Glencore Said to Vie With Vitol for $1 Billion Kazakh Oil Deal

Glencore Xstrata Plc (GLEN) and Vitol SA are competing to buy $1 billion of crude from Kazakhstan’s largest oil field, said two people with knowledge of the matter.

The world’s largest oil traders are negotiating to purchase state-run KazMunaiGaz National Co.’s share of production from Kashagan, which started pumping oil last month, said the people, who asked not to be identified because the deal is private. The companies may raise pre-payment loans of as much as $1 billion to buy the oil, delivered over five years, they said.

Crude traders including Vitol, Glencore and Trafigura Beheer BV have been striking output deals with producers in Russia and Central Asia to secure long-term supplies of oil. Glencore and Vitol teamed up earlier this year to make a $10 billion pre-payment to Russia’s top oil producer OAO Rosneft (ROSN) in return for 67 million tons of crude over five years. Trafigura, an independent oil trader, raised a $1.5 billion loan to finance deliveries from Rosneft in June.

Kashagan started production last month after eight years of delays and costs that climbed to $48 billion. Production at the Caspian Sea field will rise to 370,000 barrels a day in the first phase from an initial 40,000 barrels a day, Kurmangazy Iskaziyev, deputy head of KazMunaiGaz, said Oct. 1. Production was halted for the second time after a gas pipeline leak, the project’s operator said Oct. 11.

KazMunaiGaz holds 16.8 percent of the project.

Officials at Geneva-based Vitol and Baar, Switzerland-based Glencore, declined to comment on the supply contract and financing. Officials at KazMunaiGaz didn’t respond to two phone calls and an e-mail seeking comment.

To contact the reporters on this story: Stephen Morris in London at smorris39@bloomberg.net; Andy Hoffman in Geneva at ahoffman31@bloomberg.net

To contact the editors responsible for this story: Faris Khan at fkhan33@bloomberg.net; Timothy Coulter at tcoulter@bloomberg.net

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