Russia oil interests expanding in
Germany By Vladimir Socor
On May 31, Gunvor oil-trading company, 45%
owned by Gennadiy Timchenko, announced its full
acquisition of the Ingolstadt oil refinery in
Germany, the top-performing plant of the insolvent
Petroplus concern. The acquisition price is not
disclosed.
Russian President Vladimir
Putin paid a working visit (the first since his
re-election) to Germany on the same day, May 31.
The Ingolstadt takeover, a major event in
Germany's oil industry - and a business issue of
great interest to Putin - did not come up at
Putin's brief joint news conference with German
Chancellor Angela Merkel. Instead, Merkel praised
the Gazprom-led Nord Stream pipeline and waved off
the notion of German gas dependency.
On
the day of the Ingolstadt takeover, no doubt
fortuitously, The
Financial Times listed
Timchenko at the top of its "Putin's People"
feature, while the Moscow Times ascribed Timchenko
to a select group of "Putin cronies".
International media often refer to Timchenko as
Putin's "friend" or "acquaintance". The Economist
describes Gunvor as, "the most important trader of
Russian oil". Timchenko holds both Finnish and
Russian citizenship. Gunvor forcefully denies
being either Russian or an oil company.
Only three months ago, Gunvor took over
the Antwerp oil refinery in Belgium from the
Petroplus concern. That plant seems set to
re-start production. The Ingolstadt refinery is
Gunvor's second acquisition from Petroplus and in
Western Europe generally. Petroplus Holding was
Europe's largest independent oil-refiner (ie, not
involved in oil extraction or trading) as well as
Europe's largest by processing capacity (totaling
33.5 million tonnes annually), until as recently
as late 2011, early 2012. Petroplus's five
West-European refineries have each filed for
insolvency and halted their operations in
February.
Ingolstadt is a choice morsel
from Germany's oil sector. With a crude-oil
processing capacity of 100,000 to 110,000 barrels
per day, or 5 million to 5.2 million tonnes per
year, the Ingolstadt plant is located on the
Danube River in an advantageous position to
deliver its products by river transport.
The refinery is a major supplier of oil
products in some of Germany's most lucrative
markets. In the Land of Bavaria alone, the
Ingolstadt refinery holds market shares of 30% for
gasoline, 25% for diesel fuel and 22% for heating
oil (prior to the February 2012 halt in
operations). This refinery boasts a high Nelson
complexity index [a gauge of its secondary
conversion capacity] of 7.3.
Prior to its
recent halt, Ingolstadt was achieving gross
margins of US$8.5 per barrel - the best average of
all Petroplus refineries. The American company
ExxonMobil built the Ingolstadt refinery during
the 1960s, upgraded it continuously, and sold it
to the Swiss-based Petroplus in 2007 for $630
million.
The Ingolstadt plant
traditionally receives crude oil mainly from the
port of Trieste via the Trans-Alpine oil pipeline
(TAL), which runs from northern Italy to Austria,
Bavaria, and onward to the Czech Republic
(www.petroplusholdings.com). Ingolstadt also
processes some crude volumes originating in
Kazakhstan, but re-sold in Germany by the Russian
state-controlled Rosneft.
Under the
agreement just signed, Gunvor is taking over both
the Ingolstadt plant and the associated marketing
operations - mentioning both wholesale and retail.
Gunvor pledges to retain the refinery's entire
workforce of more than 400.
The official
announcement does not reference investment
commitments. It also omits stating whether Gunvor
would start delivering Russian oil volumes to
replace volumes traditionally delivered via the
TAL pipeline from Trieste to Ingolstadt. This
takeover (as that of the Antwerp refinery)
reflects Gunvor's vertical integration strategy in
its oil business, seeking to combine oil trading
with refining operations. While most of its crude
oil seems to originate in Russia, Gunvor targets
refining capacities in Western Europe.
Gunvor consummated the acquisition
swiftly. With Petroplus no longer able to pay for
crude supplies, and the refinery on stand-by mode
since February, the insolvency procedure elicited
bids from two European financial groups as well as
from the Swiss-based Vitol oil trading company (a
worldwide leader by volume). In April, each of
these expressed interest in acquiring the
Ingolstadt refinery. There was, however, no public
bidding or information about the offers. Gunvor
won the assets for an unknown purchase price. The
price it paid for the Antwerp refinery is also
undisclosed.
In the vicinity of Ingolstadt
along the Bavarian Danube, Russia's Rosneft
acquired 25% of the Bayernoil refinery in 2010.
Bayernoil consists of two oil-processing plants
with a total capacity of 10 million tonnes per
year.
In Germany's west, along the Rhine
River, Rosneft acquired 50% of Germany's largest
oil-refining conglomerate, Ruhr Oel, in 2010 (BP
holds the other 50% in Ruhr Oel). That
conglomerate includes five refineries with an
overall processing capacity of 23 million tonnes
of crude annually, amounting to 20% of total
refining capacities in Germany.
With that
acquisition, the Kremlin-controlled Rosneft holds
10% of Germany's total refining capacity. With
this, 18% of Rosneft's own refining capacities are
now located in Germany. Meanwhile, Germany is
nearly 40% dependent on Russian and
Russian-mediated deliveries of crude oil.
In February, Russian Lukoil increased its
stake to 80% in the giant ISAB refining complex,
on the island of Sicily, acquired from the
financially strapped ERG Group. In the
Netherlands, Lukoil acquired a 45% stake in the
Vlissingen refinery from French Total in 2009. In
these cases as well, Russian companies are taking
over the marketing operations along with the
processing plants. Both BP and Total failed to
exercise their pre-emption rights vis-a-vis
Rosneft in Ruhr Oel and vis-a-vis Lukoil in
Vlissingen, respectively.
The acquisition
prices are rumored to be well below the pre-crisis
market value of these refineries. Some
West-European refiners are unable or unwilling to
incur temporary losses during the crisis while
awaiting the recovery. Russian companies (a
category into which Gunvor explicitly says it does
not fit), however, can acquire crisis-hit European
refineries cheaply, accept low profit margins for
the duration of the European recession, and
possibly invest in reconfiguring some refineries
for Russian crude.
Planning for the
long-term, they seem willing to await Europe's
eventual recovery and return to higher profits in
oil-refining. Thus, Russian oil companies (a
category into which Gunvor explicitly says it does
not fit) have begun absorbing revenue streams from
European end consumers of oil products. This
revenue flow from Europe to Russia can only
increase with the post-crisis recovery in Europe.
Some of these takeovers are welcomed in
Europe as crisis-relief measures to rescue jobs
and prop up the local economies. In Ingolstadt,
according to German press reports, the work force
and municipal authorities are "elated" and
"breathed deep sighs of relief" at the takeover by
Gunvor. The Antwerp refinery's takeover recently
prompted similar reactions. In Germany's case, the
oil sector adds to the natural gas sector in
creating structural inter-dependencies between the
Russian and German economies and business.
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.
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
