October 23, 2012 / 7:30 PM / 5 years ago

UPDATE 1-COLUMN-Will a bigger Rosneft shake up Russia's oil trade?: Campbell

* Adds detail on Gunvor in paragraphs 6-10

    By Robert Campbell
    NEW YORK, Oct 23 (Reuters) - Rosneft will eclipse
the Western supermajors in crude output once the Russian
state-controlled oil producer takes over rival TNK-BP, but
despite its size, the company will hardly punch its weight in
energy trading.
    That is because Rosneft, like most of its Russian peers, has
outsourced the marketing of its crude and refined products to
foreign companies.
    Russia's influence over oil markets is strangely limited
despite the fact it is the world's top oil producer and one of
the globe's biggest oil exporters. The reason is Russian
producers trade very little of the nation's gigantic output. 
    Swiss trading houses Glencore and Vitol 
now dominate Russia's oil trade and control an estimated
one-third of the volume that the country will sell to Europe
this month via ports in the Black and Baltic seas.
    Oil majors BP Plc and Royal Dutch Shell Plc 
are also significant players in the marketing of Russian oil.
    Indeed, Western firms' grip over Russian oil exports has
increased in recent months as privately-held trader Gunvor has
at least temporarily ceded market share.
    Gunvor rose spectacularly over the last ten years to the top
ranks of global energy trading, bolstered by its extensive
business with Russian state energy companies.
    As a result, the recent loss of term supplies has prompted
considerable speculation in the oil trading community.
    However the company, which rejects claims advanced by some
Russian opposition figures that its success was due to close
personal ties between its co-founder Gennady Timchenko and
Russian President Vladimir Putin, says the loss was entirely due
to its unwillingness to overpay for crude. 
    The business of buying and selling Russian crude is about
more than making a profit buying low and selling high, though.
    Controlling huge volumes of Russian oil has given Vitol,
Glencore, BP and Shell enormous market power, particularly in
the Mediterranean, where the European Union ban on purchases of
Iranian oil has limited refiners' alternatives to Russia's Urals
    And having a hammerlock on the Urals stream in turn gives
these companies considerable influence over the direction of
Dated Brent, the benchmark price for much of the sea-borne oil
traded worldwide. 
    So it is more than a simple business deal of buying low and
selling high. A strong position in the Urals trade is a linchpin
of many companies' global trading strategies.
    To be sure, there are benefits to both sides. Russian
producers that sell through intermediaries do not need to take
the time and expense to set up their own marketing networks. 
    They also gain access to short-term financing and face
reduced working capital requirements, not insignificant
    And Russia still retains considerable influence over the
destination of its crude oil exports. State pipeline monopoly
Transneft plays a huge part in determining how Russian crude
finds its way to market.
    The Russian export tax policy is equally powerful, sending
signals to producers to refine oil instead of exporting crude.
    But clearly the Russian producers are not getting top dollar
when they make these sorts of deals. And with growing debts and
increased management sophistication, these companies,
particularly Rosneft, may start chipping away at the market
power of foreign traders.
    Rosneft is loading up on debt to finance its $55 billion
deal to buy the bulk of TNK-BP from controlling shareholders BP
and the AAR group of Russian businessmen.
    Even before the announcement of the Rosneft takeover, TNK-BP
was preparing to dilute the power of trading companies in 2013
by limiting the amount of its oil it would permit a trader could
    Although this policy was not expected to have much of an
impact at TNK-BP, the erosion of oil traders' market power would
be substantial if the enlarged Rosneft, which will control more
than 35 percent of Russia's oil output, implements the plan.
    And there are other reasons to believe Rosneft may become a
bit more savvy in trading. BP, long the most entrepreneurial oil
trader, has emerged as a strategic partner for the Russian
    The London-based company, which is already a joint venture
partner with Rosneft in several German oil refineries, will end
up with nearly a 20 percent stake in the Russian giant as well
as two seats on its board.
    That gives BP some influence over corporate decisions and
may well contribute to a more sophisticated commercial operation
emerging at Rosneft.
    If so, that could prove a headache for the companies that
now dominate the Russian oil trade. At the very least, margins
from trading may come under pressure. 
    Lower trading margins would mean that those companies
without European refineries of their own, or at the very least,
exclusive supply agreements with European plants, would face
very tough competition. 
    More daunting, however, would be a Rosneft that opts to
throw its weight around in the Urals market for its own benefit.
    Such a development would upend the power structure in the
world oil market, probably at the expense of Western companies.
    If Russia really does want to deepen its control over the
oil industry, such a move looks increasingly likely.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below