Russia's Rosneft inks deal to buy 49% stake in Essar Oil's Vadinar refinery

Essar Oil Limited and Russia’s Rosneft have signed a term sheet as per which Rosneft will pick up 49 percent in Essar Oil’s Vadinar refinery in Gujarat. The principles laid down in the Term Sheet, will be reflected in final documents, which are subject to approvals. In addition, two companies have entered into long-term contract under which Rosneft will supply 100 million tonnes of crude oil to Essar’s Vadinar refinery over a period of 10 years.
 
The refining capacity of the Vadinar refinery is 20 million tonne per annum. The deal also includes marketing business whereby Essar operate a retail chain of 1600 stations located in India. From this base, two companies intent to further develop both refining and marketing businesses in India.
 
Essar Oil, which operates the second largest single location refinery at Vadinar, has a large requirement of crude oil that has to be primarily met by imports. The long term crude oil supply agreement with a large integrated oil company like Rosneft will help Essar Oil to diversify its supply sources, expand geographical market coverage and enhance supply security. Adequate operational flexibility is provided for the refinery to benefit from the international oil market opportunities.
 
Prashant Ruia, chairman of Essar Oil Limited, expressed hope that these agreements will give a boost to increased cooperation in the hydrocarbon sector between India and Russia.
 
Through these transactions, Rosneft aims to obtain a share in one of the biggest refineries in India and the Asia-Pacific region. Igor Sechin, chairman, Rosneft, commented, “The reached agreement is of a strategic nature. The performance of the terms of the signed documents will have a substantial impact on the scale of economic cooperation between Russia and India. The goods turnover between two countries will grow more than 50 percent. The new formula of integrated cooperation opens wide perspectives for the development of dialogue, both in specialised and related areas.”