Essar Oil in fuel-for-loan deal with Chinese bank

Essar Oil Ltd has agreed to supply refined products to top state oil producer PetroChina against a $1 billion loan from China Development Bank (CDB).

Essar Oil is expected to sign a preliminary agreement with CDB on Tuesday on the sidelines of Chinese prime minister Li Keqiang's visit to Mumbai, reports quoting sources close to the matter said.

Details of the deal like pricing of the products and shipment schedules and crediting against loans are yet to be worked out, reports said.

Essar is also looking to take ultra-heavy Latin American crude from PetroChina, according to reports.

The Ruias-controlled Essar Oil has been swapping high-cost rupee debt with relatively lower-priced overseas loans and has so far refinanced $481 million of debt.

"As part of our initiative to dollarise our debt, we have been in discussion with several international banks, including Chinese banks. CDB is part of that conversation," reports quoted from an Essar Oil statement.

Essar Oil chief executive L K Gupta had said early this month that the group plans to refinance another $1.8 billion within the next three to six months.