Dubai (Gulf News) -- India's Essar Group, a multi-billion dollar steel-to-telecoms conglomerate, plans to set up three steel plants in the Middle East at a cost of about $1.5 billion as part of a big regional push, a top official said.

Anshuman Ruia, a director at the Essar Group told Gulf News the company has signed a 50:50 joint venture agreement with state-owned Qatar Steel Company to set up a 1.5 million ton a year steel plant there.

Essar will also set up a one million ton steel rolling mill at the Hamriyah Free Zone on the outskirts of Sharjah and has formed a joint venture with pension funds to set up another 1.5 million ton a year steel plant in Iran.

"The Middle East is a very important part of what we are doing because most of our businesses are very energy centric, steel, power, refining. So we believe we need to have a much bigger presence here," Ruia said.

The Essar group, which has assets of more than $6 billion in its steel, telecoms, shipping, power and oil businesses, has emerged from a sharp industry downturn of the 1990s and now has an operating income of about $1 billion a year. Essar Steel, with a capacity of 4.6 million tons a year, is India's second-biggest private steel maker while the Essar Group owns a 33 per cent stake in mobile phone operator Hutchison Essar Ltd.

Ruia said the commissioning of group firm Essar Oil's 10.5 million ton a year oil refinery on India's west coast in October will create huge demand to buy crude oil from the region and a steel business here would be a natural fit.

"Our philosophy has always been to have (steel) production capacity in markets which are growing and which have a captive need," Ruia said.

Large industrial projects being executed in the Middle East, funded by huge oil surpluses, is creating huge local demand for steel that are now being met through imports. Some three to four million tons of steel are currently being imported into the region annually.

Ruia said production cost of Essar's steel from Qatar and Iran will be among the lowest 10 per cent in the world owing to the availability of low-price natural gas in these countries. Energy makes up nearly 45 per cent of the production cost of steel.

Essar has currently taken possession of the land in Qatar, has tied up debt for the project and is in the process of signing gas contracts with the government.

It will set up a hot briquetted plant in the first phase at a cost of $325 million and a 1.5 million ton a year steel rolling mill for long products like rods in the second phase at a cost of another $300-400 million. It expects commissioning in 30 months after construction begins, most likely in November.

The Iran project, in which Essar will hold 60 per cent and pension funds 40 per cent, will be identical to the project in Qatar. The rolling mill in Hamriyah, which will use imported steel billets from Essar's India plant, will cost about a $200 million.

Ruia said Essar is also keen to expand its telecom footprint beyond India, and is actively looking for opportunities in the high growth emerging markets, including the Middle East.