Shashi Ruia: Big plans

Mumbai, July 31: In its first major acquisition overseas, Essar Oil today bought a 50 per cent stake in a Kenyan oil refinery.

The acquisition of Kenya Petroleum Refineries Ltd will help the Ruia-owned company to sell fuel in east Africa.

The stake was bought by Essar Energy Overseas Ltd from Shell, BP and Chevron.

The unit in Mombasa can refine 4 million tonnes a year but operates at a capacity of 1.5 million tonnes.

Essar plans to upgrade and expand the capacity to 5 million tonnes and sell fuel not only in Kenya but also in neighbouring countries, including Tanzania, Uganda, Burundi and Rwanda.

Essar group chairman Shashi Ruia said, “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.”

According to Prashant Ruia, who is the company chief executive, Essar and the Kenyan government, which holds the remaining 50 per cent stake in the company, will invest $400-450 million to upgrade the refinery.

“The acquisition marks Essar’s foray in the overseas refining market and is a step towards its vision of a global refining capacity of 1 million barrels per day,” he said.

Essar Oil, which operates a 280,000-barrels-per-day(bpd) refinery at Vadinar in Gujarat, paid $2 billion to the Kenyan government for waiving its pre-emption rights. Kenya had the first right of refusal in buying the stakes of the three firms in case they exit, but decided against exercising it.

With the acquisition, Ruia said, Essar had got the retailing and distribution rights and would replicate the refinery-to-petrol-pump model it follows in India. It will expand its Vadinar refinery capacity to 7,00,000bpd by 2011.