Business Hour

Rosneft’s Interest in Greenfield Refinery Partnership with Indian State Refiners Signals Shift in Energy Cooperation

Rosneft Oil Company, a Russian integrated energy company headquartered in Moscow, is involved in various aspects of the oil and gas industry, including exploration, extraction, production, refining, transportation, and sale of oil, natural gas, and petroleum products. It operates under the control of the Russian government through the Rosneftegaz Holding Company.

 

According to sources familiar with the matter, Rosneft has expressed interest in establishing a Greenfield refinery in India through a three-way partnership with domestic state-owned refiners. Indian public sector refiners are actively seeking foreign partners to collaborate on the proposed $44-billion west coast refinery, which has faced delays for several years. While it remains unclear which Indian refiner will ultimately join forces with Rosneft, Indian Oil and Bharat Petroleum Corporation Limited (BPCL) appear to be the most likely candidates. Hindustan Petroleum Corporation Limited (HPCL) is burdened by constructing a Greenfield refinery in Rajasthan, making it overleveraged. On the other hand, BPCL possesses suitable land in Uttar Pradesh for a refinery. At the same time, Indian Oil is optimistic about expanding its capacity and already has a crude acquisition agreement with Rosneft.

 

Multiple state refiners have recognized the need for an alternative to the west coast project, initially involving Saudi Aramco taking a 50% stake in 2018. The collaboration between Indian Oil, BPCL, and HPCL aims to fill this gap. However, land availability and political unrest in Maharashtra could impede the project’s progress. The agreement between Rosneft and the Indian refiners was signed during Rosneft CEO Igor Sechin’s working visit to India. The parties also discussed opportunities for expanding cooperation between Rosneft and Indian companies throughout the energy sector value chain, including the possibility of conducting transactions in national currencies.

 

India currently receives substantial discounts ranging from $35 to $40 per barrel on the crude oil it imports from Russia. This is unsurprising, as Russia is eager to reduce excess oil supplies. It is important to note that the deals proposed by Indian oil refiners, including Rosneft, are in addition to the shipments India already purchases from Russia through other agreements. Indian banks have agreed to finance all cargoes from Russia fully. For India, the Russian offer is a beneficial opportunity, considering the country’s struggle with high crude oil prices and their impact on inflation. This arrangement serves two purposes, allowing India to secure oil quotas at prices below the market rates, thereby helping to control inflation. However, it is essential to recognize that it may be challenging for India to sustain an insular approach indefinitely in an interconnected world.

 

The interest shown by Rosneft, the Russian integrated energy company, in building a Greenfield refinery in India through a partnership with domestic state-owned refiners reflects the evolving dynamics of the global energy market. India’s public sector refiners actively seek foreign collaborations to advance their refinery projects, and Rosneft appears to be a potential partner for Indian Oil and BPCL. The proposed partnership aims to fill the void left by the delayed west coast refinery project and offers opportunities for expanding cooperation in the energy sector between Russia and India. In addition, India’s ability to secure discounted crude oil prices from Russia further enhances its appeal as an energy partner. However, as the world becomes increasingly interconnected, India may need to balance its insular approach with broader international cooperation in the long run.

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