Report: Trafigura improves ties with Rosneft with Asian crude deal

MOSCOW, Nov 11 (PRIME) -- Trading house Trafigura has signed a deal with Russia’s state-backed oil company Rosneft to buy more of its Asia crude, strengthening the ties that have developed between the companies since Moscow was hit with western sanctions last year, Financial Times reported late on Tuesday.

Swiss-based Trafigura, one of the largest independent oil traders, will take Rosneft’s crude from its stake in a development on Sakhalin Island in the east of the country, giving it more oil to sell in Asia at a time when China is loosening restrictions on energy imports.

Independent traders are showing renewed interest in shipping oil in Asia as China starts to allow small, independent refineries — known as “teapots” — to start buying crude from outside China’s network of state-backed oil companies.

The 12-month deal to sell Sokol, a premium grade crude, will further boost Trafigura’s role in loading and selling Rosneft’s oil to overseas customers. The trading house already ships more than a third of Rosneft’s seaborne crude after arranging a number of multibillion-dollar pre-pay deals with the Kremlin-backed company. News of the deal was reported by Argus Media.

Rosneft has struggled to attract long-term loans from banks since western powers targeted Russian companies’ access to international financial markets last year over Moscow’s involvement in Ukraine.

Pre-pay deals allow Rosneft to receive funding in return for future deliveries. Vitol, the largest independent trader, and Glencore — the London-listed trader-cum-miner — signed a U.S. $10 billion pre-pay deal with Rosneft in 2013.

Since sanctions were imposed, most trading houses have shied away from signing new deals, even though transactions that run for up to 30 days are permitted. But Trafigura has inked in a number of agreements that have seen it become Rosneft’s go-to shipper.

The company has leveraged the connections of its head of Eurasian trading, Jonathan Kollek, who previously established the trading operation of TNK-BP.

Rosneft took over TNK-BP in a $55 billion Kremlin-backed deal in 2013, which overnight made it the world’s largest publicly listed oil company by production. Moscow controls about 70% of Rosneft, which is run by Igor Sechin, a close ally of President Vladimir Putin. BP retains a stake of about 20%.

Rosneft has long desired its own trading operation to maximise the value of its crude, but its efforts have been stymied by sanctions, pushing it closer to Trafigura.

While no formal partnership has been struck, the two companies have not been shy about trumpeting their links, throwing a joint party this September at a major Asia petroleum conference. At that time, Sechin said Rosneft had several “pre-pay or partial pre-pay contracts in place with Trafigura”.

“These types of contracts are more stable. With Trafigura we have a very trustful relationship,” Sechin said.

The latest deal is expected to raise Trafigura’s shipments of Rosneft crude to more than 480,000 barrels a day this month from about 420,000 barrels per day in October. That would be roughly double the amount lifted by Glencore, the second largest shipper of Rosneft oil and about triple the level of Vitol.

In total the Rosneft deals have helped increase the amount of oil Trafigura ships daily to almost 3m barrels, up from some 2.5 million barrels previously — equivalent to the combined daily consumption of France and the U.K.

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