July 18, 2007 / 3:23 PM / 11 years ago

Oil traders snap up Estonian terminals snared in row

MOSCOW/ST PETERSBURG, July 18 (Reuters) - Global energy traders are buying Estonian oil terminals from Russian and local investors whose businesses have been hurt by political friction between Moscow and Tallinn, traders said.

They said the sales were prompted by repeated disruptions to re-exports of Russian refined oil products, while the trading companies saw an opportunity to change the supply logistics of the terminals.

In two recent deals involving Swiss-based traders, Mercuria bought into the Eurodek terminal in the port of Muuga, while Trafigura, the world No.3 independent trading house, invested in a terminal in Sillamae, traders said.

Russian group Severstaltrans is holding talks with Royal Dutch Shell (RDSa.L) and Dutch Vopak (VOPA.AS) to sell its EOS fuel oil terminals in the ports of Muuga and Maardu, the country’s biggest.

“The prospects are not so great for Estonian terminals at the moment, but others could argue that acquisitions have become cheaper after recent events,” said a trading source with a major player.

“Trading houses typically try to win access to loading facilities as without them your business is poor.”

Russia’s state railways have imposed sanctions on shipments toward Estonia repeatedly since May, after relations with Talinn soured over the removal of a Red Army monument in the former Soviet republic.

Previous reductions have halted gasoline and naphtha exports via Estonia, leaving the light products-focused terminals of Alexela in Paldiski and Sillamae Oil Terminals in Sillamae mostly dry.

FUEL OIL HIT

Trading sources said this week the latest round of restrictions would affect fuel oil — a key export that had been largely unaffected until now — as oil firms have been told to halve exports to the ports of Muuga and Maardu.

Estonia is the transit route for 25 million tonnes per year of fuel, or around a quarter of Russia’s total oil products exports. It is also an important transit route for coal, metals, timber and chemicals.

“Alexela Logistics has bought 100 percent in Sillamae Oil Terminals with Trafigura being a minority shareholder in Alexela,” said Alexela board member Aarto Eipre.

He declined further comment. Sources close to the deal said Trafigura committed 60 million euros ($83 million) to help buy the terminal from Russians Yevgeny Malov and Andrei Katkov.

A Trafigura spokesman confirmed his firm was a minority shareholder in Alexela.

The terminal exported 300,000 tonnes of Russian products last year, mainly gas oil from TNK-BP, but Eipre said volumes could rise to a few million tonnes by the year end.

“I have heard Trafigura might focus on blending by bringing products from Russian ports by sea if rail deliveries do not restart,” said one trader.

TNK-BP TNBPI.RTS, with Surgut’s (SNGS.MM) Kirishi refinery and the Yaroslavl plant, half owned by TNK-BP and Gazprom Neft (SIBN.MM), are the key shippers via Estonia.

The less they send, the less current owners are interested in holding on to their stakes in terminals, traders say.

Last month, a group of Russian businessmen sold the Eurodek terminal, which remained virtually dry for over a year despite being in a long-term lease with Shell, to Mercuria.

“The Baltic remains the key market for most large traders and competition is still high. Buying a terminal in a new member of the European Union and NATO will pay out at some point anyway,” said a trader with a Western trading house.

Another trader said the purchase of Eurodek could have been driven by other interests. “There have been rumours Mercuria might consider an IPO and having a terminal on the Baltic is a good asset boost ahead of the float,” he said.

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