Stanlow ups Essar Energy earnings 18%

Gross refinery margins rose to average USD 8.03 per barrel, compared with USD 3.06 a barrel in the first eight months to March 2012.

"Of this margin uplift, USD 1 per barrel is due to internal initiatives and investments as part of the '100 day plan' put in place following acquisition by Essar for USD 350 million in July 2011," the company said in a statement.

Essar said initiatives and investments at Stanlow aimed at improving margins by a total USD 2-USD 3 per barrel by 2014-15 (including the USD 1/barrel just achieved) are continuing - including installation of natural gas to fuel the six boilers on site, which will be completed in the coming weeks.

Stanlow is the second largest UK refinery, with nameplate capacity of 2,96,000 barrels per day, and an above average Nelson complexity of 8.2.

However, current optimised configuration gives Stanlow a 220,000 bpd operating capacity with an effective complexity above 10. This produces an above average proportion of middle distillates at 55%,--principally diesel and jet fuel - of which there is a significant and growing deficit in the UK and Europe as dieselisation of vehicles continues and weaker refineries shut.

Stanlow produces 15% of UK transport fuels. The company is installing natural gas to fuel the six boilers providing steam to drive the refinery.

Also, it has started to use 11 lower cost crudes from various geographies like Africa, Canada to optimise efficiencies.

Besides, it will close lubricants production once remaining customer obligations have been met.

Essar expect material benefits from the closure as lubricants make up only 1-2 per cent of Stanlow's output but dictate the choice of 25 per cent of the overall crude intake.

Essar expects to add USD 3 per barrel to gross refinery margins over the next two years, which would lift EBITA by USD 225 million.

... contd.

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