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Rosneft to acquire India’s Essar Oil

A group led by Russia’s oil major Rosneft will acquire India’s Essar Oil in a USD12-13 billion deal, including USD4.5 billion in assumed debt. Essar Oil operates a 400,000 barrel-per-day oil refinery on India’s west coast and retails fuels at 2,470 service stations throughout India. The deal will also include the Vadinar port and a power plant associated with the refinery, according to local media reports.

Rosneft will acquire 49% of Essar Oil, while two other investors will acquire the other 49% in equal shares, namely oil trader Trafigura and a Russian fund, UCP.

Essar Oil, which is part of a conglomerate controlled by the Ruias brothers, has been facing pressure from creditors to reduce debt which is currently estimated at more than USD14 billion. The Ruias brothers and other minority shareholders will be left with the remaining 2% stake in Essar Oil.

The deal will be funded by Russia’s VTB Capital, which is part of Russia’s state-controlled bank VTB, according to local media reports.

The Indian firm is expected to announce the deal tomorrow during a visit by Russian President Vladimir Putin, who will meet Indian Prime Minister Narendra Modi for a bilateral summit in India’s coastal resort of Goa.

With this acquisition, Rosneft will be able to secure an outlet for its crude oil as well as gain a foothold in the world’s fastest-growing economy.

India is replacing China as the driver of global oil demand growth as its economy expands, while China’s economy starts slowing down.