Putin effect: Essar inks $10-bn pact to import oil from Rosneft

The deal was among a host of agreements being signed during Russian President Vladimir Putin's visit to India and talks with Prime Minister Narendra Modi.

In one of the biggest oil deals, Essar Group on Thursday signed a $10-billion contract to import crude oil from Russia over a 10-year period.

Essar signed a deal with Russia's top crude oil producer Rosneft to buy 10 million tons a year of oil, worth about $10 billion, for 10 years beginning 2015.

The deal was among a host of agreements being signed during Russian President Vladimir Putin's visit to India and talks with Prime Minister Narendra Modi.

Moscow-based OAO Rosneft Chairman Igor Ivanovich Sechin said the agreement was to ship by sea as much as 10 million tons of oil per year to Essar Group.

The deal, he said, could be extended beyond 10 years.

"Rosneft and Essar signed key terms of oil and oil products supplies to Essar refineries in India.”

"Supplies may begin in 2015," Essar Oil, which operates a 405,000 barrels per day refinery at Vadinar in Gujarat, and Rosneft said in a joint statement in New Delhi.

This is one of the biggest oil import deals any Indian refiner as signed. Reliance Industries' 15-year deal to purchase 300,000 bpd to 400,000 bpd crude oil from Venezuela is possibly the biggest by an Indian company.

Essar's 200,000 bpd (10 million tons a year) contract may be the second biggest.

"Consequently Rosneft expands its distribution area and builds up deliveries to the region, where the world's economy growth zones are concentrated," the statement said.

Essar head Shashi Ruia and Sechin signed the agreement in the presence Putin and Modi.

"The reached agreement opens new horizons of cooperation between the two countries, thanks to the synergistic potential of the partnership in upstream and downstream areas of two leaders of the oil and gas industry of Russia and India.

"Thanks to this agreement Rosneft grants itself a secure market outlet of oil and oil products, while Essar gains a reliable and stable partner as a supplier of oil and oil products to its refining facilities," it said.

Sechin said the agreement will have a "substantial impact on the scale of economical cooperation between Russia and India."

"For our Indian partners the signing of this agreement represents a vital element of basic supplies diversification which, at the same time, will ensure energy security for the country.

“The Russian counterpart, in turn, will get the possibility of production and supplies volume planning to a new region with considerable growth potential," he said.

Ruia said the pact provides good long term raw material security to Essar's refineries.