Good afternoon Ladies and Gentlemen,
On behalf of the Board of Directors, I have pleasure in welcoming you to the 16th Annual General Meeting of your Company. The Annual Report and accounts have been with you for sometime and I will take them as read. I would like to give you a brief update on Essar Oil's progress in the last few months and the way we see the future for your Company.

The International Oil Scenario and its Impact on India
When we met at this time last year, experts believed that international crude prices would hover in the range of US Dollars 60 per barrel. The year showed how volatile this industry could be and prices climbed another 25% over the year. On July 14, 2006, crude oil prices hit a record US Dollar 78.4 per barrel before starting to climb down. It is a coincidence that exactly a year later, at our AGM today, we can report that prices are back in the low US Dollar 60s range, and the Indian basket will settle at slightly lower levels. OPEC leaders have indicated that they will maintain production levels in the same range as winter approaches in the US and Western Europe and demand of oil will firm up. Let us hope that prices do not show the same volatility this year.

Progress of the Refinery Project
On behalf of the Board and the employees of Essar Oil, I am extremely pleased to report that we are in the final stages of completion of the Refinery project and expect testing and start up work to begin in a month's time. I wish to reinforce that your company's refinery is coming up at an opportune time, as in spite of increasing demand for finished petroleum and petro-chemical products, no capacity has been added in the last few years and we believe that it will take a few more years before there are significant additions to capacities, especially in India.

Your Company believes that there are opportunities for middle and higher distillates products both in domestic and export markets and when we complete the technological additions and up gradation we will be in a position to extract maximum value from the refinery's production.

I am extremely happy to inform you that the first two crude consignments have arrived at Vadinar port and as we are speaking to you, the primary process units are being readied to take their first charge. I am also pleased to inform you that all utilities and supporting infrastructure is complete. This includes major utilities such as the power plant, desalination and demineralization plants, cooling tower, port and single point mooring, sea water intake and captive crude and product pipelines etc. I am sure all of you appreciate that putting together such a complex project has to be done in a carefully planned sequential manner and I can say that we are on the right track.

The international supply trading desk has started functioning and has commenced trading in crude. The first two crude carriers that have arrived in Vadinar port are their first purchase contracts.

We have made a lot of progress on completion of the township and I am happy to report that key officials are now living in the Essar Township close to the refinery. Essar's Oil Club, with 90 rooms is also fully functional and accommodates employees and visitors to the refinery. Two schools promoted by the Company have also started functioning.

Your Board firmly believes that the wait is over and our vision of building a world class refinery will be realised in a short time. The sweet rewards of our perseverance and the untiring efforts of our employees are near.

Marketing
In spite of crude prices going up by over 20%, the Government of India revised retail prices only once, in July 2006 and that too it was a case of too little, too late. Public sector oil marketing companies were given concessions in the form of Oil marketing Bonds while private sector companies like Reliance and Essar were left to fend for themselves. Both companies have had to revisit their entire retail marketing strategy, with great reluctance. With crude oil prices coming down we are hopeful that our cost effective, franchisee based business model will be able to take off again, although we believe that the long term health of oil marketing companies, especially in private sector has to be addressed early by the Government in a more rational manner. In order to mitigate the hardships faced by our franchisees, the company has worked out a compensation package which provides some financial relief to the franchisees.

Despite these problems of mis-match between the product purchase price and the retail selling price, your company is committed to the development of a country wide retail network. We have a total 1000 retail outlets completed, with another 550 under various stages of construction, which means that by the end of March 2007, we will have a network of 1500 retail outlets. We have also identified 800 sites as suitable for setting up outlets.

Exploration and Production
As we have reported in the Annual Report, your Company is formalising a development plan for its Oil & Gas wells in the Cambay region in which crude oil find has already been reported. We are now awaiting approval for the production sharing contract from the Government for its Ratna & R Series offshore fields. The work on our Myanmar project is also progressing satisfactorily.

Your Board feels that this year we will see increased activity by companies in the exploration business as the demand for oil continues to rise. We will be able to increase drilling activities as another Essar Group Company has ventured into offering oil drilling services and has recently acquired 13 rigs for this purpose. We are confident that there will be a lot of value for your company from this activity.

Conclusion
Finally, I must express our deep felt gratitude and thanks to our employees for the tremendous effort that they have put in to get the refinery into the commissioning phase ahead of approved schedule. It is said often that "Systems, technology and machines can be fixed but it is humans that make possible things that seem impossible." Our employees have shown the power of team work and collective wisdom.

I would also like to thank our colleagues at Essar Construction, Essar Shipping and Essar Power for their contribution to the project.

I express my thanks to our project management consultants, business associates, suppliers, and franchisees for their support through the years. We are grateful to our bankers and financial institutions as well as the Central Government and the Government of Gujarat for their support and guidance.

Finally, I sincerely acknowledge the support from you, our shareholders and my colleagues on the Board for your support and continued faith in Essar Oil.

Thank you,

Chairman

Note: This does not purport to be the proceedings of the 16th Annual General Meeting held on September 29, 2006