India-based Essar Oil will invest over Rs. 1,600 crore ($239m) in the next three years to boost refining margins.

The latest round of investment, worth Rs. 1,200 crore ($179.5m), has been set aside to upgrade the company's Vadinar oil refinery in Gujarat.

With this investment, Essar Oil wants to increase its gross refinery margin by an additional $1.50 per barrel of crude oil.

Out of the total investment, the company has already invested Rs 4bn ($59.8m) during a 28 day planned shutdown scheduled between September – October last year.

The shutdown activity was not just about routine inspection and maintenance, but it was crucial in converting the Vacuum Gas Oil- HydroTreating Unit (VGO-HT) into mild hydrocracker (MHC) and installing facilities to process High Acid (TAN) crudes.

Since the shutdown and upgrade, Essar claims that the Vadinar refinery has been able to convert its entire VGO production into higher margin products.

Essar Oil refinery director C Manoharan said: “Post the shutdown, we have been able to modify our crude blend to process higher quantities of ultra-heavy and high TAN crudes, and increase the production of high value distillates.

“This has enabled Essar Oil to improve its crude and product mix significantly, which is reflected in our financial performance.”

The planned upgrades in the next round of investment would include naphtha hydro treater (NHT), isomerisation unit, continuous catalytic reformer (CCR) units and facilities which will further extract sulphur to improve its margins.

Essar Oil managing director and CEO Lalit Kumar Gupta said: “We are committed to making our refinery among the best in the world through efficient deployment of resources. We will take a path of safety and sustainability in reaching our goals.

“We believe in setting new benchmarks for the industry with our efforts. With the shutdown having been successfully completed, EBITDA and PAT in the current financial year is expected to be significantly higher because of the full availability of the refinery, stable crude oil prices, and our ability to optimally leverage on the investments in the MHC and high TAN facilities.”

Essar Oil claims that the margins at the refinery have been above the industry benchmarks, standing at $10.29/bbl, since the shutdown, followed by the investment.