Narendra Modi-Vladimir Putin effect: India eyes Rosneft stake

By: | Updated: June 24, 2016 7:09 AM

South Block’s interest in increasing economic cooperation with Kremlin is seen as an extension of several rounds of talks between Prime Minister Narendra Modi and Russian President Vladimir Putin

India's NSG, India's NSG bid, india nsg membership, India's NSG bid newsSouth Block’s interest in increasing economic cooperation with Kremlin is seen as an extension of several rounds of talks between Prime Minister Narendra Modi and Russian President Vladimir Putin. (AP Photo)

Indian companies could possibly buy equity stakes in Russian energy giant Rosneft to cement the diplomatic and commercial ties between New Delhi and Kremlin. Rosneft, the Moscow-based world’s largest publicly traded petroleum company, is reportedly selling 19.5% in order to garner funds to bridge the nation’s budget deficit.

“Rosneft is offering its equity in market… Indian companies are looking into that offer… they could take some equity in Rosneft,” petroleum minister Dharmendra Pradhan told mediapersons on Thursday.

In the past two years, India and Russia have agreed to collaborate on oil and gas projects worth about $5.5 billion.

South Block’s interest in increasing economic cooperation with Kremlin is seen as an extension of several rounds of talks between Prime Minister Narendra Modi and Russian President Vladimir Putin.

“India is now the third-largest consumer of oil and as a result, it is appropriate to look for investment opportunities to ensure the security of supply. Russia, on the other hand, has high oil reserves and is desperate to get more investment. Russia is also sceptical about the West’s investment in its oil industry, but looks favourable to India, which has been one of its strategic partners in the past. For Indian companies, it is hard to invest in West Asian countries. Therefore, India has to look for alternatives and Russia is one of them,” said Ehsan Ul-Haq, principal consultant at KBC based in London.

Pradhan visited St Petersburg last week and held meetings with Rosneft’s chief executive Igor Sechin. The Indian petroleum minister, however, did not divulge details on whether government-owned firms or private companies are carrying out the due diligence.

Bloomberg on June 20, pegged the 19.5% equity in Rosneft at 700 billion rubles or around $11 billion. It also mentioned that Russia is considering selling part of its corporate crown jewels to China and India.

Sechin, in a recent interview to a local television channel, admitted that selling company shares on the stock exchange would be ineffective and instead, it should be sold to a strategic partner chosen by the Russian state. But Sechin, who is considered a close ally of President Putin, said value of Rosneft could be as high as $130 billion, “depending on the situation on the market”.

Responding to an FE query on the issue, Rosneft on Thursday cited Sechin’s interview to Russia 24 TV channel on June 21, saying: “No, we are not having such talks (with India). We have not received such an order from the government.”

Rosneft has already offered equity stakes in two Siberian hydrocarbon assets — Vankor and Taas-Yuryakh to Indian firms, including ONGC Videsh, Indian Oil Corporation (IOC), Oil India (OIL) and Bharat PetroResources (BPRL).

“Each barrel of Rosneft’s developed reserves is worth about $4.16 of enterprise value, according to Bloomberg calculations — well below ONGC’s $7.16, not to mention figures north of $20 for the likes of Exxon Mobil, Total and Shell, and $46.62 for Cnooc,” Bloomberg said in an opinion article on June 20.

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