* Rosneft to supply 200,000 bpd of oil to Essar
* Stake acquisition deal is subject to corporate approval (Recasts to say Rosneft buying stake in Essar, comments fromEssar and Rosneft, background)
By Denis Pinchuk and Katya Golubkova
UFA, Russia, July 9 (Reuters) - Russia's top oil producerRosneft has taken a significant step towards expandingits global reach by signing a preliminary deal to acquire up to49 percent in Essar Oil Ltd, India's second biggestprivate refiner.
Rosneft had initially said it would buy into Essar's Vadinarrefinery. But a company spokesman clarified on Thursday the dealincluded Rosneft entering into Essar Oil's charter capital,echoing a statement from the Indian firm.
The companies have signed a non-binding term sheet forRosneft to buy an equity stake of up to 49 percent in Essar Oil,the Indian company said in a statement on Thursday.
Rosneft, the world's top listed oil producer, has longsought to increase its exposure to the global markets but itsefforts have been hampered by Western sanctions over Moscow'srole in the Ukraine crisis.
The deal with Essar from India, a country Russia has closeties with since the Soviet era, was announced as Indian PrimeMinister Narendra Modi met President Vladimir Putin on thefringes of a summit of emerging nations.
Rosneft said on Wednesday that it had also finalised a dealto supply 10 million tonnes of oil a year, or 200,000 barrelsper day, to Essar's Vadinar refinery over 10 years.
"Thanks to this agreement Rosneft grants itself a securemarket outlet of crude oil, which will create an additionalpossibility of production planning and marketing," the companysaid in a statement.
DEAL SUBJECT TO CORPORATE APPROVAL
Rosneft has been in talks with Essar to buy a key stake inthe unit that owns the Vadinar refinery, but the deal has faceddelays due to difference over the price, sources have said. Theysaid Rosneft valued the refinery at less than $6 billion, whileEssar wanted a higher price.
The latest proposal to purchase a stake in Essar isconditional upon due diligence, determination of the transactionprice, execution of definitive transaction documents and receiptof requisite approvals, the Indian refiner said.
A source close to the matter said the entire process,including due diligence, will take at least two to three months.
Rosneft is interested in only picking a stake in therefinery and there is a possibility that Essar Oil may have tohive off or de-link exploration assets from its portfolio, addedthe source, who did not want to be named because he was notauthorised to speak to the media.
An Essar Oil spokesman said the agreement, as signed, wasfor the entire company, including its refining, exploration andmarketing businesses.
Mumbai-based Essar, whose business interests include steel,oil and gas, power and ports, has been forced to considerselling some of its assets to reduce its debt pile, afterexpanding in India and overseas in the last few years.
Essar's founders own 90.5 percent of Essar Oil, of which65.6 percent is in the form of overseas depository shares.
SUPPLYING OIL TO VADINAR
Essar depends heavily on Iran to feed its 400,000 bpdVadinar refinery in western India.
The intent for an oil supply agreement between Rosneft andEssar was first signed in December during Putin's visit toIndia. However, processing 200,000 bpd of Russian oil will hurtthe profitability of Vadinar because of the higher transportcosts and yield.
Rosneft's chief executive officer, Igor Sechin, did not ruleout the possibility of supplying oil via swaps, but declined toelaborate. A source said last month that Rosneft may supplyVenezuelan oil to the Vadinar or it may sell Iranian oil toEssar, once international sanctions against Tehran are lifted.
Rosneft on Thursday withdrew its statement about itsintention to more than double Vadinar's capacity to 900,000barrels per day by 2020. (Additional Reporting by Nidhi Verma in NEW DELHI and Aman Shahin MUMBAI, writing by Vladimir Soldatkin; Editing by AlexanderWinning, Susan Fenton and Himani Sarkar)
BP (BP.)
