Ros­neft en­ters India with $13b Es­sar deal

The Myanmar Times - - International Business -

IN a spec­tac­u­larly costly gam­ble aimed at boost­ing Rus­sia’s strate­gic po­si­tion, state-con­trolled gi­ant Ros­neft is in­vest­ing in India’s Es­sar Oil to mus­cle into a promis­ing mar­ket with out­lets through­out Asia.

Rus­sian Pres­i­dent Vladimir Putin re­turned from last week’s BRICS sum­mit in Goa with one of the largest deals the oil sec­tor has seen in the last two years of fall­ing prices: 98 per­cent of Es­sar Oil at a val­u­a­tion of US$12.9 bil­lion.

Ros­neft – Rus­sia’s biggest oil com­pany led by Mr Putin’s close ally Igor Sechin – will buy 49pc of Es­sar Oil, which owns the Vad­i­nar re­fin­ery in western India.

Vad­i­nar is one of India’s largest re­finer­ies and one of the world’s most mod­ern, with ac­cess to a port nav­i­ga­ble by the largest ves­sels.

Es­sar Oil op­er­ates 2700 petrol sta­tions and was con­trolled un­til now by bil­lion­aire broth­ers Shashi and Ravi Ruia.

A fur­ther 49pc will be ac­quired by a group of in­vestors led by Trafigura oil traders, one of Ros­neft’s part­ners in Rus­sia.

“Ros­neft is en­ter­ing one of the most promis­ing and fast-growing world mar­kets,” Mr Sechin said.

Ros­neft said the Vad­i­nar re­fin­ery will al­low it to process its crude oil pro­duced in Venezuela, which is heavy and more dif­fi­cult to re­fine.

It could also serve as a base for ex­port­ing to the Asia-Pa­cific re­gion, in­clud­ing In­done­sia, Viet­nam, the Philip­pines and Aus­tralia. While the deal rep­re­sents an un­prece­dented for­eign ac­qui­si­tion from the In­dian per­spec­tive, for Rus­sia it is “an im­por­tant strate­gic vic­tory”, said Emily Stromquist, an an­a­lyst at Eurasia Group.

“It sends a sig­nal to the EU and US that Rus­sia has al­ter­na­tive mar­ket op­por­tu­ni­ties de­spite sanc­tions” im­posed over Rus­sia’s ac­tions in Ukraine, she wrote in a note.

“It also pro­vides a much needed op­por­tu­nity for ex­port diver­si­fi­ca­tion as Euro­pean demand flat­tens and Chi­nese growth be­comes more un­pre­dictable.”

With its 1.2 bil­lion in­hab­i­tants, India is the world’s fourth-largest con­sumer of hy­dro­car­bons, with demand con­stantly growing.

It is in­creas­ingly de­pen­dent on crude im­ports, de­spite au­thor­i­ties tak­ing steps to en­cour­age for­eign in­vest­ment and seek­ing to di­ver­sify its sup­pli­ers, cur­rently mainly in the Mid­dle East.

In­dian com­pa­nies in turn this year bought al­most half of Vankor, one of Ros­neft’s most promis­ing oil fields in Siberia.

The Rus­sian group has al­ready grown con­sid­er­ably in re­cent years. It took over the ru­ins of oil mag­nate Mikhail Khodor­kovsky’s group af­ter his jail­ing and has since in­creased its acquisitions, no­tably TNK-BP in 2013 for $55 bil­lion.

Due to the weak ru­ble, it is sit­ting on large cash re­serves that soften the ef­fect of oil prices fall­ing in dol­lars.

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