Essar Oil arm inks pact to buy 50% in Kenya Petroleum

Essar Energy Overseas, a subsidiary of Essar Oil, entered into an agreement to acquire 50% of Kenya Petroleum Refineries (KPRL), a 4 million metric tons (MMTRA) per annum refinery in Mombasa, Kenya. The government of Kenya holds the remaining 50% of KPRL.

Essar will acquire the stake from the existing shareholders, The Shell Petroleum, Chevron Global Energy and BP Africa. Subject to certain conditions, the acquisition is expected to complete in early 2008.

The Mombasa refinery is the only refinery in Eastern Africa. It currently produces LPG, gasoline, diesel, kerosene and fuel oil. The refinery is planned to be upgraded by adding secondary units at a project cost of USD 400-450 million.

Naresh Nayyar, chief executive of Essar Energy Holdings said, ``We are very pleased that our first refinery acquisition outside of India will be made in Kenya. We look forward to working with the government of Kenya to develop KPRL further to supply the growing Kenyan and adjacent markets and finalise the upgrade project.``

KRRL`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 tons per annum.

This, the first international acquisition by Essar in the refining sector, fits Essar`s strategy of achieving refining capacity of one million barrels per day. In addition, Essar already has three exploration and production blocks in Madagascar and one in Nigeria.

Shares of Essar Oil declined Rs 10.8, or 3.54%, to settle at Rs 294.25. The total volume of shares traded was 2,581,376 at the BSE. (Tuesday)