Essar Oil in talks for Mideast, Latam crude

By Hiral Vora

MUMBAI (Reuters) - India's second-largest private oil firm, Essar Oil Ltd (ESRO.BO: Quote, Profile, Research, Stock Buzz), is in discussions with Middle East and Latin American oil producers about securing long-term supplies next year, its managing director said on Wednesday.

Essar Oil, part of the Ruia family-owned Essar Group, commissioned its 210,000 barrels-per-day (bpd) refinery in the western state of Gujarat a year ago, although key secondary units will start up only at the end of this year.

"Post-commissioning of the secondary units, our crude diet will undergo a change. We will be able to process heavier crudes, so we want to have a blend of term and spot," Naresh Nayyar said at the Reuters India Investment Summit on Wednesday.

"In the first year maybe 40 percent term, 60 percent spot, but we intend to gradually increase the term share."

He declined to name the specific countries or companies from which Essar Oil hoped to buy crude. The company currently runs its refinery purely on imported crude bought on the spot market.

The existing refinery has a complexity rating of 6.1, which indicates a limited ability to convert cheaper, heavy-sour crudes to higher-value fuels, but that will rise to near 13 once it completes a $6 billion expansion in 2010, Nayyar said.

The expansion would boost capacity to around 680,000 bpd, on a par with the current capacity of rival and neighbor Reliance Industries Ltd (RELI.BO: Quote, Profile, Research, Stock Buzz), whose Jamnagar refining and petrochemical complex has a rating of over 14.

(Editing by John Mair)