Russia’s Rosneft has agreed to sell nearly 500,000 barrels per day of oil to Indian private refiner Reliance (NS:RELI) in the biggest-ever energy deal between the two countries, Reuters reported on Thursday.
The report claimed that the deal will be for 10 years to supply roughly 0.5% of the total global supply. It will be worth $13 billion a year at today’s prices.
Russia continues to be India’s top supplier of crude oil amid heavy sanctions from the West.
After Moscow invaded Ukraine in early 2022, western powers such as the US and Europe imposed heavy sanctions on Russia’s oil and gas sanctions.
India emerged as one of the top destinations for Russian oil from March 2022. Before it invaded Ukraine, Moscow accounted for just 2% of India’s total crude oil imports.
Reliance told Reuters that the company works with international supplies, including Russia, and deals were based on market conditions.
The deal comes ahead of the planned visit of Russian President Vladimir Putin to India and after US President-elect Donald Trump said he wants to push Moscow and Kyiv to end their nearly three-year conflict when he takes office.
Russia accounts for more than a third of India’s imports
According to data from Vortexa, Russia accounted for more than a third of India’s oil imports.
Russia had replaced Saudi Arabia and Iraq as the top supplier of crude to India in 2022.
India has no sanctions on Russian oil, so refiners have cashed in on the cheaper crude oil from the country. According to Reuters, sanctions have made Russian oil cheaper by $3 to $4 per barrel cheaper than other grades.
The report claimed that the Reliance-Rosneft agreement would lead to further challenges for competitors, including Saudi Arabia.
Additionally, competition among major oil producers across the world for a share of the Indian market remains hot as it is one of the fastest-consuming markets.
According to estimates by the Organization of the Petroleum Exporting Countries, India is expected to dethrone China as the major driver of crude oil demand in the coming years.
Rosneft to deliver 20-21 Aframax-sized cargoes
Under the agreement, Rosneft would deliver 20-21 Aframax-sized cargoes, roughly 80,000 to 100,000 tons, of various crude grades to Reliance, according to Reuters.
It would also supply three cargoes of about 100,000 tons each of fuel oil every month.
The shipments will be delivered to Reliance’s refining complex at Jamnagar in Gujarat, the biggest in the world.
The report claimed that both companies will review pricing and volumes every year to assess oil market dynamics.
According to the report, the new deal would account for nearly half of Rosneft’s seaborne oil exports from Russian ports. This would leave not much of supply available for other traders and middlemen.
Shipments to start from January
Under the new deal, Rosneft will start supplying the oil to Reliance from January.
The new deal between Rosneft and Reliance was discussed and approved during Rosneft’s board meeting in November, Reuters reported.
The agreement would be for 10 years, with an option to extend the deal for another 10 years, the report claimed.
The pricing of the grades to be supplied on a delivered basis is set at differentials to the average Dubai price of the loading month, Reuters said.
Premiums for the light sweet grades were set around $1.50 per barrel for ESPO, Sokol at about $2 a barrel and Siberian Light at around $1 a barrel against Dubai quotes for 2025, the report showed.
The majority of the shipments would carry medium-sulphur and diesel-rich Russian Urals, which are popular with Indian refiners. These will also be set a $3 per barrel discount to Dubai benchmarks, Reuters said.