Rosneft and Reliance Agree on India-Russia Largest Oil Supply Contract

Russia's national oil giant Rosneft has agreed to deliver over 500,000 barrels per day (bpd) of crude to Indian private refiner Reliance in the two countries' largest-ever energy transaction.

The 10-year arrangement represents 0.5% of world supply and is worth around $13 billion per year at today's pricing. It would strengthen energy ties between India and Russia, which is under strict Western sanctions for its invasion of Ukraine.

Reliance said it works with worldwide suppliers, including those from Russia, and that transactions are based on market conditions.

The agreement comes ahead of Russian President Vladimir Putin's planned visit to India, and after US President-elect Donald Trump stated that he intends to press Moscow and Kyiv to end the war as soon as he takes office in January.

Russian oil contributes for more than one-third of India's energy imports. India became the largest importer of Russian crude when the European Union, the previous top user, implemented sanctions on Russian oil imports in reaction to Ukraine's 2022 invasion.

India has no restrictions against Russian oil, therefore refiners have benefited from the cheaper crude supplies. Sanctions have reduced the price of Russian oil by at least $3 to $4 per barrel compared to rival grades.

India's increased Russian imports have come at the expense of competing Middle Eastern producers. The Reliance-Rosneft merger would give another threat to competitors, notably Saudi Arabia.

According to the agreement, Rosneft would send 20-21 Aframax-sized cargoes (80,000 to 100,000 metric tons) of various Russian crude grades and three cargoes of around 100,000 tons each of fuel oil per month.

The supplies will be sent to Reliance's refining complex, the world's largest, in Jamnagar, Gujarat. Under the agreement, Reliance and Rosneft will review price and quantities annually to account for changes in the oil market.

In 2024, Reliance agreed to buy 3 million barrels of crude per month from Rosneft. Rosneft has been selling crude to Reliance through intermediaries on a regular basis.

The new agreement covers about half of Rosneft's seaborne oil exports from Russian ports, leaving little supply for other dealers and middlemen.

From January to October, Reliance imported an average of 405,000 barrels per day of Russian oil, up from 388,500 bpd the previous year, according to ship data collected from sources.

The new arrangement between Rosneft and Reliance was considered and accepted during Rosneft's board meeting in November. Supplies will begin in January and will last for ten years, with the possibility to extend the agreement for an additional ten years.

The grades to be provided on a delivered basis are priced at a discount to the average Dubai price for the loading month. Premiums for the light sweet grades were fixed at about $1.50 per barrel for ESPO, $2 per barrel for Sokol, and $1 per barrel for Siberian Light compared to Dubai prices for 2025.

The majority of the supply will be medium-sulphur and diesel-rich Russian Urals, which are popular among Indian refiners, and will be priced $3 a barrel lower than Dubai quotes for the next year.