New Delhi, Feb 5 (IANS) Russian oil major Rosneft inked a pact with India’s largest fuel retailer Indian Oil Corporation (IOC) on Wednesday for importing 2 million tonnes of Urals grade crude oil during the year 2020.
This is the first-ever term contract reached between a Russian oil supplier and an Indian state-owned oil company. The pact was signed in the presence of Indian Petroleum Minister minister Dharmendra Pradhan and Rosneft CEO and Chairman Igor Sechin.
The supply arrangement between IOC and Rosneft is expected to be followed by similar crude oil supply arrangement being worked out by other government-owned companies, Hindustan Petroleum Corporation Ltd (HPCL) and Bharat Petroleum Corporation Ltd (BPCL). The two have already indicated this earlier.
The signing ceremony was followed by bilateral meeting Sechin and Pradhan where a host of issues including sale of BPCL was discussed. The Rosneft CEO expressed his company’s interest in acquiring BPCL, a news report said.
Rosneft has already gained a foothold in the Indian market with the $12.9 acquisition of Essar Oil (now Nayara Energy) in August 2017. BPCL may fit into its scheme of things as it would help it grab a larger share of the fuel retail market in India and significantly improve its financial performance.
The Petroleum Ministry has held roadshows for BPCL disinvestment late last year but has not received very encouraging response from investors so far. It is looking at big global oil companies to pick up its entire 53 per cent equity in the company and in this regard, some initial talks has also taken place with world’s largest oil company Saudi Aramco. At current prices, the government’s stake in BPCL is worth Rs 60,000 crore.
“An important subject of talks between Sechin and Pradhan was the issue of providing Indian consumers with quality crude and petroleum-based products, including the increase in Russian oil supplies to India. During the meeting, the parties discussed the ongoing joint projects of Rosneft and Indian companies, including Sakhalin-1, Taas-Yuryakh, the Vankor cluster (a consortium of Indian companies owns 49 per cent in the Vankor cluster field), Far East LNG, and Nayara Energy,” Rosneft said in a statement.
Sourcing of Russian crude oil through long term contracts is a part of India’s strategy for diversifying the country’s crude oil supplies from non-OPEC countries, and a part of the five-year roadmap for bilateral cooperation in the hydrocarbons sector that was signed during Prime Minister Narendra Modi’s visit to Vladivostok last September.
The addition of Russia as a new source for crude oil imports by India’s largest refiner will go a long way in mitigating the risks arising out of geo-political disruptions. The new arrangement would also usher in price stability and energy security for India, which is witnessing robust growth in demand for petroleum products.
A government statement after the event said that both sides agreed to take forward mutually aligned priorities, including preparing a roadmap for Indian investments in the Eastern Cluster projects of Russia. It was noted that the four Indian oil and gas Public Sector Undertakings (PSUs) have already submitted the Expression of Interest to Rosneft to participate in the project.
In order to negotiate the terms of Indian companies entering Vostok Oil in the shortest time possible, it was agreed to create a working group of representatives of Russian and Indian companies.
During the meeting, both leaders also reviewed the ongoing investments between Indian oil and gas PSUs and Rosneft, and discussed further enhancing energy cooperation and strengthening hydrocarbons engagement, both on investment front as well as sourcing natural gas and crude oil.
The crude oil, being sourced under the contract, will be loaded in Suezmax vessels at Novorossiysk port of Russia and will come to India, bypassing Straits of Hormuz.