Mumbai: Essar Oil Ltd started operations at its petroleum refinery at Vadinar in Gujarat four months ahead of schedule. The plant has started trial production with a capacity of 7.5 million tonnes per annum of crude, which will gradually go up to 10.5 million tonnes per annum. The company expects to attain production at full capacity in the next two quarters.

Essar Oil said that the project cost is extremely competitive being lower than estimated costs for a green field refinery.

The state-of-the-art refinery has the capability to produce petrol and diesel as per international standards. It will also produce LPG, naphtha, light diesel oil, aviation turbine fuel and kerosene. The Rs10,826 crore ($2.4 billion) refinery has been designed to handle a diverse range of crude - from sweet to sour and light to heavy.

"We are delighted at the successful commissioning of Essar Oil's refinery at a time when India is strengthening its presence in global markets and integrating with the global economy. The refinery signals our commitment to the nation to be a strong and dominant force in core sectors of the Indian economy. The early commissioning is also a tribute to the employees of the Essar group and its business associates for their unstinted efforts," said group chairman Shashi Ruia.

The refinery comes at a most opportune time and will fulfill the gap between worldwide demand and supply in the petroleum sector. Refineries the world over, currently, are operating at over 98 per cent capacity utilisation. Significantly, there has been no addition to refining capacities in the last three years and planned new capacities are not expected to come up before the end of 2008.

Essar Oil's refinery has dedicated infrastructure like utilities, terminals, crude intake and product evacuation facilities.

The company's oil terminal at Vadinar has an integrated facility to receive crude through a single point mooring system and dispatch of finished petroleum products through its product jetty. It can receive 32 million tonnes per annum of crude and can handle tankers up to 350,000 DWT. The terminal has product dispatch facilities with an annual capacity of 14 million tonnes and includes a port, a tank farm, associated pipeline network and storage and dispatch facilities. The terminal was built at a cost of Rs2,857 crore ($635 million).

The refinery has a cogeneration plat - the Vadinar Power Company -  with a generation capacity of 120 MW of power.

The engineering, planning and construction of the entire refinery were carried out in a record time by Essar Constructions. The company's products will have a ready market both internationally and in India. The refinery is also ideally located near the Vadinar port, which ensures easy access to all international markets, including Europe and the US.

Essar had set up a retail chain in advance of the commissioning of the refinery, thereby ensuring a ready outlet for its products in India. The company will also be in a position to supply to bulk consumers. Essar has already commissioned over 900 retail outlets and expects to have 1,500 outlets fully operational by the end of March 2007.