Russia's state-owned oil company, Rosneft, has signed a major deal to supply up to 500,000 barrels of crude oil per day to India's Reliance Industries (RIL). According to Reuters, this is the largest energy agreement between the two countries.

According to the statement, the 10-year deal is worth about $13 billion annually at current prices and represents 0.5% of the world's oil supply. As per authorities from the Ministry of Petroleum and Natural Gas, the agreement would guarantee stability in the crude oil flows and boost Rosneft's plans to increase its footprint in India. Ministry officials, without mentioning the size of the agreement, said the government knew that negotiations between the two companies were close to being finalised. “Commercial contracts are confidential and based on market conditions. The government is not involved. However, such a deal will ensure greater stability in supplies,” said an official.    

“Even when prices remain on a long-term downward trajectory, securing stable flows is of paramount importance,” said an official. A purchase of this magnitude, according to government sources, might boost Rosneft's confidence in maintaining its international commercial connections at a time when the US is allegedly preparing to tighten sanctions on Russian companies, especially those in the oil industry. “The incumbent US President seeks to enact a tighter framework of sanctions on Russian entities before he leaves office next month. A mega pact with Indian firms would help Moscow send a message at this juncture,” a top source said, under the condition of anonymity. Additionally, the deal will increase RIL's exposure to Russian crude oil.

The ministry did not respond to inquiries until the time of publishing. A RIL spokesperson told Business Standard, “We do not comment on specific details of any supply contract that are confidential in nature. As always, any such supplies are compliant with prevailing sanctions policies as applicable to Indian buyers of such feedstock.” Requests for comment from Reuters were not answered by Rosneft.  

Rosneft, Russia's second-largest company by market value and one of its top earners, is working to increase its presence in India. In early December, Russian President Vladimir Putin mentioned Rosneft's $20 billion investment in India, although he didn't provide more details. Energy cooperation is expected to be a key focus during Putin's visit to India, which is planned for early next year, according to the Kremlin. In 2023, Rosneft showed interest in setting up a new refinery in India through a joint venture with public-sector refiners. Additionally, Rosneft made history by appointing Govind Kottieth Shah from India to its board, marking the first such appointment.

Shah, an experienced industry leader, has previously served as the chairman of several joint ventures (JVs) with Indian Oil Corporation (IOCL), such as IndianOil-Adani Gas and IndianOil Total, before joining Rosneft. Currently, Nayara Energy, backed by Rosneft, operates over 6,000 fuel stations in India, with an additional 1,200 in various stages of development. The company also owns India's second-largest refinery in Vadinar, Gujarat, with a production capacity of 20 million tonnes per year, or 405,000 barrels per day.

Responding to queries about Russian oil supplies, the RIL spokesperson said, “Russia is currently the largest supplier of crude oil to India. This is well-documented. We are always engaged with several international suppliers, including Russia, to source feedstock for our refinery. As per practice, such supply contracts are done for the following year. The number of cargoes will vary depending on market conditions and economics.”

The percentage of Russian oil in India's overall sourcing mix has stayed close to 40% since FY23. “India’s crude oil import bill declined by nearly 15 per cent year-on-year in FY24 even with a slight increase in crude oil imports, mainly due to availability of cheaper Russian crude and the said benefit continued in the first eight months of FY25 but with reduced discounts on Russian crude," stated Hardik Shah, director, CareEdge Ratings.