Essar Oil Refinery, Vadinar, Gujarat, India

The Essar Oil Ltd grass roots refinery in Gujarat, India (started in 1996) was completed and commissioned in 2006 (commissioned in third quarter). The refinery project was delayed several times due to environmental concerns and financial problems, including initial cost over runs and a shortfall in equity contributions.

According to company reports, the refinery was 60% complete in 1998 but had the misfortune to be struck by a cyclone that caused considerable damage. Now the refinery is complete it is expected to produce between 10.5 and 12 million tonnes of processed products a year (mmtpa). The refinery employs over 1,000 personnel (the construction process required between 3,000 and 4,000).

The refinery is now the second largest in India after the Reliance Jamnagar refinery on an adjacent site which can produce over 27mmtpa.

Essar Oil will focus on producing middle distillates such as high-grade kerosene oil and low sulphur high-speed diesel, which form over 60% of India's domestic consumer demand.

Substituting imports will help conserve India's foreign exchange. The refinery will also produce LPG and lead-free gasoline of various octane levels for the domestic markets and high-octane lead-free gasoline for export.

The refinery will be able to produce 5.5mmtpa of diesel and 2.2mmtpa of gasoline. Essar Oil is still following an aggressive plan to open over 2,500 retail outlets for their fuels and oil products across India.

REFINERY START UP

Following commissioning the refinery started with 60%–70% capacity use representing a capacity of seven million tonnes. By January 2007, full production of 10.5 million tonnes had commenced. The refinery capacity will be further raised to 12 million tonnes by the end of 2007 and even higher to 14 million tonnes by the end of 2008.

Diesel will represent 5.5 million tonnes and gasoline 2.2 million. The company plans to focus on producing middle distillates such as SKO (Superior Kerosene Oil) and high-speed diesel. It will also produce Liquefied Petroleum Gas (LPG) and lead-free motor gasoline of various octane levels for the domestic markets and high-octane lead-free gasoline for export.

According to the company, the refinery that is located on the west coast enjoys a location advantage as it is close to both suppliers and customers. It is the nearest point from West Asia, which is a major source of crude supply. The site is linked to the Kandla-Bhatinda product pipeline through the Vadinar-Kandla pipeline, giving it easy access to the key markets of North India.

COMMISSIONING PROCESS

The units commissioned in the first phase were the CDU, VDU, sulphur gas unit, naphtha hydrotreater, catalytic cracker and visbreaker. The fluid catalytic cracker and a diesel hydro desulphuriser were commissioned in November 2006.

The FCC and DHDS plants were modified so as to be compliant with the cleaner Euro III and Euro IV fuels. The refinery configuration actually lends itself quite well to de-bottlenecking and the capacity it is believed can be enhanced to 14mtpa.

The refinery is fully integrated with its own dedicated 120MW power plant, port and terminal facilities. It will be largely self supporting for its power and water needs. The construction of a larger 1,200MW power plant at the refinery is being considered, which will burn refinery residues.

The docking facilities include an SBM capable of handling vessels up to 350,000DWT with a capacity of 25mtpa, tankages with interconnecting pipelines of 20mtpa capacity; marine product dispatch capacity of 12mtpa and rail-car and truck loading facilities.

In early 2007 a fire was reported at the refinery where four people were killed and 18 injured. The fire broke out in when workers were carrying out welding work near a naphtha pipeline (which apparently was leaking). The refinery is now back in production producing in excess of 150,000 barrels a day.

CRUDE SUPPLY

Ahead of the commissioning, the company received one million barrels at the Vadinar port in Gujarat in August 2006. The crude was a Saharan blend suitable for refining in the Essar Oil's refinery. The company also received a second cargo from Vitol in West Asia. Both cargos were of sweet crude.

The annual requirement of crude oil at the refinery is in the region of 10.5 million tonnes per annum (mtpa). The refinery is configured to allow flexibility to process diverse varieties and qualities of crude. The refinery is primarily designed to handle a crude mix of Arabian Light and Heavy in a 70:30 ratio. However, adequate flexibility has been provided to handle a variety of crude mixes at refinery processing units from sweet-light crude to heavy high sulphur sour and bituminous crude.

The refinery refines crude oil to produce diesel, gasoline, jet fuel, kerosene, fuel oil and bitumen to suit market requirements. Imported crude oil is discharged from a single buoy mooring situated off a coastal site at a distance of 8km. A submarine / on-shore pipeline transfers crude to onshore storage tanks.

CONTRACTORS AND CONSTRUCTION

The principal contractor and project manager for the project since it was started is ABB Lummus Global of the Netherlands (ABB have put Rs9,300 into the project themselves). The company responsible for detailed engineering, procurement and construction (EPC) is TCE. Larsen and Toubro is another engineering company involved in the project. Semb Co E&C has secured contracts worth $350m for engineering, procurement, project management and construction management for the project.

The TCE remit for construction includes offsite facilities, storage and transfer of crude, intermediates and products, blending facilities, despatch facilities, fuel oil / gas system, effluent treatment and disposal facilities. Utilities include power / steam generation facilities (two 38.5MW / three 150t/hr) with distribution network, compressed air (three 3,120Nm³/hr) and nitrogen system (1,900Nm³/hr), demineralising plant (775m³/hr), desalination plant (two 390m³/hr), salt cooling water facilities (64,000m³/hr) and tempered water facilities.

A refinery-wide integrated Distributed Control System (DCS), safe guarding system, fire and gas detection system and electrical control system is provided with hardware located in satellite buildings and operator consoles provided in the crude oil tank control building and central control building.

A sophisticated Tank Gauging System (TGS) has been provided – one each for crude oil tank farm, product and intermediate tank farm and despatch tankages – comprising radar, servo and hydrostatic systems. Over 700 motor-operated valves with intelligent actuators are connected to DCS and emergency shutdown systems. The despatch automation system is integrated with the TGS and DCS systems.

The refinery is being constructed with a view to the future since it will have sufficient infrastructure for a low-cost expansion to a production capacity of 27mmtpa. The refinery also has two desalination plants each with a capacity to produce 8,450m³ a day of less-than-5ppm Total Dissolved Solids (TDS) from feed water of 40,000ppm TDS (sea water).

PORT AND SHIPPING

Part of the project will involve the construction of a new deep-water port near to the refinery capable of accepting Very Large Crude Carriers (VLCC) of 350,000t. Essar oil Ltd is expected to construct / develop the new port over 18 months in conjunction with the Housing and Urban Development Corporation Ltd (HUDCO), who will provide a portion of the cost (estimated at Rs5,000).

The port will include crude oil and storage tankers, a Single Buoy Mooring (SBM) capable of handling VLCCS of 350,000dwt, a product jetty with a capacity to handle tankers up to 100,000dwt, a railway siding for product transport and a truck loading depot.

Essar Shipping Ltd has an agreement with Essar Oil to ship crude oil as required by the refinery. Essar Oil Ltd has set up a new company, Vadinar Oil Terminal Ltd, to administer all affairs of the new deep-water port on behalf of Essar Oil Ltd and Essar Shipping Ltd.

The shipping company is expected to commission two new VLCCs (250,000t) from Eastern shipping yards in 2005 (at $60m to $70m each; they are currently at bargain prices).

PIPELINES

The refinery is ideally located on the west coast of India at Vadinar, Gujarat, close to both suppliers and customers. This is the nearest point to the Middle East, which is a major source of crude supply. The site is linked to the Kandla-Bhatinda product pipeline through the Vadinar-Kandla pipeline, giving it easy access to the key markets of North India.

The proposed Central India pipeline will transport its products to the western and central parts of India in a cost-effective manner. Essar Oil Ltd also has a stake in the pipe-holding company Petronet India Ltd.

FINANCING

Funding for the project, which amounts to an estimated Rs98,740 ($2.26bn), has been a complicated arrangement.

Financial closure by Essar Oil has now been achieved for the project. In January 2005, Essar Projects raised Rs3,750 through Global Depository Receipts (GDR) and Essar Shipping raised $213m through the issuing of Foreign Currency Convertible Bonds (FCCB), to make a total of $299m (this was a condition of the remaining funds being released).

The financial institutions, including ICICI bank, the Industrial Development Bank of India (IDBI) and the Industrial Finance Corporation of India (IFCI) bank, then released the remainder of the Rs80,000 funding held in escrow for the project.

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