Rosneft says reaches preliminary oil supply deal with India's Essar

MUMBAI: Billionaire brothers Shashi and Ravi Ruia run-Essar Group singed two pacts with Russian firms to secure two of its key requirements—crude oil and finance, as a part of the co-operation pacts singed between the two countries during Russian President Vladimir Putin’s visit to New Delhi.

Russian bank VTB will open a $1 billion credit line to Essar Group. In a separate agreement, Rosneft agreed to supply oil and oil products to Essar refineries in India in a deal valued at $ 10 billion.

“We are very happy to partner Rosneft, a global leader in hydrocarbon reserves and production, for long term supply of crude oil and products. This provides good long term raw material security to our refineries,” said Essar’s Chairman Shashi Ruia.

Rosneft would supply 10 million tons of crude to Essar for 10 years beginning 2015.

Moscow-based Rosneft’s Chairman Igor Ivanovich Sechin said, “The performance of the terms of the agreement will have a substantial impact on the scale of economical cooperation between Russia and India – our company estimates that the implementation of the contract will fuel significant growth in the goods turnover between two countries.”

Rosneft is 69.50% owned by the Russian government, while BP owns 19.75%, and the remaining 10.75% of shares are publicly traded. It has interest in hydrocarbon exploration and production, refining, upstream offshore projects, and crude oil and marketing.

Essar Group has diversified interests in oil exploration and production, steel production, power and shipping. Essar Energy has increased its refining capacity to 741,000 barrels per day from 260,000 barrels per day, which included expansion and upgradation of it Vadinar refinery. The financing deal with VTB is intended to finance the continued consolidation of assets in Essar Group’s investment portfolio and strengthening of their capital structure. This agreement follows the $ 1.2 billion transaction arranged in first half of 2014 by VTB Capital, which acted as financial adviser and financier for the company in delisting Essar Energy from the London Stock Exchange.