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Bloomberg: Essar to Buy Chevron, Shell, BP Stakes in Kenya Plant (Update1)

By Manash Goswami and Archana Chaudhary

Jan. 15 (Bloomberg) — Essar Oil Ltd. agreed to buy half of Kenya Petroleum Refineries Ltd. from Chevron Corp., BP Plc and Royal Dutch Shell Plc, marking the first overseas acquisition of an oil refinery by an Indian company.

Essar Energy Overseas Ltd. will buy the combined 50 percent holding, the Mumbai-based company said in an e-mailed statement, without saying how much it would pay. The transaction may be completed early this year, the refiner said. The government of Kenya holds the remainder of the company.

The purchase will boost Essar’s oil-refining capacity by half and help Chief Executive Naresh Nayyar meet the target of processing 1 million barrels a day of fuels. The investment may give the Indian company an opportunity to sell auto-fuels, and explore for oil and gas in Kenya and other African nations.

“They are trying to explore opportunities in newer markets, where there are growth opportunities,” said Karthik Ramakrishnan, a senior analyst at Mumbai-based Sunidhi Consultancy Ltd.

Kenya Petroleum can process 4 million metric tons of crude oil into fuels a year, or 80,000 barrels a day, Essar said. An investment of $450 million is planned to upgrade the plant to produce cleaner-burning fuels, the company said. The refinery currently produces gasoline, diesel, kerosene and fuel oil.

“We plan to invest on increasing the capacity of this refinery,” Nayyar said in a telephone interview from Mumbai. “We also want to upgrade the refinery so that it can process heavier crude varieties.”

Fundraising

Essar Oil, operator of India’s newest refinery, plans to raise $4 billion, half of it overseas, to more than triple capacity, Nayyar said Dec. 17. Essar will increase capacity at the western India-based plant to 34 million tons a year from 10.5 million tons.

The company’s Jamnagar facility started in 2006, almost a decade after it was first planned, as the group’s steel unit faced losses because of falling prices of the commodity.

The Essar group, which has interests in energy, steel and telecommunications, plans to spend a record $2 billion on developing oil and gas fields in India, Myanmar and Nigeria to benefit from high fuel prices, Shishir Agrawal, chief executive officer of Essar Exploration & Production Ltd., said on Oct. 4.

To contact the reporters on this story: Manash Goswami in New Delhi at [email protected] .

Last Updated: January 15, 2008 10:19 EST

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