Essar spots an opportunity in the sale of LPG to cars

Vol 10, PW 25 (19 Apr 07) Midstream & Downstream

Essar Oil is set to reap the benefits from a booming market in LPG used as fuel for cars.

“This market is growing by 10%-12% on a month-by-month basis,â€‌ Essar tells us. “It’s a new generation fuel, environmentally friendly, and the best alternative to CNG.

â€‌ Essar’s determination to make a mark with auto-LPG is driven by an imminent hike in production at its 10.5m t/y refinery at Vadinar in Gujarat, commissioned in November last year at a cost of $2.5bn. Since March this year Essar has been selling its entire LPG production of 14,000 to 15,000 tonnes per month to state-owned refiners Indian Oil, Bharat and Hindustan Petroleum.

But when the Essar refinery is fully commissioned in September this year, LPG production will more than double to 36,000 tonnes per month. “Our refinery can produce â€کstraight run’ LPG,â€‌ adds Essar.

“This is ideal for use as auto-LPG. We plan to produce another 6000 tonnes â€کstraight run’ LPG for use in automobiles in addition to the 36,000 tonnes per month for the regular market.

â€‌ Essar is well placed to begin selling auto-LPG though its network of petrol pumps across the country. “If I sell auto-LPG from let’s say 80 retail outlets,â€‌ says Essar.

“I should be able to sell approximately 40-50 tonnes of â€کstraight run’ LPG per month to automobiles. This comes to around 4000 tonnes LPG per month.

â€‌ Essar has already begun talks with three companies that manufacture auto-LPG pumps: L&T, Midco and Tokhein. “They have also submitted price bids,â€‌ says Essar.

“We are just waiting for oil ministry approval before we go ahead.â€‌ Last month Essar wrote the latest in a line of letters to the oil ministry seeking approval for its new venture.

“We have been writing to the oil ministry for quite some time now,â€‌ Essar tells us. “Our papers have gone to the concerned people for their opinion and we expect to get the approval soon.