Russian oil companies Gunvor, Rosneft, and
Lukoil are spearheading what looks like an
acquisition spree of refining capacities in
Western Europe. Some West European authorities
accept without qualms and even welcome such
Russian takeovers, apparently viewing them as
crisis-relief measures for stricken European
refineries and workforces involved.
On
March 2, Prime Minister Vladimir Putin's friend
Gennady Timchenko's oil-trading company, Gunvor,
announced its full takeover of the Antwerp
refinery in Belgium. This is one of the five
refineries of Petroplus Holding, Europe's largest
oil refining concern by processing capacity
(totaling 33.5 million tons annually). Petroplus
is also Europe's largest independent refiner, ie,
not involved in oil extraction or trading.
Hit by the European recession and low
profits from high-priced oil, Petroplus ultimately
phased out its refineries' production and filed
for insolvency in late
2011-early 2012. By acquiring the Antwerp
refinery, Gunvor is expanding from oil-trading
into oil-refining for the first time; and not in
Russia, but in Europe.
With a crude-oil
processing capacity of 107,000 barrels per day, or
5.2 million tons per year, the Antwerp refinery is
ideally located within the
Antwerp-Amsterdam-Rotterdam industrial and trading
hub. With at least 1.2 million cubic meters of
storage capacity, the refinery enjoys direct
access to maritime transportation for crude
supplies, and inland canals for delivering its
refined products.
This refinery has a low
Nelson complexity index [a measure of the
secondary conversion capacity of a petroleum
refinery relative to the primary distillation] of
4.5, but (despite and because of it) is well
positioned in market niches for products from the
Russian Urals crude blend, and also from
unconventional crude mixed with Urals crude
("crude blending"). This refinery was already
using Urals blend as feedstock, and Gunvor is
interested in also refining unconventional oil
here.
Gunvor won the bid for the Antwerpen
refinery because other bidders (apparently, mere
financial investors) were unable to guarantee
crude supplies and retention of the workforce.
Belgian state and provincial authorities therefore
approve of the takeover by Gunvor. The price has
not been disclosed yet; Moscow analysts assume a
discounted price of some US$700 million for this
takeover.
The company sold 1.26 million
barrels of Russian and non-Russian crude oil on
daily average during 2010 (2011 data not yet
posted). Gunvor is now embarking on a vertical
integration strategy in its oil business, seeking
to combine trading with refining, and potentially
extraction (more likely outside Russia) later on.
The Ingolstadt refinery in Germany is
another insolvent refinery of Petroplus Holding
(the holding has initiated five distinct
insolvency proceedings, one for each of its five
refineries in Europe). Russia's state-owned
Rosneft, heavy with the Yukos baggage, is a
candidate in the as-yet unofficial bidding for the
Ingolsadt refinery. At least one, possibly several
equity groups and funds are said to be interested,
but none has oil supplies of its own. If Rosneft
can guarantee crude oil supplies, it would be well
positioned to win in Ingolstadt on the same logic
that applied to Gunvor in Antwerpen.
With
a crude-oil processing capacity of 110,000 barrels
per day, or about 5.3 million tons per year, equal
to that in Antwerpen, the Ingolstadt refinery has
a superior Nelson complexity index of 7.3.
Configured to produce light and medium
distillates, this refinery is a major supplier to
southern and central areas of Germany. It receives
its feedstock largely from the port of Trieste via
the Trans-Alpine pipeline (TAL) which continues
from Bavaria into the Czech Republic.
In
the vicinity of Ingolstadt, Rosneft has owned 25%
of Bayernoil (two refineries with a total
crude-processing capacity of 10 million tons per
year) since 2010.
On February 1, Russian
Lukoil increased its stake to 80% in the giant
ISAB refining complex, on Sicily island. Lukoil
had first acquired a 49% stake in that refinery,
paying $2.1 billion to the Italian ERG group in
2008, with an option to increase it later. Lukoil
has done so in two share packages, now paying $400
million for 20% of ISAB's shares in the second
package. Lukoil has an option to acquire the last
remaining 20% within three years.
ISAB is
comprised of two refineries with a total
crude-processing capacity of 320,000 barrels per
day, or 16 million tons annually, with extensive
related installations in the Syracuse area.
According to ERG management's press
release, "This transaction allows ERG to downsize
its presence in the refining business against a
background of continuing crisis, and to further
consolidate the Group's financial structure ...
during a difficult financial period" - a phrasing
that may be condensed into "cutting losses".
Ideally positioned to receive North
African, Middle Eastern, and also Russian crude
oil, ISAB is a major supplier of
middle-distillates to the Italian market and
farther afield, and a tremendous acquisition by
Lukoil with such a processing capacity.
Lukoil already owns a choice morsel with
its 45% stake in the Vlissingen refinery in the
Netherlands, acquired from French Total in 2009.
Rosneft has owned 50% of Germany's largest
oil-refining conglomerate, Ruhr Oel, since 2010
(British Petroleum holds the other 50% of Ruhr
Oel). With this, Rosneft holds a full 10% market
share on Germany's fuels and lubricants market.
Western Europe's financial-economic crisis
exposes its oil-refining industry to Russian
acquisitions and takeovers. Russian oil companies
have now embarked on a second round of expansion
in Western Europe's refining sector (the first
round was seen in 2009-2010). Both the strategy
and the tactical timing look auspicious at this
stage.
Drawing on their ample cash
reserves, Russian oil companies acquire crisis-hit
European refineries on the cheap, accept low
profit margins for the duration of the European
recession, and invest in reconfiguring some
refineries for Russian crude, awaiting Europe's
eventual recovery and return to higher profits in
oil-refining. As a cumulative effect, Russian oil
companies are absorbing European revenue streams
on a growing scale.
Vladimir
Socor is a Senior Fellow of the
Washington-based Jamestown Foundation and its
flagship publication, Eurasia Daily Monitor, and
is an internationally recognized expert on the
former Soviet-ruled countries in Eastern Europe,
the South Caucasus and Central Asia. Socor is a
regular guest lecturer at the NATO Defense College
and at Harvard University’s National Security
Program’s Black Sea Program. He is a Romanian-born
citizen of the United States based in Munich,
Germany.
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