Russia's Rosneft cracks deal, takes 49 per cent stake in Essar Oil

Russia's Rosneft Oil Company (Rosneft) has signed a Long Term Crude Oil Supply Agreement with Essar Oil at Ufa, Russia on Wednesday (8th July). With this agreement Rosneft has bought 49 per cent stakes in Essar Oil's Vadinar refinery located in western Gujarat apart from the import of crude oil over a 10 year period which contains a supply of 10 million metric tons of crude oil per year. The financials of the deal have not been disclosed by the company and also the deal is subject to other regulatory approval.

As per the media reports Rosneft Chairman Igor Sechin commented  that, “the performance of the terms of the agreement will have a substantial impact on the scale of economic cooperation between Russia and India.” Also, the trade of goods between the two countries will grow by more than 50 per cent. With this agreement, Rosneft aims to increase its annual capacity to 45 million tons by 2020, from the current 20 million tons a year.

As per Essar Oil, this agreement will help to expand the geographical market coverage of the company and it will also help to diversify its supply sources, as it has a large requirement of crude oil that has to be primarily met by imports. Prashant Ruia, Chairman of Essar Oil expressed his happiness on the signing of the crude contract and strategic partnership with Rosneft. The company also informed that the agreement will lead to an increased cooperation in the hydrocarbon sector between India and Russia.

The company's share price surged by 92 per cent in last one month, from Rs 103.50 on 8th June, 2015 to a 52 week high of Rs. 198.35 in the BSE on Thursday 9th July 2015.

Essar Oil owns India’s second largest single site refinery having an annual capacity of 20 million tons and a complexity of 11.8, which is amongst the highest globally. It is a fully integrated oil & gas company of international repute with strong presence across the hydrocarbon value chain from exploration & production to refining and oil retail. It has a portfolio of onshore and offshore oil & gas blocks with about 1.7 billion barrels of oil equivalent in reserves & resources. Essar also has 1500 oil retail outlets in various parts of India, with another 1500 in various stages of implementation.