I wrote late last year about an unusual trend emerging in oil and gas M&A. Namely, a wave of outgoing global investment from E&P firms in Russia.
And news this week confirmed that Russia is on the rise when it comes to global petroleum deals.
Russian petro-major Rosneft announced that it is near closing on one of its biggest acquisitions ever: India’s Essar Oil. With the company’s CEO, Igor Sechin, telling shareholders at the annual general meeting that one of the last hurdles to the mega-deal has now been removed.
Sechin noted that Essar’s creditors have withdrawn any objections to the Rosneft takeover. Now allowing the deal to move forward.
And the deal is a massive one.
Rosneft itself will buy a 49 percent interest in Essar. And the E&P firm will bring in Russian investment company United Capital Partners to take a further 24 percent, while commodities trader Trafigura also buys 24 percent.
That will give the incoming buyers near-total control of Essar. With the pricetag for the deal coming to $13 billion — making it India’s largest-ever incoming foreign investment.
The assets this opens to Rosneft are significant. With Essar holding a key spot in India’s downstream petroleum industry — including ownership of the country’s second-largest refinery, as well as a network of gas stations.
Beyond the assets, the deal is an important sign of geopolitical alignment. With Russia continuing to play a key role in India’s business sector, and beyond. Related: The Biggest Obstacles For China’s $900 Billion Silk Road
That could be a very strategic move for Rosneft and other companies. With India right now attempting to open up more oil and gas development across the country — and holding numerous basins onshore and offshore with big potential.
Russian firms may now have a front seat for such new project opportunities here. Watch for more deals from Russia’s E&Ps in country, and for Rosneft in particular to use Essar as a platform to build a new energy stronghold.
Here’s to going forth.
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By Dave Forest
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A major deal between Essar Oil and a consortium led by Russian oil major Rosneft completed a $12.9 billion deal today.
Rosneft will get a 49% stake in Essar, while the other two major investors Trafigura, a European trader and a Russian fund UCP, will hold the other 49% in equal parts. This acquisition is one of the largest outbound deals between India and Russia in recent times since the Soviet era.