Traders Vitol, Mercantile join Rosneft's giant Vostok Oil project

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The logo of Russia’s oil company Rosneft is pictured at the Rosneft Vietnam office in Ho Chi Minh City, Vietnam April 26, 2018. REUTERS/Maxim Shemetov/File Photo

Russia’s Rosneft (ROSN.MM) has signed a heads of terms agreement on selling a 5% stake in Vostok Oil, a giant oil producing project, to a consortium of traders Vitol and Mercantile & Maritime, Rosneft said on Thursday.

Vostok Oil, in which global commodities trader Trafigura already has a 10% stake, is one of Russia’s biggest oil projects, comparable in size with the exploration of West Siberia in the 1970s or the U.S. Bakken oil region over the past decade.

The deal is expected to be closed after the parties receive the required regulatory and corporate approvals.

Rosneft has discussed with different partners, including traders and companies from China and India, about possibilities to invest in the project.

Earlier this week, Rosneft said it had kicked off meetings with foreign contractors and suppliers for Vostok Oil. read more

Trading houses generally avoid investing directly in production, but the Rosneft deal may be attractive as it could give them access to a long-term major source of supply for the growing Asian market.

“Definitely, the project is interesting to the companies focused on feedstock supply, trading and logistics with an extensive client base and distribution channels around the world, those that consider the future need for ‘green’ oil supply,” Rosneft’s CEO Igor Sechin said in a statement.

Vitol has decreased its trading operations with Rosneft oil and products in the recent years, so the new deal may be a good start for future development of the companies’ partnership, a trader in Russian oil market said.

Mercantile & Maritime has been one of buyers of oil products from Rosneft in the last couple of years, while the company also showed interest in trading Russian crude, another trader said.

Rosneft estimates the project’s resources at 6.2 billion tonnes (45 billion barrels) of oil and plans to build three airfields, two sea terminals, a railway, some 50 vessels and facilities to generate 3,600 megawatts of power.

Vostok Oil will cost dozens of billions of dollars to develop and is valued by Rosneft at $70-$150 billion, depending on the price of oil and cost of capital, according to three sources close to talks on potential partners. read more

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