Company Background - Essar Oil

Essar Oil Limited (EOL), a company incorporated as a Public Limited Company during the year 1989, engaged in preliminary activities relating to bidding for Oil & Gas fields as well as advising the Energy. EOL deals with its three segments of business, such as Exploration & production, the Refinery and Marketing - Retail Business. The Exploration and Production (E&P) business of the company has participating interests in several hydrocarbon blocks for exploration and production of Oil & Gas, namely in Mehsana in Gujarat, and Cachar in Assam (all in India). Essar's oil refinery at Vadinar in Jamnagar, Gujarat is ideally located in India's West Coast in close proximity to the crude rich Gulf States. Vadinar is an all-weather deep-draft natural port. The refinery is configured to produce Euro II and Euro III grades of Petrol and Diesel with capacity of 10.5 million tonnes per annum (MTPA) and also fully integrated with its own dedicated 120 MW co-generation power plant, port and terminal facilities. EOL is one of the few private companies permitted to market petroleum products in India. To serve retail customers under the brand 'Essar Oil', EOL has a modern, large countrywide distribution network of Retail Outlets.

The Exploration and Production Division was set up for the purpose of Oil & Gas exploration activities in the year 1990. The company became a wholly owned subsidiary of Essar Gujarat Limited in March of the year 1992 and entered into an MOU for operation and maintenance services for the Refinery with an affiliate company, Essar Refineries Limited. In the year 1993, EOL secured international drilling contracts against international competitive bidding; it was the first drilling Company in India to. EOL has signed a Memorandum of Understanding with UOP Inter Americana, USA (UOP), for providing major process technologies. Essar Gujarat Limited proposed to transfer the entire shareholding of Essar Oil Limited in the year 1994 to Essar Investments Limited. EOL has entered into an MOU with Essar Gulf for the supply of Crude Oil. In the year 1995 EOL has entered into a contract with Essar Gulf FZE (Essar Gulf), a company based in UAE for supply of imported equipment and also has entered into a contract with Essar Projects Limited a group company, for supply of indigenous Equipment and Materials and for construction and erection of all Equipment at site.

The Company entered into an MOU with Government owned public sector oil company, Indian Oil Corporation Limited for marketing and distribution of its products. The energy division has made entry into Qatar in the year 1996 with a three-year contract from Qatar General Petroleum Corporation for our deep Rig. A Marketing division has been set up to source, handle and market petroleum products for the group in line with the Government's policy from time to time. During the year 1997, Essar Oil has joined the National Securities Depository Limited (NSDL). Essar Oil Ltd has decided to hike its petroleum refinery capacity at Vadinar in Gujarat from nine million tonnes to 10.5 million tonnes. The Exploration and production (E&P) division of the company has also signed production sharing contracts for three more exploration blocks-two onshore blocks in Rajasthan and one offshore in the Mumbai offshore basin. Essar Oil Ltd and Reliance Petroleum Ltd have sought 13 per cent equity each in a proposed pipeline joint venture. During the year 1998, EOL has forged alliances with three foreign oil companies and Hindustan Oil Exploration Company (HOEC) for joint exploration activities in the country.

EOL has initiated a marketing agreement with the public sector Indian Oil Corporation (IOC), according to which, 50 per cent of the offtake from the refinery would be through IOC, and the balance through BPCL. Essar Oil and Bharat Petroleum Corporation (BPCL) have hired Price Waterhouse Coopers in the year 1999 and SBI Caps to independently evaluate the Ruias-promoted refinery and expedite the process of the latter buying an equity stake in the company. EOL proposed to hive off its drilling division into a separate entity in the year 2000 activated as the same. During the year 2002, the company received the authorisation from government to sell petrol and diesel. Negotiates with PSU refineries to source products for its entry into retail marketing of petro products. In 2003, the company sold its Energy Division to Bin Jabr group Ltd, an oil and gas service provider based in Abu Dhabi with total consideration of $0.6m. In the same year EOL started marketing imported products. The first consignment of imported HSD already arrived. Sets up its first retail outlet at Devrukh in Ratnagiri District of Maharashtra and divided its Petromarketing Business into two entities called 'retail' and 'institutional'. The company has bagged a tender for diesel supplies to the Bangalore Metropolitan Transport Corporation (BMTC), EOL and Castrol India Ltd signed an agreement for sale of Castrol lubricants through Essar Oil fuel outlets throughout the country during the year 2004.

In the year 2005, the Company had entered into an agreement with the Myanmar Government for exploration and production of two oil blocks there. The company had resumed work on the refinery in March 2005. Essar Oil is all set to commission its USD 2.2-billion 10.5-million-tonne (mt) refinery at Vadinar in Gujarat in the year 2006. EOL has started supplying Liquefied Petroleum Gas (LPG) and Kerosene during the year 2007 to PSUs for sale through the Public Distribution System. The Company has begun the implementation of the up-gradation of base refinery by addition of the following units i.e. Delayed Coker, VGO Hydrotreater, second Diesel Hydrotreater (High Pressure), ATF Hydrotreater and three small units Amine Regeneration Unit, Sour Water Stripper Unit and ATF Merox Units. This will enable the Refinery to process very heavy and sour crudes to produce products meeting exacting current international standards. In petroleum terminology this would translate into increasing the 'Nelson's complexity index from 6 to 12'. Simultaneously, the Company would also be de-bottlenecking the primary units (CDU/VDU), which will increase the refining capacity to 16 MMTPA.

World renowned Technology providers and consultants, UOP have completed the configuration study with the objective of processing heavy, sour crudes to produce international quality petroleum products while expanding minimum energy and protecting and preserving our environment. The Company has already executed contracts with key process licensors (UOP, Jacobs and ABB) who have made significant strides in completing the Basic Engineering work for these Units. Contracts have also been executed for Detailed Engineering, Procurement of Equipment and Construction of the Refinery, and the Contractors have received firm bids for equipment with long lead delivery periods. The cost of the proposed expansion and up-gradation of the company is estimated at USD1.2 billion. The Company has targeted to complete the expansion project by December 2009.