Russia's top oil producer Rosneft struck oil and gas deals with India on Thursday, seeking to strengthen ties with Asia and diversify its exports away from Europe, under pressure from Western sanctions.
During President Vladimir Putin's one-day visit to the Soviet-era ally, Rosneft signed an initial deal to supply 10 million tonnes a year or 200,000 barrels per day (bpd) of oil to India's Essar Group over 10-years, its head Igor Sechin told reporters. Supplies could begin as early as in 2015.
Essar Group said in a statement that the two companies signed key terms of crude and oil product supplies by Rosneft to its Indian refinery. Russian bank VTB also signed a deal to open a $1 billion credit line to Essar.
Essar last year signed a similar $1 billion debt-for- fuel deal with China, but the contract has yet to take off.
"There is a possibility of a swap deal between Rosneft and Essar, which may have got a deep discount in prices to justify freight for a long haul crude," said Ehsan Ul Haq, senior consultant at UK-based consultant KBC Energy Economics.
Essar has recently opened a trading office in Geneva.
Haq said Essar may cut imports from Iran to accommodate Russian barrels. Essar depends heavily on Iran to feed its 400,000 bpd Vadinar refinery.
In January, sources told Reuters that Russia and Iran were negotiating an oil-for-goods swap deal.
Russian Economy Minister Alexei Ulyukayev was quoted on November 30 as saying the deal with Iran might be sealed soon. Iran Oil Minister Bijan Zanganeh however played down the news earlier this week.
Sechin, a long-standing ally of Putin, also told reporters that India's ONGC would join its liquefied natural gas project in Russia's Far East. Rosneft already has one foreign partner in the project, U.S. ExxonMobil.
The plant is designed to produce 5 million tonnes of frozen gas initially starting from 2018-2019.
ONGC is already a stakeholder in the Rosneft-led Sakhalin-1 oil and gas project in Russia's Far East.
Sechin said Rosneft would continue talks with ONGC on increasing the participation of the Indian company in its upstream projects in Russia.
Rosneft has offered a 10 per cent stake in the Vankor oilfields, but New Delhi is pushing for a 25 per cent interest. India is also seeking tax breaks on a proposed 49 per cent stake in Yurubcheno-Tokhomskoye, a greenfield project in eastern Siberia.
Russo-Indian trade, at $10 billion a year, is only one-ninth of the volume of trade between Russia and China.
Russian fertilizer company Acron also signed a preliminary agreement with miner NMDC, to help a group of Indian firms buy stake in its $2 billion Potash mine in Russia.
Copyright: Thomson reuters 2014
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