India's second biggest private refiner Essar Oil has quadrupled processing of cheaper ultra heavy crude oils at its Vadinar refinery in Gujarat, following the unit's expansion, to earn handsome margins.
Vadinar refinery, which is amongst the most complex units globally, has stabalised operations at its expanded capacity of 20 million tonnes per annum (MTPA), the company said in a presentation to analysts after July-September quarter
The refinery's diet of ultra heavy crude, which are cheaper and offer better margins, rose four fold to 64 per cent in July-September from 15 per cent a year ago. The refinery processed almost 3.21 MT of ultra heavy crude oil in the quarter.
The company had turned 5.07 MT of crude oil into products in the second quarter.
Essar said secruity of supply of ultra heavy crude oil as it has signed term contracts for 70 per cent of requirement with Latin American, Middle East and domestic suppliers like Cairn India.
As a result, it earned USD 7.86 for turning every barrel of crude oil into petroleum product in Q2 in the July- September quarter as against a gross refining margin of USD 5.07 per barrel in the same period a year ago.
In September, the GRM was as high as USD 10.83 per barrel, Essar said adding full benefit of higher complexity post expansin projects will start getting reflected from the current quarter.
Valuable light distillates (LPG and petrol) and middle distillates (kerosene and diesel) improved to 81 per cent of the product slate from 72 per cent over the same period, inspite of four fold increase in ultra heavy crude.
Pre-expansion Vadinar refinery had a capacity of 14 MT per annum and a complexity of 6.1. Post it being expanded to 20 MT, it has a compexity of 11.8.
Higher complexity of a refinery enables it to process inferior quality crude or heavy sour crudes and produce superior refinery product slate comprising of high percentage of LPG, light distillates and middle distillates and low
percentage of heavies and fuel oil.
Essar said refining margins going forward are expected to remain high as global capacity utilisation is under pressure due to planned and unplanned shutdowns. Also, investory levels are at five year low even though there is strong diesel demand in India, China and Middle East.
"Continuous strong diesel demand in India, China and Middle East will benefit Asian diesel refiners and will result into healthy refinery margin," it said in the presentation.