New Delhi: In what explains the recently announced state-owned ONGC Videsh Ltd’s acquisition of a 15% stake in Russia’s second-largest oilfield by production, owned by OAO Rosneft, for $1.3 billion, Igor Sechin, chairman of the world’s largest publicly traded oil company, stated his “Asian pivot" strategy on Monday.

Speaking at a conference in Singapore, Sechin, one of the most powerful men in Russia, said that Rosneft is directing its production towards Asian markets such as India and China due to “good compensations" and the growth offered, according to an email from Rosneft.

This comes in the backdrop of subdued international energy prices, with producing countries seeking buyers as their respective economies are heavily dependent on exports for revenues. A case in point is Russia, which is particularly affected due to the twin onslaught of low oil prices and Moscow facing Western sanctions for the annexation of Crimea and its support for rebels in neighbouring Ukraine.

Rosneft recently signed three contracts with China for supplying 600 million tonnes of oil for a 25-year period. It also offered 49% stake to Sinopec in Russkoye field, Yurubcheno-Tokhomskoye field and swapped assets with ChemChina. Russia and India are also exploring the possibility of constructing transnational crude oil and gas pipelines.

“We have goods, Asian markets are prepared to pay good compensations for that and this is the reason we are directing our commodities there. We, yes we have big consumers there and the growing APR (Asia-Pacific region) markets are very attractive for us," said 55-year-old Sechin, considered to be a close ally of Russian president Vladimir Putin.

This also comes in the backdrop of an expected agreement that may result in lifting of trade curbs on Iran, which will then open up its substantive hydrocarbon reserves.

“We’ve been working with Indian partners, with Japanese partners. So, we are in favour of diversification and we are in favour of becoming more active and increasing presence in these growing markets," said Sechin.

With the agreements on the OVL deal reached during a meeting between Putin and Prime Minister Narendra Modi in Ufa in July, experts believe it is an example of a government-to-government deal. India has been trying to secure energy resources in Russia by leveraging its historical association with the country. Indian investments in Russia, mainly in the hydrocarbon sector, total around $4.25 billion.

Analysts believe that the current scenario offers a mutually beneficial opportunity for both India and Russia.

“As one of the largest importers of oil and gas, India can be a major market for Russia, especially now when there is an over-supply in the oil market. Russia is one of the largest producers and exporters of crude oil, natural gas and petroleum products—it needs to secure demand, particularly in the aftermath of the country’s face-off with the West over Ukraine, which is possibly leading some of its key customers to consider alternative suppliers of energy," Amit Bhandari, a fellow at the think tank Gateway House said in a 4 September statement.

India follows the US, China and Russia in total energy usage, accounting for 4.4% of global energy consumption. India imports 80% of its crude oil and 25% of its natural gas requirements. Petroleum product consumption in India has also been growing. According to the oil ministry, it grew 3.14% to around 163.17 million tonnes (mt) in 2014-15. India also sourced 189.43 mt of crude oil last year.

“The majority of producers have to considerably decrease investments. And the overall reduction is nearing $100 billion," Sechin said.

Rosneft has the world’s lowest cost per barrel of $2.8 per barrel. Crude oil prices for the current fiscal averaged $59.07, $63.82, $61.75, $56.30 and $47.33 per barrel for April, May, June, July and August, respectively. Crude oil prices in the Indian energy basket averaged at $84.16, $105.52, $107.97 and $111.89 in 2014-15, 2013-14, 2012-13 and 2011-12, respectively.

“Overall cutback in global upstream investment was about $140 billion, and it is expected to reach $200-250 billion by 2016 year-end. Within 2-3 years, this will inevitably influence the production and will have a long-term negative effect," Sechin added.

Positioning itself as an alternative to Organization of the Petroleum Exporting Countries (Opec), which accounts for 85% and 94% of India’s crude oil and gas imports, Sechin said: “It needs to be recognized that lately Opec functions as a regulator of the oil market have been lost. Opec is no longer structure which is consolidated. There are many inter-group differences, Opec member countries pursue various different interests and they themselves fail to observe their own quota approved by themselves."

India’s energy consumption increased by 7.1% in 2014, reaching an all-time high and accounting for 34.7% of the global consumption increment in 2014, according to the BP Statistical Review 2014.

While Russia has an observer status at Opec, it has decided not to accept the Opec’s offer to become a member. With Asian countries being primarily dependent on West Asia to meet its energy needs, it is perceived that customers from the continent pay a premium owing to this dependence as compared to the prices paid by the US or the European Union.

Rosneft claims that the estimated recoverable gas and oil resources in Russia are in the range of 90-220 trillion cubic meters and 367-506 billion barrels, respectively.