Rosneft to Boost Oil Supplies to India

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Rosneft, Russia’s biggest oil producer, said Wednesday it had signed a term agreement with Indian Oil Corp. (IOC) to increase crude supplies to India.

The Russian state-controlled major did not specify the volumes envisaged by the contracts, saying only that shipments would grow “significantly” while the supplied grades would be “diversified.”

In December 2021, the two companies signed a deal to supply a relatively modest 2 million metric tons per year (40,000 barrels per day) of Russian crude oil in 2022 from the Black Sea port of Novorossiysk.

Actual shipments could have been much bigger, experts say, as Russia has become one of the major suppliers to India.

Russian Deputy Prime Minister Alexander Novak said this week that in 2022 Russian crude exports to India increased 22-fold. Indian buyers now take about 2 million b/d of Russian oil.

Until recently, the Russian Urals crude export blend accounted for the majority of volumes purchased by the India companies. However, its share has fallen to less than 60% now as Indian refiners are looking for lighter crudes to mix with sour Urals.

IOC's new contract with Rosneft may address this issue. Rosneft could provide for shipments of the Siberian Light, Espo, Varandey and Sokol grades, on top of Urals.

However, the details of the new contract related to Russian crude deliveries to India remain unknown. India doesn’t have the ships, so it has to be a delivered deal, analysts say.

Broader Ties

The deal was signed during a work trip to India by Rosneft CEO Igor Sechin who “met with officials from the Indian government, as well as with the heads of some of the country's largest oil and gas companies,” Rosneft said.

According to the Russian major, Sechin also discussed ways of expanding cooperation "in the entire value chain of the energy sector, including possibilities of making payments in national currencies."

The agreement builds on broader energy ties between Rosneft and India's energy sector.

Rosneft is 49.13% stakeholder in the Nayara Energy consortium operating the 400,000 b/d Vadinar refinery in India.

Meanwhile, several Indian companies are Rosneft’s partners in a number of Russian upstream ventures. ONGC Videsh (OVL) holds 20% in the Sakhalin-1 project on the Russian Pacific shelf, which used to be operated by Exxon Mobil. The US supermajor withdrew from Russia following Moscow’s invasion of Ukraine and its 30% stake in the venture is up for sale.

Rosneft, which also holds 20% in Sakhalin-1 and is currently operating the development, is seen as the main candidate. However, Energy Intelligence understands that OVL could be interested as well, since Russia is seen as playing a key role in helping it achieve its long-term worldwide production target of 40 million tons of oil equivalent per year by 2040.

Some analysts say there could be a joint bid of Rosneft and OVL, although no official offers have been made to the Indian company so far. The Russian government is still evaluating the damage inflicted by Exxon, and a Russian court has recently ordered Exxon to pay roughly $200 million in tax arrears and penalties related to its previous participation in the Sakhalin-1.

In addition, OVL, Oil India, IOC. and Bharat Petroresources own 49.9% of the Rosneft subsidiary Vankorneft, which is developing the Vankor oil and gas condensate field in East Siberia.

Oil India, IOC and Bharat Petroresources also own 29.9% of Taas-Yuryakh Neftegazodobycha developing the Srednebotuobinskoye field, also in East Siberia.

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Ukraine Crisis, Oil Term Contracts, NOCs, Independent Refiners
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