India's Essar Oil buys 50 pct in Kenya Petroleum

MUMBAI Jan 15 (Reuters) - Essar Oil Ltd (ESRO.BO), India's second-biggest private oil firm, said on Tuesday it had entered an agreement to acquire 50 percent of Kenya Petroleum Refineries Ltd from Shell (RDSa.L), BP (BP.L) and Chevron (CVX.N).

Essar's first international acquisition in the refining sector is through its subsidiary Essar Energy Overseas Ltd, it said in a statement, without disclosing financial details.

The government of Kenya holds the remaining 50 percent in the Kenyan company, the country's sole refiner, which has a refinery in Mombasa with a capacity of 4 million metric tonnes per annum.

The refinery is being upgraded with secondary units at a cost of $400-$450 million, it said.

Subject to conditions, the acquisition is expected to be completed in early 2008, it said.

"We look forward to (developing) KPRL further to supply the growing Kenyan and adjacent markets and finalise the upgrade project," Naresh Nayyar, chief executive of Essar Energy Holdings, was cited as saying.

Sources in the company had told Reuters in December the company was in advanced talks to buy the 50 percent stake.

Essar, which has three exploration and production blocks in Madagascar and one in Nigeria, said the acquisition fits into its aim of achieving refining capacity of 1 million barrels per day.

The Mombasa refinery produces LPG, gasoline, diesel, kerosene and fuel oil, which are all sold in Kenya and neighbouring countries, it said.

Demand is estimated at 5 million tonnes per annum. (Reporting by Rina Chandran; Editing by Ranjit Gangadharan)