Home Commodities Abu Dhabi’s Adnoc and Gunvor extend talks to reach investment deal

Abu Dhabi’s Adnoc and Gunvor extend talks to reach investment deal

by SuperiorInvest

Abu Dhabi National Oil Company and Gunvor, an energy trading house, are extending an exclusivity period for deal talks as they seek to reach an agreement on a possible investment.

People close to the deal say the discussions could see Adnoc take a minority stake in Gunvor, whose net profits rose to $841m in the first half of last year – more than its full-year profit in 2021 – as energy markets were swept away by the Russian market. total invasion of Ukraine.

The interview exclusivity period has begun last summer, it was set to expire at the end of December, according to people familiar with the matter.

Adnoc, which is the UAE’s state oil producer and pumps about 4 percent of all global oil supplies, is working to diversify its revenue streams and build a trading division.

Gunvor – co-founded in 2000 by CEO Torbjörn Törnqvist and Russian oligarch Gennady Timchenko – is looking to raise funds to support growth.

The commercial arm of Adnoc is preparing to open its first Swiss office this year as part of plans to expand the unit.

CEO Sultan Ahmed Al Jaber, who will also serve as chairman of this year’s UN climate summit with the UAE hosting the meetings in November and December, he previously said he wanted to “stretch the value” of every barrel of Adnoc oil through investment in refining and trading capacity.

But the talks falter at times and the two companies have different backgrounds: Adnoc is a state-owned energy giant that set up its trading division less than five years ago, while Gunvor is known for its aggressive culture and once-close ties to Russia.

Gunvor is one of a handful of major independent commodity traders, including Trafigura, Vitol and Mercuria, that play a significant role in global energy trading, acting as intermediaries and operators of infrastructure such as terminals and refineries.

Last year, trading houses saw unprecedented gains due to volatility in the oil and gas markets caused by Russia’s invasion of Ukraine.

Törnqvist, who controls almost 90 percent of Gunvor, has been considering a sale for some time. He held unsuccessful talks with Algeria’s state-backed energy company Sonatrach in 2019 and has discussed potential tie-ups with other trading houses in the past, according to people familiar with the discussions.

While Gunvor has its roots in Russian oil trading, it has branched out in recent years to become one of the world’s largest LNG traders.

In 2014, shortly before co-founder Gunvor Timchenko was sanctioned by the US government for his alleged ties to President Vladimir Putin, the Russian businessman sold his stake to Törnqvist and has since left the company. At the time, the US State Department claimed that Putin himself may “have access to Gunvor funds”, without providing evidence.

Gunvor has always fiercely denied allegations that he has ties to Putin and has spent the nine years since Timchenko’s departure diversifying his business outside the Russian sector, such as selling most of his stake in the Ust Luga oil terminal near the border with Estonia. .

The commodities trader, despite record half-year profits in 2022, also faced financial pressures due to high margin calls on trading houses due to extreme volatility in energy markets last year.

Adnoc and Gunvor declined to comment.

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