Vitol sells stake in Russian Arctic development

Vitol has sold its multibillion-dollar stake in Vostok Oil, the Arctic mega-project backed by Russian president Vladimir Putin, as western energy companies exit their investments in the country after the invasion of Ukraine.

Vitol and joint venture partner Mercantile & Maritime sold their 5 per cent stake to Fossil Trading FZCO, a Dubai-based company, the world’s largest independent oil trader said on Friday.

The deal, whose size was not disclosed, was agreed in July and finalised this month, Vitol added. Similar transactions have taken place at fire-sale prices as western energy companies have divested quickly from Russia. That 5 per cent stake would have been worth at least $3.5bn prior to the war.

The Vostok oil and gas project, which spans Siberia and includes a large new oil terminal in the Arctic, was forecast to meet as much as 2 per cent of the world’s oil demand once completed.

However, its future is now in doubt, as more of Russia’s energy sales have shifted toward China and India, and major western backers have pulled out of Vostok because of sanctions.

Russia’s state-backed oil company Rosneft says the Vostok project is still progressing, and construction on the new Arctic oil terminal started in July.

Rosneft did not immediately respond to requests for comment.

This year, Trafigura sold its 10 per cent stake in Vostok Oil to Nord Axis Limited, a Hong Kong-registered company, for an undisclosed amount. Other big exits from Russia include BP selling its 19.75 per cent stake in Rosneft in February, three days after Russian troops invaded Ukraine.

Shell exited its Russian operations by selling its retail and lubricants business there to Lukoil in May.

Vitol owned 75 per cent of Amur Group, which held a 5 per cent stake in Vostok Oil. The remaining 25 per cent stake in Amur was owned by Mercantile & Maritime, a Singapore-based commodity trader led by Pakistani-born businessman Murtaza Lakhani.

Fossil Trading FZCO was established in April and has business links to Rosneft. It also owns Energopole, a Swiss-based company set up by Rosneft in 2020 to conduct oil trading.

As trading Russian oil has come under increasingly tight sanctions as well as restrictions from the oil price cap imposed by western countries, a growing amount of trading activity has shifted to Dubai.

Vitol has reduced its activities in Russia significantly. It no longer trades any Russian crude, although it does trade a small amount of refined oil products from the country, according to the company.

Additional reporting by Anastasia Stognei