(EnergyAsia, December 26 2013, Thursday) — Russia’s state energy giant Ronseft is hoping to boost its downstream operations by acquiring the global physical oil trading business of Wall Street firm Morgan Stanley for an undisclosed sum.
The proposed deal caps a busy year for Rosneft which has emerged as a important upstream player with access to develop Russia’s best Arctic and Siberia reserves, a major oil supplier to China and a liquefied natural gas (LNG) trader to Asia.
Backed by President Vladimir Putin, Rosneft is being positioned to become a global oil and gas company to compete against other state-owned companies and the supermajors.
While approved by the boards of both companies, the deal, targeted for closure in the second half of 2014, must still clear regulatory approvals in the US, the European Union and certain other jurisdictions.
Some US politicians may seek to delay or even block the deal. Senator Edward Markey, a senior Democrat politician, wants the US government to ensure that Rosneft “cannot manipulate our markets and harm the United States and its citizens.”
The proposed acquisition of Morgan Stanley’s oil trading business will help complete Rosneft’s profile as a fully integrated oil company.
“The sale includes access to an international network of oil storages, crude oil and products inventories and related off-take and customer contracts, freight shipping agreements and equity investments into infrastructure, international marketing and research businesses,” said the Moscow-based firm.
“Approximately 100 front-office executives dedicated to oil and products merchanting in the US, UK and Singapore, or one-third of Morgan Stanley’s total commodities merchanting personnel, and approximately 180 mid- and back-office executives will become part of Rosneft group as part of the transaction. The transfer of all supporting systems and processes is an integral part of the agreement including a first in class approach towards managing market risk, trading controls and adhering to regulatory compliance.”
The transaction does not include Morgan Stanley’s current client business related to oil and products trade, or its ownership stake in TransMontaigne, or any of the US firm’s other commodities operations.
Igor Sechin, Rosneft’s President and chairman, said:
‘The agreements represent a breakthrough in strengthening Rosneft’s commerce and logistics unit which will spearhead the company’s growth in the international oil and products markets creating substantial incremental synergies based on Rosneft’s unique position as the leading oil and gas company and Morgan Stanley’s Global Merchanting Unit’s geographical reach and depth of “supplier – customer” commercial relationships.”