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Global Energy Advisory December 2nd, 2016

Global Energy Advisory December 2nd, 2016

The successful OPEC production cut…

Rosneft, Trafigura, UCP Set to Buy 98 Percent Of India’s Essar Oil

Essar Tank Truck

Russia’s oil giant Rosneft, oil trader Trafigura and Russian investment fund UCP will buy 98 percent of India’s Essar Oil in a deal valued at US$12-13 billion, which includes the Indian firm’s US$4.5 billion debt, Reuters reported on Thursday, quoting sources familiar with the transaction.

Rosneft will receive 49 percent of Essar Oil, while Trafigura and UCP will equally share the other 49 percent, the Reuters sources said.

The deal is expected to be announced by the Indian company this coming Saturday when Russian President Vladimir Putin visits India for bilateral talks with Prime Minister Narendra Modi.

In March of this year, Rosneft confirmed its interest to buy into the share capital of the Indian company. The two parties had also agreed that Rosneft would deliver crude to Essar Oil’s Vadinar refinery. Back then, the parties, which had reached a preliminary understanding on a deal, expected to sign and close the transaction by June.

In August, however, Indian media reported that the planned sale in Essar Oil to Rosneft may have run afoul of the U.S., which has Rosneft on the list of sanctions it had imposed over Russia’s annexation of Crimea. Essar Oil’s owners, the Ruia brothers, had initially sought to sell 74 percent to Rosneft, but reduced the share to 49 percent to avoid the company being categorized as a subsidiary of a group that has U.S. sanctions imposed.

Related: Israel, Turkey Discuss Energy After Years Of Diplomatic Silence

According to the Reuters report, Rosneft would indeed get 49 percent of Essar Oil, which claims that its 400,000-barrel-per-day Vadinar refinery contributes to more than 9 percent of India’s total crude oil refining capacity.

On the eve of what it looks like an imminent announcement of the deal, other news outlets report a different percentage division within the transaction. According to India’s The Economic Times, Rosneft would buy 49 percent of Essar Oil, while Trafigura would acquire 24 percent, and an unnamed sanctions-compliant fund would acquire 15 to 20 percent, which would leave the current owners, the Ruia brothers, with a stake of between 5 percent and 8 percent, or even less.

By Tsvetana Paraskova for Oilprice.com

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