Adnoc and Gunvor deal talks reach impasse

Abu Dhabi National Oil Company’s potential acquisition of Gunvor, the energy trading house, has reached an impasse because of a disagreement between the two sides over the size of the deal, said people familiar with the negotiations.

While Adnoc had hoped to acquire all of Gunvor, or a majority stake, the trader’s chief executive Torbjörn Törnqvist is not willing to give up control of the group he co-founded in 2000, two people involved in the discussions said.

Instead Törnqvist, who controls almost 90 per cent of Gunvor, has told Adnoc he is only willing to sell a minority stake as a way to raise funds to drive growth.

Such a deal is of less interest to state-owned Adnoc, which was seeking control of the company as a way to significantly boost its trading ambitions, one of the people said.

Adnoc established its own trading arm two years ago and chief executive Sultan Ahmed Al Jaber has frequently stated a desire to improve profit margins through investments in refining and trading capacity.

The deal would have been the biggest move by a Middle Eastern company into commodity trading. Though several Gulf states, including Saudi Arabia, have large national oil companies, unlike European rivals Shell and BP they do not have large trading divisions.

Trading has been highly profitable in recent years because of the huge volatility created in energy markets first by the coronavirus pandemic then Russia’s full-scale invasion of Ukraine.

Adnoc and Gunvor have been in talks since last summer and extended an exclusivity clause until the end of March in an attempt to get a deal over the line.

Adnoc and Gunvor both declined to comment.

People close to the talks gave different accounts of whether further discussions were possible, with one suggesting a smaller deal could still be done. Others said Adnoc was effectively withdrawing from the discussions. But they agreed a larger deal for a controlling stake in the company was now highly unlikely.

Gunvor, which is headquartered in Geneva and domiciled in Cyprus, is among the world’s largest independent energy traders, moving about 240mn tonnes of commodities including oil, gas and coal in 2021.

Founded by Törnqvist alongside Russian businessman Gennady Timchenko in 2000, the company was initially known for its close ties to Russian energy producers.

In 2014, shortly before he came under US sanctions for his ties to Vladimir Putin, president of Russia, in the aftermath of the annexation of Crimea, Timchenko sold his shares in the company to Törnqvist. The company has reduced its volumes of Russian-originated commodities in recent years.

Törnqvist has been keen to maintain his majority stake, according to people close to the company. Previous talks with potential investors including Algeria’s Sonatrach and informal discussions with rival trading house Mercuria did not come to fruition.