| Essar Energy Overseas, a subsidiary of Essar Oil, has entered into an agreement to acquire 50 per cent stake in Kenya Petroleum Refineries (KPRL), a four million metric tonne per annum (MMTPA) refinery, in Mombasa, Kenya. The government of Kenya holds the remaining 50 per cent in KPRL. |
| This will be Essar Oil's first international acquisition in the refining sector. Essar already has three exploration and production blocks in Madagascar and one in Nigeria. |
| Though Essar Oil did not divulge the deal size, it is estimated that the refinery could have cost the company around Rs 3,000 crore. |
| Said an analyst, “It is not a complex refinery and considering that the company would upgrade it by adding secondary units at a project cost of $ 400- 450 million, the cost of the acquisition is likely to be on the lower side.” The government of Kenya and Essar Energy Overseas will equally share the cost of upgrading the refinery. |
| In KPRL, Essar will acquire the stake from the existing shareholders – Shell Petroleum Company, Chevron Global Energy Inc and BP Africa. Subject to certain conditions, the acquisition is expected to complete in early 2008. |
| Said an Essar Oil executive,”Africa is a strategic market for us. It is a deficit market and thus we are looking at Africa as a strategic market. We would also be sending products from our Indian refinery to African market as its a free price regime in that market.” |
| The Mombasa refinery is the only refinery in Eastern Africa. It currently produces LPG, gasoline, diesel, kerosene and fuel oil. |
| KPRL’s products are sold into the Kenyan market and exported to neighbouring countries including Tanzania, Uganda, Burundi and Rwanda. Demand for petroleum products in these markets is estimated at 5 million tonnes per annum. |
Source: Business Standard