopts globally recognised best practices towards this. Essar Oil has been ranked the second highest scorer amongst all companies this year, and the highest scorer amongst energy companies for three years in a row, by CDP in carbon disclosure. Essar Oil is also the only Energy sector company so far to have appeared in the all India 'Carbon disclosure leadership Index" of CDP, scoring an all India second place this year.'

Vadinar is an extremely strategic location, which is just a few days sailing time away from the world's largest crude sources in the Middle East and also near to major domestic and international demand sources. Vadinar Refinery Complex is a 'Super Site' with a fully integrated infrastructure. Essar Oil's all weather captive port has a capacity to handle 27 MMTPA of crude and 14 MTPA of products. Additional infrastructure exists to evacuate products through rail or roads through fully mechanised Rail and Truck gantries. Vadinar also is the only refinery in the country with its own coal fired power plant which fully meets the refinery's power and steam requirements. This is providing a GRM uplift of USD 1.0 - USD1.5/bbl as against using liquid fuel, which traditionally refineries use.

Vadinar also has seawater desalination unit to use seawater for refinery processes, thereby reducing dependence on freshwater.

Essar Oil has partnered with best-of-breed technology vendors in setting up the processing units, some of which are the largest such facilities they have set up. Its Crude Distillation Unit (CDU) has the tallest crude column at 90 mts and provides an excellent swing capabilities in terms of crude intake. Similarly the VGO Hydrotreater (VGO HT) is amongst the largest such units of its kind and produces premium quality low sulphur high octane products. Again, the Delayed Coker Unit (DCU) is one of the largest coker units in the world and is capable of complete bottom of barrel conversion into value added products.

Currently, Essar Oil is undertaking a series of low capex and short gestation optimisation projects across its refinery and marketing value chain under the banner of Optima Plus, which upon completion would provide a GRM uplift of about USD1.0 - USD1.5 per barrel over a period of next two to three years. These projects include setting up one more Hydrogen Manufacturing Unit and a conversion of existing VGO into more valuable distillates.

Downstream Opportunity
Essar Oil has a nationwide network of over 1,400 operational retail outlets, with another 300 in various stages of commissioning. With government raising diesel prices in small doses on a monthly basis, we expect that over the next couple of months, this segment will become completely deregulated, providing a big opportunity for diesel retail sales. Petrol is already deregulated and is being sold from our outlets.

We are currently reviewing our retail strategy to tap the growing petrol demand by additionally targeting city centres for new outlets. Going forward, in addition to the DODO (Dealer Owned Dealer Operated) model we currently operate on, wherein the franchisee makes all the investment in setting up to the retail outlet, we will additionally have outlets which would be Company Owned Company Operated (COCO) and Company Owned Dealer Operated (CODO).

Over the next three - four years, Essar Oil envisages to have a retail network of about 3,000 outlets.