MOSCOW/LONDON (Reuters) - Trading house Trafigura is set to become the largest exporter of oil from Russian state-owned energy major Rosneft under a deal it is negotiating with the sanctions-hit company, industry sources told Reuters.
From April, Trafigura will start handling more than a dozen tankers or 1 million tonnes a month (240,000 barrels per day) of oil from Rosneft, over a tenth of Russia’s overall oil exports, three trading sources familiar with the development told Reuters.
Rosneft and Trafigura declined to comment.
Since coming under U.S. and EU sanctions last year imposed over Russia’s role in Ukraine, Rosneft has been working hard to raise short-term financing, still not forbidden by sanctions, in exchange for oil exports, to help it meet debt repayments.
The sanctions also blocked its ambition to expand into global oil trading, by killing off a deal to buy U.S. bank Morgan Stanley’s oil trading division at the end of 2014.
The squeeze on Rosneft has been compounded by a collapse in oil prices and the rapid devaluation of the rouble — a crisis the central bank said Rosneft contributed to when it borrowed a large sum through the local bond market in the run-up to the repayment of a $7 billion loan to Western banks in December.
Swiss-based Trafigura has been trading oil with Rosneft under a two-year old deal but volumes rarely amounted to more than two tankers a month — dwarfed by deals with rival Glencore and Vitol as well as oil majors such as Eni, Total and Royal Dutch Shell.
It was not immediately clear whether the new deal would involve any short-term financing between Trafigura and Rosneft, or whether it would extend beyond oil trading.
In February, Trafigura surprised rivals by unexpectedly obtaining extra cargoes from Rosneft in exchange for short-term financing just ahead of another $7 billion debt repayment.
Rosneft has now passed the peak of debt servicing but needs dozens of billions of dollars to fund field expansion and its refinery modernization program.
Rosneft sells its crude at six-month tenders and under longer-term pre-finance deals — a $10 billion five-year loan with Glencore and Vitol dating back to 2012 and a separate $1.5 billion, 2013 loan with Trafigura.
Sanctions have banned long-term financing of Rosneft from 2014 — a measure that has forced Western companies to pull out of such deals — but financing for a period of up to 30 days is allowed.
Trading sources from rival companies said signs of the upcoming deal between Trafigura and Rosneft were evident from how Rosneft’s traditional six-month tender to sell oil from in April-September 2015 unfolded.
Rosneft has postponed the announcement of the tender results, has significantly cut volumes on offer and has asked buyers to agree to a ‘zero optionality ‘— a market term meaning it can nominate no cargoes to a winner in a given month if it decides to place volumes elsewhere.
Overall maximum volumes on offer for April-September have been cut by around 2.5 million tonnes versus the previous six-month tender.
That brought market players to a conclusion that Rosneft is working on a separate deal with Trafigura.
“The results from Rosneft were due on Feb. 27 but they have launched it into a fourth round,” one trader said, referring to an unprecedented decision by Rosneft to ask bidders to improve offers for a fourth time during the same six month tender.
Traders said that under preliminary results, Shell and Gunvor had won the rights to export between zero and three-four cargoes a month from the port of Primorsk in April-September, with BP or possibly Total preliminary chosen to export one cargo a month from the Baltic.
Shell is believed to have won the rights to export Aframax cargoes in the Mediterranean, China’s Unipec wont the right to export Suezmax cargoes from the same port. and Trafigura will market all cargoes of Kazakh CPC Blend crude belonging to Rosneft.
If preliminary tender results were confirmed oil majors Eni, Total and Shell would be among the biggest losers of Russian oil volumes.
Editing by Robin Pomeroy