Rosneft to buy 49% stake in Essar Oil

Russian state-owned petroleum explorer and the world's largest publicly traded oil company Rosneft is all set to purchase 49 per cent stake in India's private sector oil refiner Essar Oil, promoted by the Ruia family.

The Russian firm announced that its Chief Executive Officer Igor Sechin has held negotiations with the management of Essar Oil and confirmed it will buy 49 per cent stake. Through this deal, Rosneft will gain access to Essar-operated Vadinar refinery, the second-largest oil refinery in India, with a capacity of 20 MT per annum.

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"We had constructive discussions with management of Essar. We achieved preliminary agreement on the terms and procedure," Sechin told reporters after meeting Essar Directors Prashant Ruia and Ravi Ruia here.

Apart from the refinery, Essar Oil also operates a network of petrol pumps as well as coal-bed methane (CBM) blocks. "We have to go to obtain all the permits (for the acquisition). The transaction will be completed by June 2016," Sechin said. Essar Oil plans to implement the modernisation program expanding the refinery's capacity up to 25 million tonnes per annum including production of 1 million tonnes per annum of propylene, the Russian explorer said in a statement.

Essar Oil Director Prashant Ruia confirmed the development saying Rosneft has today confirmed its intention to acquire 49 per cent equity interest in Essar Oil Ltd. "The parties intend to close the transaction by June 2016 following the execution of mutually agreed binding documents and after receipt of necessary approvals," he said.

According to Rosneft, preliminary mutual understanding has been achieved on the timing and structure of the deal to buy into the equity of Essar Oil Ltd. "The parties intend to sign and close the transaction by the end of June 2016 upon obtaining all necessary permits," the firm said in a statement. Rosneft will also supply 10 million tonne of crude per annum to the Vadinar refinery in Gujarat for 10 years. "In addition an agreement on crude oil deliveries to commence this year has also been achieved," it said.

Rosneft and Essar Oil & Gas Ltd and Essar Energy Holdings Ltd, companies incorporated and managed under the laws of Mauritius, had in July last year signed a non-binding Term Sheet. Promoter Ruia family held 90.5 per cent of Essar Oil in July last year, of which 65.6 per cent is in the form of overseas depository shares. The company has since been delisted through a share buy-back.