Essar renews major agreement in India

India-focused energy group Essar has announced the renewal of a major product sale and purchase agreement with Bharat Petroleum Corporation Limited (BPCL).

The four-year agreement, which will run through to 2016, will see Essar Oil supply diesel, petrol, kerosene and aviation turbine fuel to BPCL from Essar's recently completed Vadinar refinery in the Gujarat state.

"It also entitles Essar Oil to purchase products from BPCL and gives the two companies the option of sharing each other's distribution infrastructure," the company announced in a statement.

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Essar completed a $1.81bn expansion (phase one) of the refinery last month which increased its capacity from 14.8m tonnes a year (300,000 barrels per day) to 18m tonnes a year (375,000bpd) and also improved complexity from 6.1 to 11.8.

Vadinar is currently undergoing a further "optimisation project" which is expected to lift capacity to 20m tonnes (405,000bpd) by September 2012.

"We are delighted to further cement our long-term relationship with BPCL. Essar Oil has emerged as the biggest supplier for fuels for BPCL. With our expanded capacity coming on stream, we are fully geared to serve the growing demands of high quality fuel for the nation," said S Thangapandian, the Chief Executive Officer of Essar Oil's Marketing division.

Essar Oil already has similar agreements with two other leading oil-marketing companies from the public sector, Indian Oil Corporation Limited and Hindustan Petroleum Corporation.

By 15:31 in London, shares were trading 4.52% higher at 131.8p.

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