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Essar Oil UK wants to fly high on jet fuel for future growth

The company plans to increase production of jet fuel to 135-140 kilo tonne a month from 120 kilo tonne per month now

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Prashant Ruia
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Essar Oil UK, after posting a record half-yearly net income, has began looking at future beyond conventional road transportation fuel for its growth.

The company has started focusing on high-value jet fuel and plans to increase its production to 135-140 kilo tonne a month from 120 kilo tonne per month at present.

As part of the plan, the company has accordingly tied up with major airlines like Emirates, Etihad, Jet2.com and Oman Air for direct supply of the fuel and is in talks with several other carriers.

S Thangapandian, CEO, Essar Oil UK, said during a conference call on Wednesday that the demand for transportation fuel like gasoline and diesel may slow down with increasing dependence on renewable energy in the next 15-20 years. In such a scenario, the company wants to increase its revenue from jet fuel and petro chemicals, which offer better yields and have a longer shelf life.

Essar Oil UK is a subsidiary of Ruias-run Essar Oil, which in August this year announced the completion of the sale of its India assets to the Russian government-controlled Rosneft-led consortium for $12.9 billion.

Essar Oil's refinery and the oil terminal at Vadinar in Gujarat will give Russia's state-owned major a strategic place in the Asian oil market which is expanding rapidly, strengthening president Vladamir Putin's foreign policy influence by controlling crucial oil assets.

Essar Oil UK, which owns and operates the Stanlow Refinery, produces 16% of the UK's road transport fuel demand. The company has so far invested over $800 million in the refinery since its acquisition in 2012 including the $250-million investment which it announced earlier this year for expansion of the capacity by the first quarter of next year.

Meanwhile, around $25 million forex gains helped Essar Oil UK report its highest ever half-yearly net income at $169 million or Rs 1,082.61 crore, a 231% growth from a year ago, the company said.

The company said the massive jump in net income was driven by record refining margin which soared to $11 a barrel from %7.6% a year ago. The management, however, said such high level of margins are not sustainable in the long-run but exuded confidence that the ongoing $250 million reconfiguration of the plant will help it net better margins.

Thangapandian further said that the company, which is also focusing on its retail expansion in the UK, plans to have around 400 petrol pumps by the turn of 2022, of which majority will be on dealership basis and a handful will be company-owned-company operated (COCO). At present, the company runs 46 petrol pumps in the British market.

Prashant Ruia, non-executive chairman of Essar Oil UK, said, " We have invested more than $800 million in the Stanlow refinery since acquisition towards improving the environment standards and safety performance, improving yields and driving further upside by increasing throughput and unit margins. We have now started reaping the benefits of this investment."

NEW AVENUE

  • The company plans to increase production of jet fuel to 135-140 kilo tonne a month from 120 kilo tonne per month now
     
  • It has also tied up with major airlines like Emirates, Etihad, Jet2.com and Oman Air for direct supply of the fuel
     
  • Jet fuel and petro chemicals offer better yields and have a longer shelf life

(With inputs from PTI)

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