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Gunvor Is ‘Major Force’ in Russia After Rosneft Tender Loss

Gunvor Group Ltd., the energy trader, remains a “major force” in Russia after losing a crude tender worth about $12 billion from state-run OAO Rosneft, co-founder and Chief Executive Officer Torbjorn Tornqvist said.

Gunvor lost a bid to buy as much as 15.4 million metric tons over six months of Rosneft’s crude to Vitol Group, Royal Dutch Shell Plc and Glencore International Plc this month. The company, which relies on crude and oil products for about 95 percent of its trading volumes, was previously awarded such long-term tenders from Russia’s biggest producer.

“Even if you don’t see us winning crude oil in Rosneft tenders, we are a major force in Russia now and in the future,” Tornqvist told reporters today in Moscow. “Our volume of traded Russian crude oil and products is very high.”

The company, which has trading offices in Geneva and Singapore, is seeking to diversify its business from trading Russian crude. It bought two European refineries this year and took a stake in a coking coal project in Russia’s Sakha Republic.

Russian crude and oil products account for more than 25 percent of Gunvor’s trading volumes, Tornqvist said. This may decline as the company expands globally, he said.

The company is considering the construction of oil terminals in Singapore and Africa, Tornqvist said. Gunvor signed a memorandum of understanding in February to build an oil-storage facility in Sao Tome and Principe, an island nation off the west coast of Africa.

European Refineries

Gunvor agreed to buy the 105,000 barrel-a-day Antwerp refinery in Belgium in March, part of a plan to help to expand its presence in northwest Europe, the region’s oil-trading hub. The purchase of the 110,000 barrel-a-day Ingolstadt refinery in southern Germany followed in May.

Refining margins in Europe are currently “extremely good,” he said, adding they will weaken over the next year as the market remains oversupplied.

“The focus on downstream is difficult to understand as the European refining industry is going to a dark age,” said Ehsan Ul-Haq, senior market consultant at KBC Energy Economics in Walton-on-Thames, England. “It’s strange to think they can earn much concentrating on refining.”

Gunvor’s failure to secure the six-month crude tender from Rosneft may reflect a deterioration in its relationship with the Russian government, according to Ul-Haq. “There is speculation they don’t have access to term contracts as the relationship between the Kremlin and Gunvor might have worsened,” Ul-Haq said today by phone.

Different Approach

“The Russian market is very important to us but we are approaching it differently compared to five years ago,” Tornqvist said. “We tend to buy on the open market because we feel we can do it much cheaper.”

President Vladimir Putin, who was honorary head of a judo club founded by Gennady Timchenko in St. Petersburg, has said he isn’t involved in the billionaire’s businesses. Timchenko is co-founder of Gunvor.

The Rosneft tender was worth about $12.1 billion, according to a Bloomberg calculation based on today’s Urals price of $108 a barrel. It was awarded to Shell, Vitol and Glencore, according to two traders on Sept. 11, who declined to be identified because the information is confidential.

Gunvor plans to invest from $600 million to $700 million in the Kolmar coking coal project in eastern Siberia and about $200 million in port facilities in Russia’s Far East to ship coal to Asia, Tornqvist said.

Gunvor’s profit this year will be in the “upper range” of billionaire business partner Timchenko’s previous estimate from $300 million to $400 million, with turnover unchanged or higher than the previous year, Tornqvist said.

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