Essar Seeks Indonesia, Australia Resources for India Demand
June 13, 2011, 3:09 AM EDTBy Yoga Rusmana and Rishaad Salamat
(Adds share price in sixth paragraph.)
June 13 (Bloomberg) -- Essar Group plans to acquire more coal and iron ore assets in Indonesia, Australia and Africa as it seeks to boost supply to meet domestic Indian needs, Chief Executive Officer Prashant Ruia said.
“We’re looking at investing overseas, including in Indonesia, Australia and Africa, to access natural resources,” Ruia said in a Bloomberg TV interview at the World Economic Forum on East Asia in Jakarta yesterday. “Coal and iron ore are two major possibilities and, going forward, oil and gas.”
Indian companies including Essar, Tata Power Co. and Reliance Power Ltd. are expanding overseas to meet energy needs to support growth in Asia’s second-fastest growing major economy. India, which imports about 75 percent of its crude requirements, had its oil-import bill climb sixfold in the past decade to $85.5 billion for the year ended March as demand and prices rose, equivalent to about 7 percent of gross domestic product.
“Getting raw materials from overseas for power generation and steel making is paramount as land acquisitions and environment approvals in India are bottlenecks,” said K.K. Mital, a fund manager at Globe Capital Market Ltd. in New Delhi. “Essar has the access to capital for acquisitions and can raise money overseas after listing Essar Energy in London.”
Essar Energy Plc raised 1.27 billion pounds ($2.1 billion) in an initial public offering in April last year and listed shares on the London Stock Exchange a week later.
Essar Oil Ltd., a unit that operates India’s second-biggest non-state refinery, fell 1.2 percent to 124.55 rupees at 11:33 a.m. in Mumbai trading compared with a 0.4 percent drop in the benchmark Sensitive Index.
Aries Mines
Last year, Essar Group agreed to buy the Aries coal mines in Indonesia’s East Kalimantan province to secure supplies for its power plants, the Mumbai-based company said in March 2010. The areas, which hold as much as 100 million metric tons of power-station coal, may start output within a year, Essar said.
“We believe that Indonesian coal is a natural fit for India, for power generation in the country, because India is short in power requirements and the import of coal is only going to increase over time,” Ruia said. Essar is also looking at development in oil and gas, power plants and coal-bed methane projects in Indonesia, he said.
Environmental restrictions and delayed land purchases in India may cause a shortfall of 142 million tons of coal in India in the year that started April 1, compared with an 83 million- ton gap in the previous year, Coal Minister Sriprakash Jaiswal said on Feb. 3.
Refining Capacity
The Essar Group, controlled by billionaire brothers Sashi and Ravi Ruia, is targeting 1 million barrels a day of oil processing capacity by expanding its Indian plant, operated by Essar Oil, and buying refineries in Europe and Africa.
Essar is completing acquiring Royal Dutch Shell Plc’s Stanlow refinery, which has a capacity of 12 million tons to 13 million tons and has a stake in a Kenya refinery, Ruia said.
Essar Oil purchased a 50 percent stake in Kenya Petroleum Refineries Ltd. from Shell, Chevron Corp. and BP Plc in 2009. The Mombasa-based refinery has a capacity of 90,000 barrels a day, the permanent secretary in the Energy Ministry, Patrick Nyoike, said on April 2.
“The Chinese have been very active in Africa, led by the government or government-led companies,” he said. Still “the continent is vast, the resources are vast. Although the Chinese have got large assets, I don’t think all of the best are gone.”
Essar aims to increase its refining capacity in India to 18 million to 20 million tons from 14 million to 15 million tons, Ruia said. Capacity will further be expanded to 36 million tons, he said, without providing a time frame.
--With assistance from Bambang Djanuarto and Liza Tan in Jakarta and Rakteem Katakey in New Delhi. Editors: John Chacko, Jane, Ching Shen Lee
To contact the reporters on this story: Yoga Rusmana in Jakarta at yrusmana@bloomberg.net; Rishaad Salamat in Hong Kong at rishaad@bloomberg.net.
To contact the editor responsible for this story: Greg Ahlstrand at gahlstrand@bloomberg.net.
