The deal between Russia's Rosneft and India's Reliance is the biggest energy deal ever between the two countries, three sources told Reuters.
The 10-year deal represents 0.5% of global supply and is worth about $13 billion a year at current exchange rates.
The deal between Rosneft and Reliance will also strengthen energy ties between Russia and India amid Western sanctions over the conflict in Ukraine.
Reliance said it was working with international suppliers, including those from Russia. The Indian company stressed that the deals were based on market conditions.
The deal comes ahead of Russian President Vladimir Putin's scheduled visit to India.
Russian oil accounts for more than a third of India's energy imports. India became the largest importer of Russian crude after the European Union - previously Russia's top oil buyer - imposed sanctions on Russian oil amid the Russia-Ukraine conflict.
India has not imposed sanctions on Russian oil, so refiners in the country have benefited from cheaper crude supplies, according to Reuters. International sanctions have made Russian oil at least $3 to $4 a barrel cheaper than rival grades.
India’s increased imports of Russian oil are hurting rival Middle Eastern producers. The Reliance-Rosneft deal will be another challenge to competitors, including Saudi Arabia.
Competition among oil producers for market share in India is heating up as it is one of the fastest-growing energy markets and is increasingly important as a driver of global demand as growth in top importer China slows.
Under the deal, Rosneft will deliver 20-21 Aframax cargoes (80,000 to 100,000 metric tons) of various Russian crude grades, three sources said. In addition, Rosneft will deliver three additional cargoes of about 100,000 tons of fuel oil each per month.
These cargoes will be supplied to Reliance's refining complex at Jamnagar in the western Indian state of Gujarat.
Reliance and Rosneft will review prices and volumes every year, two sources said.
Reliance has an agreement with Rosneft to buy 3 million barrels of crude oil per month in 2024. Rosneft also regularly sells crude oil to Reliance through intermediaries.
The new deal accounts for about half of Rosneft's seaborne oil exports from Russian ports, leaving little supply available to traders and other intermediaries, a source said.
Between January and October, Reliance imported an average of 405,000 barrels of Russian oil per day, up from 388,500 barrels per day in the same period last year.
The new agreement between Rosneft and Reliance was discussed and approved at Rosneft's board meeting in November. Oil supplies will begin in January 2025 and are expected to continue for 10 years, with an option to extend the agreement for another 10 years.
