At the BRICS summit, Russia’s top state oil producer Rosneft signed an agreement withthe Indian corporation Essar onJuly 8 to deliver oil over a period of ten years and agreed to buy a 49% stake in India’s second-largest oil refinery.
“The agreement which was reached is ofa strategic nature,” Rosneft’s President Igor Sechin ina press release. “The realisation ofthis agreement will have a substantial impact onthe scale ofeconomic cooperation betweenRussia and India. The turnover ofgoods betweenthe two countries will grow more than50%.”
The agreement follows a previous agreement reached bythe two companies inNew Delhi inDecember, inthe presence of Russian President Vladimir Putin and Indian Prime Minister Narendra Modi.
“For our Indian partners, the signing ofthis agreement represents a vital element ofbasic supplies diversification which, atthe same time, will ensure energy security forthe country. The Russian counterpart, inturn, will obtain the possibility ofproduction and supplies volume planning toa new region withconsiderable growth potential,” Sechin said inDecember, who also visited the refinery inVadinar, which is India’s second largest and one ofthe biggest inthe Indo-Pacific region.
Rosneft said Essar’s fuel retail outlets in India would rise to 5,000 over the next two years from 1,600 right now. The statement said that the two companies have signed a term sheet for the deal which is subject to further corporate approvals.
Rosneft said the deal is still subject to corporate approval. The world’s top listed oil producer has long sought to increase its exposure to the global markets but its efforts have been hampered by Western sanctions over Russia’s role in eastern Ukraine.
Rosneft has also to cope with the collapse in crude prices. The Russian oil giant, like most industry peers, has cut capex plan for this year by 30% from 2014’s estimated $14-$16 billion.
Mumbai-based Essar has been forced to consider selling some of its assets to reduce its debt pile, after expanding in India and overseas in the last few years. Essar Oil buys crude from various sources and the deal with Rosneft will help it reduce dependence on Iranian supply.
Sechin said it was too early to talk about the inclusion of Iranian oil in its supplies to Essar now, but there was “no doubt” that such transfers would be considered.
Iran is in the final stages of trying to hammer out a deal with Western powers on its nuclear programme, which would allow long-running economic sanctions on Tehran to be lifted. According to Russian experts, Moscow wants to delay the implementation of its barter trade until a sanctions deal is reached.
Chris Weafer, senior partner at Macro Advisory, a Moscow-based consultancy, wrote in an e-mailed note to investors on July 9 that “over the summer the main driver is expected to be where the oil price trades and, with prospects for an Iranian nuclear deal rising and no evidence of supply cuts, the greater likelihood is Urals trading nearer to $50 per barrel”.
The world’s four main emerging economic powers, known bythe acronym BRIC, standing forBrazil, Russia, India and China, now refer tothemselves asBRICS afterSouth Africa joined the four onDecember 24, 2010.
http://www.neurope.eu/article/russia-india-boost-oil-partnership-at-brics-summit/