Mumbai, Aug 7 (IANS): Essar Oil said on Sunday it is investing Rs 1,600 crore in upgrading 20 million tonnes per annum (mtpa) Vadinar refinery in view of the surging demand for petro products over the medium and long term.

"Essar Oil's Vadinar refinery is looking at earning an additional $1.50 per barrel of crude on its gross refinery margin (GRM) on the back of Rs 1,600 crore of investments," said a statement issued by the company.

"The company has already invested Rs 400 crore during a 28-day planned shutdown of the refinery in September-October last year. A further Rs 1,200 crore will be invested to make additional upgrades in the various refinery units over the next 2-3 years," the statement said.

Vadinar refinery's current production accounts for about nine per cent of India's refining capacity.

"EBITDA (earnings before interest, tax, depreciation and amortisation) and profit after tax 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," the statement said, citing Managing Director Lalit Gupta.

C. Manoharan, Director of Vadinar refinery, said: "Post the shutdown, we have been able to modify our crude blend. This has enabled Essar Oil to improve its crude and product mix significantly, which is reflected in our financial performance."

In 2003, Essar Oil became the first private company to enter petroleum product retailing in the country, when the government opened the sector to private-sector refiners.

The company runs a network of 2,470 operating retail outlets, while 2,850 additional outlets are in various stages of implementation.

Essar Oil has a target of reaching 4,300 operational outlets by the end of 2016-17. The total capital investment in these outlets would be about Rs 2,100 crore.