A major hurdle has been overcome in the acquisition of Essar Oil by Rosneft and its partners. The reported $12.9 billion deal is considered to be closed according to Rosneft’s CEO, Igor Sechin.
The deal had been planned for the end of 2016 but got held up because of the amount of debt Essar had owed to government run banks throughout India. In fact, 90% of the money paid to Essar will be used to expunge the debts in the books of such banks. Part of the deal is also the Vadinar Port, a major hub for importing crude and then exporting finished product, making it an important acquisition for the Russian oil giant as it gives them a foot in the door in the vast Asian market.
As a result of the deal, Rosneft will gain 49% stake in Essar Oil, while another 49% will go to Trafigura, a Swiss consortium, and United Capital Partners, a Russian fund. The remaining 2% will remain with the Ruia founders. “Please be informed that the legal decision was received yesterday, which guarantees the entry of the company in Essar Oil’s capital”, Igor Sechin told shareholders. This deal would also give Rosneft an extra 20% in output for the next year, with the company spending massive amounts of money in order to boost its profitability after the production cut deal with Saudi Arabia expires in March 2018.