Company reports audited EBITDA of 4.9 billion rupees for 4Q11, drop in refining margin to US$6.07/bbl.

Essar Oil, a fully integrated Indian oil company, with a refining capacity of more than 300,000bpd, has released unaudited results for 4Q11 and provided an update on progress around the expansion projects at its Vadinar refiney.

The company reports a quarterly EBITDA of 4.9 billion rupees (US$99.7 million), down from the 8.27 billion rupees (US$168.3 million) seen in 4Q10, partly due to a drop in its current price gross refining margin to US$6.07/bbl from US$7.21/bbl. It posted an after-tax loss of 36.83 billion rupees (US$747 million) for the last nine months of 2011, due to a 40.15 billion rupees exceptional item on its book reflecting the reversal of sales tax incentive income from May 2008 to December 2011. Essar states that it "believes it has good grounds for a favourable review of the judgement" and has put the charge onto its books "as a prudent measure".

For the last nine months of 2011, Essar reports EBITDA of 16.63 billion rupees, down from the 18.68 billion rupees seen recorded for the last nine months of 2010.

Essar has filed a petition in the Supreme Court, seeking a review of the judgement that set aside a ruling by the Gujarat High Court that allowed Essar to use a sales tax benefit from the Gujarat government.

Essar reports that its Vadinar refinery processed 2.81Mt of crude in 4Q11, down from the 3.73Mt seen in 4Q10, with the throughput adversely affected by a planned 35-day shutdown that took place between September 18, 2011 and October 22. Ultra-heavy and heavy crude accounted for 74% of processed crude, up from the 69% reported for 3Q11. This difference was driven by greater use of Mangala crude that made up 14% of the refinery’s crude slate in 4Q11.

Essar reports that its Phase I expansion project at the Vadinar refinery will undergo full commissioning in March 2012, with throughput increasing to 18Mta in that month. All units required for the expansion are now mechanically complete and the revamp of the CDU, VDU, SRU and FCCU, including their integration with the existing refinery, took place during the 35-day shutdown.

The concurrent optimisation project at the same refinery is almost 75% complete, according to the company statement and is currently scheduled for completion in September 2012, at which point the refinery’s capacity will be increased to 20Mta or 405,000bpd. It will involve the conversion of a soon-to-be redundant visbreaker unit into an additional CDU with a capacity of 2Mta. Once this project is complete, Essar believes it will be able to boost the proportion of ultra-heavy crude from the current 20% to 60% of the overall crude basket, and the company says it has already tied up “a substantial part of the additional ultra-heavy crude with global suppliers. The expansion project will also mean the Vadinar refinery will be able to produce gasoline and gasoil to Euro IV and V standards, while converting fuel oil into gasoil, gasoline and vacuum gasoil.