Commodity trader Trafigura has acquired 10 per cent of Rosneft’s giant Arctic oil project, further strengthening the ties between the trading house and Russia’s state-backed oil company.
The investment in Vostok Oil marks a rare foray into a big oil production venture by Trafigura and also shows how national oil companies such as Rosneft are looking to push ahead with new ventures as European majors begin a shift towards renewable energy.
Trafigura did not disclose how much it paid for the stake but said the purchase would be “majority” funded by long-term loans provided to a wholly owned off-balance sheet entity.
JPMorgan has estimated the project could require up to $150bn of capital expenditure over the next 15 years but could ultimately provide up to 2m barrels a day in crude oil production as well as substantial volumes of liquefied natural gas.
As part of the deal, Trafigura will gain access to supplies of crude oil from Rosneft, including barrels produced by Vostok Oil, building on existing arrangements between the two companies.
“The investment provides Trafigura with access to a world-class, major new onshore oil-producing region in Siberia's Taymyr province comprising the Vankor and Payakha clusters with an estimated 6bn tonnes of high-quality crude oil resources,” Trafigura said in a statement.
Vostok Oil is an ambitious project to bring together Rosneft’s vast resources in the Arctic, including the Ermak Neftegaz venture with BP, and link them via the so-called Northern Sea Route to markets in Europe and Asia. Trafigura is the first investor in the project, which has strong backing from the Kremlin but is also expected to seek support from China and India.
The aim is to create a prolific oil-producing region capable of supporting 50m tonnes a year of exports in a first phase and up to 100m when a second stage is completed.
For that to happen huge investment will be required in new oil wells as well as infrastructure including a port and a 770km pipeline. Rosneft’s chief executive Igor Sechin, a close ally of Russia’s President Vladimir Putin, has said the project will create tens of thousands of new jobs.
“Russia is acutely aware that the window to monetise its . . . reserves is narrowing as the world moves towards net-zero [emissions]. As such, we believe there is an imperative to push ahead with Rosneft’s Arctic Vostok project,” said JPMorgan analysts in November.
Trafigura is one of the world’s biggest independent oil traders, moving 5.6m barrels of crude and petroleum products around the world each day.
It helped Rosneft, which has been the subject of US financial sanctions since 2014, raise funds through permitted short-term prepayment oil deals and became a big exporter of Russian crude.
The trader was also part of the Rosneft-led consortium that in 2017 took control of Nayara, formerly Essar Oil, including a big refinery in India.
Trafigura this month reported the strongest annual results in its 27-year history as it cashed in on the extreme market volatility caused by the Covid-19 pandemic.
Twice weekly newsletter
Energy is the world’s indispensable business and Energy Source is its newsletter. Every Tuesday and Thursday, direct to your inbox, Energy Source brings you essential news, forward-thinking analysis and insider intelligence. Sign up here.
Get alerts on Oil & Gas industry when a new story is published