The panel is also of the view that the equipment at the site should not be allowed to deteriorate. This is because Vadinar is a coastal location which poses the added risk of corrosion. The committee feels that capacity of the refinery, now at 12 million tonnes, could be marginally increased through debottlenecking so long as it does not affect its time of commissioning or viability.

The five member FI-nominated team comprises ministry of petroleum and natural gas advisor AN Saxena, Indian Oil Corporation's former chief AJ Tauro, Cochin Refineries ex-CMD J Jayaraman, Bharat Petroleum Corporation former director (marketing) V Raina and Engineers India former director Mahendra Prakash. The cost of the project at Rs 7,400 crore is also ``reasonable''and compares favourably with the investment made by PSUs for their own refineries. According to experts, this figure is the accepted investment for a nine-million tonne project while Essar's is already 12 million tonnes.

The additional funds required for the project will come in the form of equity contribution from a strategic ally with a 26 per cent stake. Talks are on with the Oman Oil Company and the feedback to the offer has been favourable, sources say. The others in the running are the state-run BPCL and IOC which would provide the marketing support while Oman would be the crude supplier.

SBI Caps, it may be recalled, was hired by BPCL to do a complete valuation of the refinery. The Ruias, in turn, asked PricewaterhouseCoopers (PwC) to do an independent appraisal of their project. Later, SBI Caps roped in Engineers India to help out in the valuation exercise.

Oman Oil, meanwhile, has indicated that it will first need to take a 26 per cent stake in the tankages of Essar Shipping which will be hivedoff into a new company. This is a crucial part of its plan to participate in the equity of Essar Oil's refinery.

If everything goes according to plan, Oman will invest around $200 million in the project and consequently the stake of the Ruias and associates will be down from 57 per cent to 40 per cent. Sources say that even after this, there will be scope for BPCL or IOC to come in as third partner with a 26 per cent stake.

Essar Oil is also considering a demerger of its exploration & production (E&P) business as part of a major restructuring drive. PWC is working on the feasibility plan which will involve equity participation by an oil company from either here or abroad. Similarly, NM Raiji & Co, the Mumbai-based chartered accountants, are working on a proposal which will involve the demerger of Essar Shipping's terminals and tankages. This is the division in which Oman is looking for a stake.

Essar Oil's 80 mw captive power plant, Vadinar Power Company, expected to be commissioned around the same timeof the refinery, will be leased out by Marathon of the US to the new stakeholders. Sources have reiterated that this arrangement will be finalised shortly and that there is no way the acquirer (or new partner) of Essar Oil will take over the Vadinar Power Company.