BP move to give up Rosneft stake may not impact Nayara Energy directly

The decision by BP to abandon its 19.75 per cent stake in Rosneft is unlikely to have any direct impact on the Russian oil giant-backed Nayara Energy’s operations in India.

Industry sources were of the view that sanctions may have some impact on the long-term operations and also the investment ability of the company in India.  Rosneft holds around 49.133 per cent in Nayara Energy. “BP does not have any direct stake or proportionate stake in Nayara Energy. Hence, there will be no direct impact on Nayara Energy,” said one of the company sources.

“Nayara Energy does not comment on the actions of its shareholders,” Nayara Energy said in its response to Business Standard. For BP, Rosneft accounts for around half of its oil and gas reserves and one-third of production. The company is expecting a financial impact of around $25 billion for abandoning its stake.

However, Nayara said that there will be no impact on its expansion projects because of the sanctions. “Nayara Energy is an Indian company, focused on its growth plans to become one of the largest integrated energy and petrochemicals complexes within the country. Our endeavors are designed to fulfill the nation’s growing energy and petrochemical needs. We are making steady progress on our petrochemicals expansion, in a phased manner which is in line with our asset development strategy.”

Nayara Energy was in the process of investing around Rs 6,000 crore for its petrochemical expansion plans. In August last year, Nayara had signed a financial agreement with a consortium of banks led by State Bank of India (SBI) for a project term loan of Rs 4,016 crore.  The company was planning to use the funds to set up its polypropylene plant at its Vadinar refinery in Gujarat.

The loan facility carries a tenor of over 15 years and is among the largest private sector project finance deals in recent times. The project is proposed to be funded with a mix of debt and equity.

It was in 2019 that Nayara Energy had first announced its plans to expand into petrochemicals at the Vibrant Gujarat Summit. It set up a polypropylene plant with an annual capacity of 450,000 tonnes. This marked its foray into the petrochemical business.

Rosneft had also announced a project for maximising added value on the catalytic cracking unit. Also, petrochemicals production has been initiated at the Vadinar refinery.

After the sanctions, Nayara came out in public, stating that it is focused on its growth plans to become one of the largest integrated energy and petrochemicals complexes in the country. On the impact of sanctions on Nayara Energy as some of its promoters reportedly have business deals with VTB Bank (Russian bank), another official said that there will be no operational impact on Nayara because of sanctions.

It was in August 2017 that Nayara Energy was acquired by a consortium of Rosneft (49.13 per cent), Trafigura Group and United Capital Partners (49.13 per cent). Nayara operates India’s second-largest single-site refinery with a capacity of 20 million tonnes per annum (MTPA). The company also operates over 6,510 retail outlets across the country. It was planning to expand its retail presence to around 7,600 outlets by 2024.

Though the refinery used to import crude oil from various regions, including West Asia, Africa, Russia and Latin America, another source said there are no current orders with Russia.