Essar Oil posts net loss of 39.86 billion rupees

NEW DELHI Fri Feb 17, 2012 8:26pm IST

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NEW DELHI (Reuters) - Essar Oil(ESRO.NS), the second biggest Indian client of Iranian oil, will continue to buy 100,000 barrels per day from the Islamic country in the next fiscal year starting April 1 for its Vadinar refinery in the western state of Gujarat, Chief Executive L.K. Gupta said.

Essar Oil, 87 percent owned by London-listed Essar Energy, also said it planned to raise about 30 billion rupees in 12 to 15 months, after posting a net loss in its fiscal third-quarter ended December.

Iran accounts for about 11 percent, or 350,000-400,000 barrels per day (bpd), of India's oil imports and is the South Asian country's second-largest crude oil supplier.

Tehran is facing Western sanctions over its nuclear plans that many suspect is aimed at making a bomb.

The sanctions make it tough for importers to pay for Iran's oil. Indian purchases have been fraught with payment problems since December 2010 after a clearing mechanism was scrapped.

"We have agreement with Iran valid till March 31, 2013. It is more or less same volume presently," Gupta of Essar Oil told reporters after the company announced its quarterly results.

Up to now India has defied financial sanctions imposed by the United States and European Union to punish Iran over its disputed nuclear programme. New Delhi has come up with elaborate trade and barter arrangements to pay for oil supplies.

Gupta said Essar's current dues for Iran imports stood at about $1.2 billion.

Essar aims to expand its 14 million tonnes/year (280,000 bpd) Vadinar refinery to 18 million tonnes/year (360,000 bpd) capacity by March and to raise the capacity to 20 million tonnes or 400,000 bpd by September.


Essar Oil posted a net loss of 39.86 billion rupees for October-December, mainly hit by one-time debit of 40.15 billion rupees toward deferred sales tax payments, the company said in a statement.

Essar Oil has filed a petition in the Supreme Court seeking to review a judgment that prevents it from deferring payment of a sales tax. It had earlier deferred $1.24 billion under a tax benefit provided by the Gujarat government.

The provision pulled down the networth of Essar Oil by more than half, and to boost liquidity the company plans to raise 30 billion rupees and ask its parent Essar Energy to convert its dollar convertible bonds worth 13.96 billion rupees to equity.

Gupta did not elaborate on possible routes for raising fresh capital.

Despite the increase in its refining capacity, Essar will not raise its intake of Iranian crude and does not see any problem if sanctions adversely impacts Iranian supplies, he said.

"Although uptil now we continue to get contracted volumes, in case there is any contingency, given our suppliers base we have for our capacity, we will be able to procure crude for our refinery," he said.

With the expansion of its refinery, Essar is also increasing the complexity of its Indian refinery to process more heavy and ultra heavy grades to improve refining margins.

Gupta said substantial part of ultra heavy crude required for expanded capacity has been tied up from Latin American countries like Brazil and Colombia, and the Middle East.

(Editing by Rajesh Pandathil)

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