Rosneft and consortium led by Trafigura buy Essar Oil for $ 10.9 bn

Russia’s Rosneft and investment consortium led by Trafigura on Saturday signed agreements to acquire 98 percent stake in Essar Oil Ltd (EOL) at an enterprise valuation of Rs 72,800 crore ($ 10.9 billion). Essar Group will also receive an additional Rs 13,300 crore ($ 2 billion) for the acquisition of Vadinar Port, which has storage and import-export facilities. While Petrol Complex Pte Ltd (a subsidiary of PJSC Rosneft Oil Company) will hold 49 percent stake in EOL, Kesani Enterprises Company Limited (owned by a consortium led by Trafigura) will own the remaining 49 percent.

The all-cash deal encompasses EOL’s 20 million tonne refinery in Gujarat, India, and its pan-India retail outlets. The closing of the transaction is conditional upon receiving requisite regulatory approvals and other customary conditions. 

“We have once again reinforced our unique expertise in project incubation, execution, value creation and monetisation. We have established world-class assets that have attracted the attention of leading global companies and investors. The deals we have done have led to an FDI infusion of more than $ 30 billion into India,” said Prashant Ruia, director, Essar.

Investing in Essar Oil, which operates one of the world’s most complex refineries and runs the country’s largest private sector retail network, gives the new stakeholders a strong foothold in the Indian market that will witness robust demand growth for petroleum products in the long term. The growth for refined petroleum products in the Indian market for the next five years is expected to be in the 5-7 percent range.

“This is a significant milestone for the company. Rosneft is entering one of the most promising and fast-growing world markets. At the same time, this project provides unique opportunities for synergies with the existing assets of the company and is consistent with Rosneft's enhanced presence in the fast growing markets of other APR countries, such as Indonesia, Vietnam and The Philippines,” commented Igor Sechin, CEO, Rosneft.

EOL’s value has also been strengthened by the integrated nature of its business and the strategic positioning of its assets. Its 20 million tonne oil refinery in Vadinar, which accounts for 9 percent of India’s total refining output, is supported by a 1,010 MW captive power plant, and complemented by a network of around 2,700 operating retail outlets. The additional Rs 13,300 crore that the new stakeholders have agreed to pay is for the 58 million tonne deep draft port in Vadinar that helps in importing crude and exporting finished products.

Rosneft Oil Company is the world’s largest petroleum company with revenues in excess of $ 80 billion. The company’s main business activities include exploration & production, refining and product marketing in Russia and across countries in North America, Latin America, Europe, Asia and the Middle East.

Trafigura Group is one of the world's leading independent commodity trading and logistics group of companies with revenues of approximately $100 billion. United Capital Partners (UCP) is a large independent Russian private investment group with investments of over $3.5 billion in various industrial sectors.

Jeremy Weir, chief executive officer of Trafigura, said, “This is an important and exciting investment. Essar Oil occupies a strategic position in the global oil market and owns world-class refining and infrastructure assets that will create multiple synergies with our trading business.”