Essar Oil in $1.2-b pact with Colombia to buy crude oil

Mumbai: Colombia's Ecopetrol is to sell 12 million barrels of its Castilla crude oil to Essar Oil over one year, in a deal worth $1.2 billion (around Rs 6,720 crore).

In a bid to reduce its dependence on oil from Iran, Essar Oil has entered into an agreement with the largest and primary petroleum company in Colombia.

The Colombian giant is the fourth largest oil and gas company in Latin America and accounts for 60 per cent of Colombia’s production.

According to the company's financial report released on July 24 and on its Web site, Ecopetrol’s total unconsolidated sales climbed from $7.74 billion last year to $8.26 billion this year.

Analysts said Essar’s interest in Colombian oil reflects a recent boom, with production of crude in the South American nation almost doubling over the past six years.

The first shipment of two million barrels has already been dispatched from Colombia's Covenas Port on July 29. It would take 35 days for the vessel to berth in Vadinar, Gujarat.

New sources
Essar has significantly enhanced processing of heavy and ultra heavy crude oil at its Vadinar refinery to improve refining margins, Essar Oil CEO L. K. Gupta told participants in the first quarter FY13 earnings conference call on August 14.

Gupta said the company was “developing new and new sources of crude oil as a matter of our strategy to diversify the crude oil sources. It is a continuous on-going exercise”.

The April-June quarter was significant for Essar Oil with the company completing the optimisation project of its Vadinar refinery four months ahead of schedule. This facility is now India’s second largest single location refinery with an annual capacity of 20 million tonnes (4005000 barrels per day).

Iran contract
Refusing to be drawn in on the Iran oil contract at the earnings call, Gupta had said, “We are working with the Government of India guidelines”. He did not say any thing beyond that the company was meeting its “contractual commitments and that Iran is making its contractual commitments.”

In May, the company said it aims to buy 15-20 per cent of its crude oil needs from the domestic market, 35-40 per cent from Latin America and 30-40 per cent from West Asia.