Mumbai: After Indian Oil Corporation’s decision to sell petroleum products abroad, London-listed Essar Energy is following suit. Essar, the largest private fuel retailer in the country, would set up retail outlets in Kenya.
The company has set up a pilot fuel retail outlet in the African country, where the likes of KenolKobil are already present. “Essar has set up a pilot retail outlet in Kenya under the franchisee model,” an Essar Energy spokesperson stated in an email response.
Fuel for the outlets would be sourced from Essar’s refinery in Kenya. The retail outlets would be set up under the Essar brand; the company wouldn’t partner any local company for this. “Currently, we are studying the market and, depending on the outcome, may undertake modest expansion,” the spokesperson added.
As part of its global expansion plans, Essar Energy had acquired 50 per cent stake in Kenya Petroleum Refineries (KPRL) in 2009 from Royal Dutch Shell, BP and Chevron. The government of Kenya owns the remaining 50 per cent in the company’s equity. The refinery processes crude oil primarily imported from the Gulf region for marketing companies. KPRL’s primary products include liquefied petroleum gas, unleaded premium gasoline, regular petrol, automotive gasoil, industrial diesel, fuel oil and special products like bitumen and grease.
In June, KPRL had signed a financing agreement with Standard Chartered Bank to help the refinery roll out its business transformation plan. The agreement would enable KPRL to access $250 million and transform the toll refinery to a merchant refinery. “This facility would be utilised for our working capital requirements. We will now be able to procure oil, process it and sell the petroleum products to marketing companies,” said Brij Mohan Bansal, chief executive, KPRL.
Currently, KPRL receives crude oil from oil marketing companies. A merchant refinery would enable KPRL to purchase its own crude oil.
The refinery currently processes 1.6 million tonnes of crude oil a year. After the transition, it would process Murban crude from the United Arab Emirates. It would also be able to handle crude oil from cheaper sources. The refinery would continue to focus on servicing the main Kenyan market, the most dominant in the region. Kenya has a demand of about 4 million cubic metres per year.
Essar Energy also owns Stanlow refinery in the UK, which it bought on July 31, 2011, for $350 million.
The refinery has a nameplate capacity of 2,96,000 barrels per stream day, though currently, it operates at about 70 per cent of this level. The refinery is UK’s second-largest and helps meet about 15 per cent of the country’s gasoline requirements, along with large volumes of diesel and jet fuel. Refined fuels from Stanlow are distributed across the UK, mainly by roads and pipelines.
After the company had announced its results for the quarter ended June, it had said it would not expand its retail operations in India till there was clarity on pricing of diesel in the country.
Essar Oil, a unit of Essar Energy through a franchise model, operates about 1,400 retail outlets, with 200 outlets under various stages of construction. The fuel retail outlets across India sell gasoline and gasoil under the Essar brand. The company is also increasing non-fuel retailing activities in its portfolio of retail outlets to provide an additional source of revenue.
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