Photographer: Andrey Rudakov/Bloomberg

Russia Deepens Oil Ties to India With Siberian Field Sales

  • Three Indian companies buy $1.3 billion stake in Taas-Yuriakh
  • India to hold almost 50% of Russia's Vankorneft oil unit

Russia’s Rosneft OJSC agreed to sell bigger stakes in its Siberian oil assets to Indian state-run energy companies, including a $1.28 billion share to a consortium of Indian producers, as the two countries seek to deepen energy cooperation.

The group of three Indian companies will take a combined 29.9 percent share in Taas-Yuriakh Neftegazodobycha and a 23.9 percent stake in Vankorneft, according to Sunjay Sudhir, joint secretary for international cooperation at India’s oil ministry. Rosneft also offered 11 percent in Vankorneft to Oil & Natural Gas Corp., an addition to the 15 percent that India’s biggest explorer bought for $1.27 billion in September.

State-run Rosneft, impeded by U.S. and European financing bans over the conflict in Ukraine, is looking for investments from Asia to fund expansion. India, poised to overtake Japan as the world’s third-biggest oil user, is seeking to enhance energy security amid low prices by tying up new sources of supply. Rosneft and the Indian companies signed preliminary agreements during Indian Prime Minister Narendra Modi’s visit to Russia in December.

The deals “establish a reliable energy bridge between our countries,” Rosneft chief executive officer Igor Sechin said at a briefing in New Delhi to announce the agreements. They will lead to “Indian companies gaining access to production projects within the territory of Russia, and Rosneft is gaining access to the opportunity to operate in the Indian market.”

‘Only One’

ONGC may pay up to $900 million for the new Vankorneft stake and it expects to complete the transaction by October, according to S.P. Garg, finance director at the company’s ONGC Videsh unit. The combined shares of the four Indian companies would give them 49.9 percent of Russia’s second-largest oil development. It produces more than 60,000 tons (about 440,000 barrels) a day and is one of the main sources of supply for the Eastern Siberia-Pacific Ocean pipeline, Rosneft said in September.

Rosneft is using the sale for “deleveraging and improving future funding,” Ildar Davletshin, an oil analyst at Renaissance Capital, said by e-mail. 

“India is almost the only one left who could still invest in Russia” as China has already made plenty of commitments in prepayments and for LNG investments to Russia. “Western companies are very cautious and sanctions add further obstacles.”

Essar Deal

Oil from Taas-Yuriakh will be used to supply refineries in Russia’s Far East, as well as China, and production will rise fivefold to 100,000 barrels a day next year, according to Rosneft’s website. An Indian government official who asked not to be identified, citing internal rules, provided the $1.28 billion value of the Taas-Yuriakh assets bought by the group made up of Indian Oil Corp., Oil India Ltd. and Bharat PetroResources Ltd. The consortium expects to close the deal by September, Indian Oil said in a statement.

Separately, Rosneft said it intends to close a deal to acquire a stake in Essar Oil by the end of June and will begin crude deliveries to the Indian company’s refinery this year, the Russian producer said in a statement. Essar said that Rosneft has completed due diligence to buy the 49 percent share of the company.

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