Trafigura sells stake in Rosneft-backed refinery in India

Trafigura has sold its stake in an Indian oil refinery joint venture with Russia’s Rosneft, severing the final tie between the commodity house and Moscow’s state-owned oil champion.

The Swiss-headquartered commodity trader disposed of its 24.5 per cent interest in Nayara Energy Limited — which operates one of the largest refineries in India and more than 6,000 petrol stations — to Hara Capital Sarl, a subsidiary of Italian energy investment company Mareterra Group Holding.

People familiar with the sale said Trafigura got book value for its stake, which was carried in its last annual report at $165.9mn and classified as “held for sale”, with a possible disposal to Mareterra, then known as Genera, first reported in 2021.

The Nayara sale marks the end of a hard-won relationship that Trafigura had established with Rosneft, which had made the trading house one of the biggest marketers of its crude prior to Russia’s full-scale invasion of Ukraine last year.

The joint purchase of Nayara announced in 2016 — two years after Russia and Rosneft had first faced western-imposed sanctions for the annexation of Crimea — was hailed at the time by as a “landmark” deal for Trafigura, cementing its position as a key partner for the Russian company.

Trading houses, including Trafigura’s rivals such as Vitol and Glencore, had long fought for access to Rosneft barrels as it is one of the world’s biggest crude producers, with all three providing short-term financing permissible under sanctions introduced after Crimea’s annexation.

But the depth of the relationship with Trafigura at times stood out and became a hallmark of the company’s strategy under chief executive Jeremy Weir, following the death of founder Claude Dauphin in 2015. That same year Trafigura and Rosneft hosted a joint party at an oil event in Singapore, in a display of their deepening ties.

Rosneft’s ambitions to establish its own trading arm had largely been stymied by the sanctions introduced over Crimea, leaving it more heavily reliant on third-party traders.

But Russia’s full-scale invasion has led many of the world’s largest trading houses to back away from the state-owned company. In July, Trafigura sold its stake in Russia’s giant Vostok Oil project, which had once promised to provide their trading business with a further supply of Rosneft barrels.

Trafigura has said it no longer trades Rosneft crude or refined products.

The Vostok sale was made to an obscure Hong Kong company — Nord Axis Limited — that was set up just nine days before the full-scale invasion of Ukraine, though Trafigura said it was not a Russian company. Vitol also exited its stake on Vostok in December, selling to a company — Fossil Trading FZCO — with business links to Rosneft.

Mareterra Group, which is based in Rome, said it would use its “strong experience in reducing the carbon footprint of fuel stations, installing electric charging stations and improving energy efficiency at industrial assets” as part of its investment in Nayara. Trafigura said the sale had received “all applicable bank and regulatory approvals”.

UCP Investment Group, which invested alongside Trafigura to acquire a combined 49.1 per cent of Nayara in the deal that closed in 2017, said it remained committed to its investment. Rosneft owns the largest single stake in the refinery, with just over 49 per cent.

Indian refiners have enjoyed strong profitability since Russia’s invasion of Ukraine, with diesel prices soaring globally. India has also become a large buyer of heavily discounted Russian oil as Europeans have turned away, further boosting potential profit margins significantly.

Trafigura said on Monday it was working with an Israeli-backed private equity fund that is buying a refinery from Russia’s Lukoil in Sicily, with the trading house set to provide working capital, crude supplies and market the plant’s output of refined fuels.