Essar will commission the oil refinery being developed Vadinar in Jamnagar in 2006. The project had been delayed due to environmental issues, cost over runs and shortfall in equity contributions.

This was announced by Prashant Ruia, managing director, Essar Steel Ltd, here today after commissioning Essar Steel's 100 MW power plant at Hazira.

"The construction work at the Vadinar refinery is in progress in full swing. The entire project, including the refinery, power plant and terminal, would involve investment to the tune of Rs 15,000 crore," Ruia told Business Standard.

Ruia, however, parried questions regarding the investment made by the Essar group in the project. "We expect the refinery to start commercial production by the third quarter of 2006. The refinery's initial capacity would be 10.5 million tonne per annum (MTPA). This would be enhanced to 12 MTPA thereafter and eventually to 14 MTPA," he said.

Ruia said that the crude distillation unit (CDU) has already arrived last week, while the vacuum distillation unit (VDU) came yesterday.

Replying to a question, a senior official of Essar Group said, "Sixty per cent work has already been completed at the refinery. A portion of the commissioning was also done, when we restarted the work at the refinery in February. We have had to spend money for maintenance of the equipment, to make sure that it is in proper condition, but it is by no means a very big sum." Ruia said that the power generation capacity of Essar Power would be enhanced from 515 to 2000 MW in blocks of 750 MW each. We expect the first block to become operational within 24 months after the actual work starts, i.e. somewhere around the end of 2007. The second block would become operational in the following 12 months." On completion the Essar refinery would be the second largest refinery in India, behind Reliance refinery.

The refinery is designed to handle a variety of crude mixes from sweet-light crude to heavy high sulphur sour and bituminous crude. The refinery will produce diesel, gasoline, jet fuel, kerosene, fuel oil and bitumen.