Key information
- Rosneft will supply Reliance with nearly 500,000 barrels of crude oil per day.
- The agreement provides for the delivery of approximately 20 to 21 Aframax-sized cargoes and three fuel oil cargoes per month.
- The deal represents about 0.5 percent of the world’s oil supply.
Russian state oil company Rosneft and Indian private refiner Reliance have reached a major long-term energy deal. The agreement, lasting ten years and worth around $13 billion per year, sees Rosneft supplying Reliance with nearly 500,000 barrels of crude oil per day.
Under the terms of the contract, Rosneft will deliver approximately 20 to 21 Aframax-sized cargoes (each carrying between 80,000 and 100,000 metric tons) of different grades of crude oil and three cargoes of approximately 100,000 tons of fuel oil each month. This deal represents about 0.5 percent of the world’s oil supply.
Agreement details
Reliance and Rosneft will review prices and volumes annually, with the possibility of extending the agreement for ten years after the initial period. While Rosneft declined to comment on the matter, Reliance said it works with various international suppliers, including Russia, and that all agreements are based on market conditions.
She chose not to provide further details on the commercial arrangements due to confidentiality agreements.
Impact of Russian oil imports
India’s dependence on Russian oil has increased significantly since the European Union imposed sanctions following Russia’s invasion of Ukraine. Russian oil now accounts for more than a third of India’s energy imports, making it the largest importer of Russian oil.
This is partly due to the price difference, with Russian oil currently selling for $3 to $4 per barrel less than other suppliers.
Market share and price
Although some grades of Russian oil have the potential to exceed the average regional price (using Dubai oil prices as a benchmark), the majority of supplies will consist of medium sulfur Urals crude and diesel fuel, which are highly sought after by Indian refiners.
These products will be sold at a discount of $3 per barrel to the Dubai price for next year.
Market competition
This new agreement between India and Russia poses a challenge to Middle Eastern oil producers competing for market share in one of the world’s fastest-growing energy markets, particularly Saudi Arabia. Saudi.
Reliance has already agreed with Rosneft to purchase 3 million barrels of oil per month in 2024.
Furthermore, from January to October, Reliance imported an average of 405,000 barrels of Russian oil per day, which is a notable increase from the 388,500 barrels per day imported during the same period last year.
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