ET reported that Essar Oil, the private sector refiner said by converting the fuel at its Vadinar refinery in Gujarat from gas to coal its margin will improve by at least USD 1 per barrel.

Mr Lalit Gupta MD CEO of Essar Oil said that the company has discarded its plans to run the 20 million tonne refinery on gas based power due to the acute scarcity of natural gas. Since the supply of heaper domestically produced natural gas is not sure they are switching the generation unit to coal fired plant. The captive power plant of Vadinar refinery has a capacity to produce 510 MW of electricity.

Mr Gupta said that by optimizing the refinery and converting the fuel, Essar is aiming to increase its gross refinery margin by USD 5 per barrel this year from USD 4.23 in the earlier year. In addition to the supply of cheaper power, their coal fired power plant will also supply steam which will increase their gross refinery margin by nearly USD 1 per barrel. The refinery optimization would give them an extra USD 4 per barrel.

In the previous month, Essar completed the refinery optimization project by increasing its capacity to 20 million tonne per annum. Complex refineries like Vadinar, have traditionally reported gross refining margins of USD 7 per barrel to USD 8 per barrel. A coal fired unit has other advantages also.

Mr Gupta said that the company has already commissioned the first of the two 255 MW units and is in final stage of launching the second. Previously, the Vadinar refinery was run on 120 MW of electricity generated by refinery residual products, such as fuel oil and naphtha, and 380 MW generated by gas. Because of the non availability of domestic gas, the imported liquefied natural gas has made the power expensive.

Following the decline of output from Reliance Industries operated KG-D6 block due to some technical reasons, India has been facing acute shortage of domestically produced gas. Domestic gas is sold at a regulated rate of USD 4.2 a unit. Imported gas is four times costlier than this. Most of the power generated by the unit would be for captive use of Essar Oil. Some power will be sold to Essar Steel and the remaining will be sold into the merchant market.

Source - Economic Times

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