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A 49 percent stake buy by Russia’s Rosneft in Indian Essar Oil will see the Indian company reduce its purchases of Iranian crude oil, according to Essar Oil’s chief executive, as quoted by Bloomberg.
Essar Oil, India’s major refiner, is the biggest single importer of Iranian crude into the country at the moment. This, however, may be about to change, as Rosneft will want to take the lion’s share of supplies to Essar’s facilities.
The deal was announced last month to be nearing completion, with the closing date set for October. As part of its, Rosneft will supply 10 million tons of crude annually to the Vadinar refinery, India’s second-largest, which constitutes half of its annual processing capacity. The supply agreement has a 10-year term.
Recently Essar Oil said it will spend around US$179 million (at current exchange rates) on raising the profit margin of Vadinar by US$1.50 a barrel. The money will be spent on upgrades over the next two to three years.
According to Bloomberg, Essar Oil purchased a daily average of 148,000 bpd from Iran over the first half if 2016, which constituted 40 percent of India’s total crude oil purchases from Iran. The amount also accounted for a third of the supplies directed to Vadinar. Iran’s overall oil exports to India shot up 63 percent in January-June, after the lifting of Western sanctions related to Tehran’s nuclear program.
In separate news, Rosneft’s chief Igor Sechin said that the company will “work with Iran in all directions”, responding to questions about what particular projects in Iran Rosneft is interested in.
The questions followed an announcement from President Putin that the Caspian region is a priority area for Russian oil and gas, and that Moscow was ready to discuss with Tehran a joint utilization of existing pipeline infrastructure for the transportation of Caspian hydrocarbons.
By Irina Slav For Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.