Russia's Rosneft agreed with Turkey's Demiroren Group to extend its oil products supply to the Turkish company to 2018-2020, when it plans to double annual delivery from this year's level, Rosneft said in a statement late Friday.
Under the new agreement, the two companies will sign an additional contract to supply upto 4.6 million mt in total in the course of the next three years, including 3.6 million mt of low sulfur diesel containing 10 ppm of sulfur, and upto 1 million mt of LPG, it said.
While Rosneft plans for roughly equal supply of about 1.533 million mt/year, or 30,800 b/d, the volumes may vary, the company's spokesman said, adding that the agreement marked the maximum volume. It declined to give the minimum permitted volume.
The document, signed during Turkish President Recep Tayyip Erdogan's visit to Moscow, is an extension of Rosneft's previous deal with Demiroren for upto 840,000 mt of diesel supply this year, Rosneft said.
Article continues below...
While the company said in December that it had agreed to supply 550,000 mt to the Turkish group this year, the volume was later reconsidered upwards, the spokesman said.
The new contract, which is yet to be signed, will allow Rosneft to "significantly strengthen its position in Turkey's market, allowing the company to ensure supplies of additional 11.3% of the country's diesel imports and about 6% of its diesel consumption," Rosneft said in a statement.
The implementation of the agreement will allow Rosneft to supply more than half of Demiroren's yearly oil product needs, it said.
The products will continue to go via Rosneft's subsidiary Petrocas Energy Limited in which the Russian major acquired 49% share in 2014, and through the South Caucasus transit corridor and Black Sea ports of Russia and Georgia, the spokesman said.
Petrocas carries out oil products supply, trading and retail in the Caspian and Black Sea regions. It owns and manages a terminal in the port of Poti in Georgia, where oil products and petrochemicals are loaded, and also manages a network of filling stations in Georgia.
Demiroren, one of Turkey's largest conglomerates, would use the products to supply its own fuel stations in Turkey, Rosneft has said previously.
Demiroren owns and operates 1,100 retail fuel and gas stations under the brands of Total, Moil and Milangaz, and multiple refined oil products terminals in Turkey.
Additionally, Rosneft signed on Friday a cooperation agreement with Gas Enerji Sanayi ve Ticaret to supply 6 million mt/year of oil products
, including those produced by Rosneft, to end-users in Turkey.
"Signing agreements with end-users of energy resources is a key element of Rosneft's strategy in commerce and logistics," Rosneft's CEO Igor Sechin said in the statement.
Rosneft sees Turkey as a prospective market as it imports nearly 35% of its oil product needs. Turkey's oil product consumption grew 35% from 2005 to 2015 to 41.1 million mt, it said.
According to the latest data by Turkish energy regulator EPDK, Turkey imported 981,647 mt of diesel in December. Russia was the main source, accounting for 19% of the total imports.
--Nastassia Astrasheuskaya, firstname.lastname@example.org
--Edited by E Shailaja Nair, email@example.com