March 6, 2019 / 3:18 PM / 18 days ago

Exclusive: Rosneft opens trading arm in Singapore as part of Asian pivot

MOSCOW/LONDON (Reuters) - Rosneft is opening a trading arm in Singapore as part of a pivot to Asia, the world’s biggest and fastest-growing energy-consuming region, where the Russian state oil major plans to manage new projects and boost oil sales.

FILE PHOTO: The logo of Russia's oil company Rosneft is pictured at the Rosneft Vietnam office in Ho Chi Minh City, Vietnam April 26, 2018. Picture taken April 26, 2018. REUTERS/Maxim Shemetov

Six sources familiar with Rosneft’s strategy told Reuters the arm, Rosneft Singapore, had been registered at the end of 2018 and that several employees would relocate from Moscow during the spring and summer of 2019.

The office will likely be run by Andrey Bogatenkov, currently the first deputy head of crude and product exports for Rosneft in Moscow, three of the six sources said.

“The fact that Rosneft plans to appoint a key crude and products trader as the head of its Singapore branch means it is really betting big on the region,” a trader at a Western oil major working on the Russian crude oil market said.

Rosneft said it was not immediately able to comment.

Russia’s coveting of the eastern oil market dates to the middle of the last decade. Back then, Russia, the world’s second-largest oil exporter after Saudi Arabia, was shipping most of its oil to Europe.

Rosneft and pipeline monopoly Transneft borrowed tens of billions of dollars from China to construct the first direct pipeline to the country and later expanded it to add a major export terminal on the Pacific, Kozmino.

The shift toward consumers such as China and India accelerated in recent years as Asia showed steady import growth and Russia came under Western sanctions over its actions in Ukraine.

The sanctions complicated Western lending to Moscow, forcing Rosneft to borrow more from Asian energy consumers.

The share of Russian crude exports heading east rose to 36 percent in 2018 from 31 percent in 2017, according to the Oxford Institute of Energy Studies.

Rosneft is run by a close ally of President Vladimir Putin, Igor Sechin, who pledged in 2017 to open offices in Singapore and has significantly boosted the company’s presence in Asia.

Rosneft’s crude oil exports to Asia-Pacific markets reached 51 million tonnes, or 1 million barrels per day, in 2018 - about half of the producer’s foreign sales, the Russian Energy Ministry says.

In 2017, Rosneft signed a long-term supply deal with China’s CEFC and increased supplies to the country under a new inter-government agreement.

TRADING AMBITIONS

Rosneft had long planned to buy a major oil trading division to compete with companies such as BP and Shell.

At some point it agreed to purchase the oil trading unit of U.S. bank Morgan Stanley, but the deal was derailed by sanctions.

The company subsequently developed a Swiss trading arm, Rosneft Trading, which focuses mostly on supplying Rosneft’s refineries in Germany.

FILE PHOTO: An employee wears a helmet with the Rosneft logo at the Achinsk refinery in the Krasnoyarsk region, Russia July 23, 2018. REUTERS/Ilya Naymushin/File Photo

Rosneft also formed a broad alliance with Swiss commodities firm Trafigura to further boost its trading activity.

The two firms co-own a refinery in India, and Trafigura has been selling a significant share of Rosneft’s oil on global markets. The opening of the Rosneft branch in Singapore represents another attempt to further boost trading.

“Rosneft wants to claw back some volumes and deal directly with many customers in Asia,” a source familiar with Rosneft’s strategy said.

Writing by Olga Yagova; Editing by Dale Hudson

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