Rosneft PJSC has entered an agreement to supply Indian Oil Corp. Ltd. (IOC) with Russian crude oil for processing at IOC’s refineries in India by yearend 2020.
As part of the term contract, signed on Feb. 5, Rosneft will deliver up to 2 million tonnes/year of Russian Urals crude to India via Suezmax vessels loaded at Russia’s Novorossiysk port, allowing shipments to bypass the Straits of Hormuz, Rosneft and India’s Ministry of Petroleum & Natural Gas (MOPNG) said in separate releases.
Sourcing of Russian crude oil through long-term contracts comes as part of India’s strategy to diversify the country’s crude supplies from non-OPEC countries, as well as forms part of a 5-yr roadmap for bilateral cooperation in the hydrocarbons sector between India and Russia that was signed in September 2019, MOPNG said.
The addition of Russia as a new source for crude oil imports by India’s largest refiner will go a long way in mitigating the risks arising from geopolitical disruptions. Alongside opening up avenues for other Indian public sector unit (PSU) oil refiners to enter into similar term contracts for import of Russian crude, the Rosneft-IOC arrangement also will usher in price stability and energy security for India, which is witnessing robust growth in demand for petroleum products, according to MOPNG.
Neither Rosneft nor IOC identified a specific duration of the long-term crude supply agreement, and IOC did not disclose details regarding how the supply would be split between its 11 Indian refineries, which includes two refineries operated by partly owned subsidiary Chennai Petroleum Corp. Ltd.
Rosneft’s Vadinar refinery plan
Separately, Rosneft—which, alongside consortium partners UCP Investment Group and Trafigura Group, owns 49.13% interest in Nayara Energy Ltd.’s 20 million-tpy Vadinar refinery in Gujarat, India—said the consortium is reviewing a project that would result in a two-fold increase in crude throughputs at the Vadinar manufacturing site.
As part of a first stage of the proposed project, Rosneft revealed the consortium plans to invest $850 million within 2 years to build a petrochemical unit at the Vadinar manufacturing site.
The operator, however, disclosed no further details regarding the proposed Vadinar capacity expansion and petrochemical project.