Russian oil major Rosneft and partners closed their $12.9 billion purchase of Indian refiner Essar Oil, giving them a foothold in one of the world’s fastest growing oil users.

The deal is the first foray by Rosneft into Asia’s refining sector and the biggest foreign acquisition ever in India, as well as Russia’s largest outbound one. It also deepens Russian and Indian economic ties that stretch back to the Soviet era.

Kremlin-controlled Rosneft ROSN.MM and its partners – global trader Trafigura and Russian fund UCP – purchased a 98.26 per cent stake in Essar Oil in a deal announced in October. The rest of Essar will be held by retail investors.

"(Rosneft) has entered the high-potential and fast-growing Asia Pacific market," Rosneft’s Chief Executive Officer Igor Sechin said in a statement.

The deal will enable Rosneft to improve the efficiency of fuel supplies to other nations in Asia, he added.

India’s oil demand is expected to rise by an average of 5.9 per cent a year through 2020, among the fastest in the world, according to a report last month by Goldman Sachs.

To capitalise on that, Rosneft and its partners are acquiring Essar’s oil refinery in Vadinar that can process 400,000 barrels a day of crude. The refinery is in the western Indian state of Gujarat and the deal includes a port, a power plant and 3,500 fuel stations. Rosneft has previously announced deals to invest in downstream assets in China and Indonesia, but none of these facilities are yet functional.

"The deal will give the consortium a strategic foothold into Asia and opens hitherto unserved markets. Entry into the Indian refining sector will help Rosneft secure a stable outlet for its oil," said Tushar Tarun Bansal, director at consultancy Ivy Global Energy.

The Russian major’s stake in Venezuelan upstream assets and oil purchase contracts with state-owned PDVSA will help to improve the economics of the Indian refinery, Rosneft said.