22nd March 2019


Rosneft opens trading arm in Singapore

Rosneft is starting a trading arm in Singapore as part of a move to Asia, the world's biggest and quickest-growing energy-consuming region, where the Russian state oil company plans to manage new projects and boost oil sales.

Six sources familiar with Rosneft's strategy told Reuters the arm, Rosneft Singapore, had been registered at the end of 2018 and that employees would move from Moscow during the spring and summer of 2019. The office will likely be run by Andrey Bogatenkov, the first deputy head of crude and product exports for Rosneft in Moscow.

”The fact that Rosneft plans to appoint a key crude and products trader as the head of its Singapore branch means it is really betting big on the region," a trader at a Western oil major working on the Russian crude oil market said.

Russia's coveting of the eastern oil market dates back over 10 years. Then, Russia, the world's second-largest oil exporter after Saudi Arabia, was delivering most of its oil to Europe. Rosneft, with the pipeline monopoly Transneft, borrowed tens of billions of dollars from China to build the first direct pipeline to the country and later expanded to add an export terminal on the Pacific, Kozmino.

The shift in supply to consumers such as China and India has grown in recent years as Asia showed steady import growth and Russia came under Western sanctions over its actions in Ukraine. The sanctions made Western lending to Moscow difficult, forcing Rosneft to borrow more from Asian energy consumers.

The share of Russian crude oil being consumed in the east rose to 36 percent in 2018 from 31 percent in 2017, according to the Oxford Institute of Energy Studies. Rosneft is run by a close ally of President Vladimir Putin, Igor Sechin, who pledged in to open offices in Singapore in 2017 and has significantly boosted the company's presence in Asia. Rosneft's crude oil exports to Asia-Pacific markets reached 51 million tonnes, or 1 million barrels per day, in 2018 - about half of the producer's sales, the Russian Energy Ministry says

In 2017, Rosneft signed a supply deal that should run for many years with China's CEFC and increased oil delivery to the country under a new inter-government agreement. Rosneft had long planned to buy a major oil division to compete with businesses such as BP and Shell.

The company also developed a Swiss trading arm, Rosneft Trading, which focuses mostly on delivering Rosneft's refineries in Germany. The company also formed a broad alliance with Swiss commodities firm Trafigura to further boost its trading activity.

The two firms co-own a refinery in India, and Trafigura has been selling a significant share of Rosneft's product on global markets. The opening of the Rosneft branch in Singapore represents another attempt to further boost trading.

"Rosneft wants to claw back some volumes and deal directly with many customers in Asia," a source familiar with Rosneft's strategy said.

Olga Yagova, via Reuters