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Rosneft and Essar agree on key terms of Russian oil supplies to India

Russia’s upstream producer Rosneft (ticker: RNFTF) and India’s oil refiner Essar signed key terms of oil and oil products supplies to refineries in India, according to a press release from Rosneft.

The document was signed on December 11 in New Delhi by the head of Rosneft, Igor Sechin and the founder of Essar, Shashi Ruia in the presence of President Vladimir Putin and Prime Minister Narendra Modi.

Rosneft signed an initial deal to supply 200 MBOPD to Essar over 10 years, Sechin told reporters. Supplies could begin as early as 2015, reports Reuters. Essar has been extended a $1 billion credit line from VTB, a Russian bank, as part of the deal.

Sechin also told reporters that India’s ONGC would join its liquefied natural gas project in Russia’s Far East, in addition to ExxonMobil (ticker: XOM). The plant is designed to produce 5 million tons of frozen gas initially, starting from 2018-2019. ONGC is already a stakeholder in the Rosneft-led Sakhalin-1 oil and gas project in Russia’s Far East. Sechin said Rosneft would continue talks with ONGC on increasing the participation of the Indian company in its upstream projects in Russia.

Rosneft has offered a 10% stake in the Vankor oilfields in Siberia, but New Delhi would like to see a 25% interest. India is also seeking tax breaks on a proposed 49% stake in Yurubcheno-Tokhomskoye, a greenfield project in eastern Siberia.

More than just energy cooperation

In addition to the deal brokered between Rosneft and Essar, Russia and India discussed other ways to increase economic ties. Currently, Russo-Indian trade amounts to $10 billion a year, but a joint statement released by Putin and Modi said that the countries were targeting bilateral trade of $30 billion by 2025, according to The Financial Express.

Russian bank VTB’s $1 billion credit line to Essar is intended to finance the continued consolidation of certain assets in Essar Group’s investment portfolio and the strengthening of its capital structure, according to VTB Group.

The Russian Direct Investment Fund (RDIF) announced two deals with India as well. The first, with IDFC Ltd, a financial services company in India, is a joint infrastructure project in which both parties will invest $500 million each. The second, with Tata Power, an Indian electricity company, is a Memorandum of Understanding to increase energy investment between the two countries.

Other deals included increased ties through the defense and mining industries. The two leaders will encourage payments in national currencies for the new bilateral trade.

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