China CEFC To Buy 14% Rosneft Stake
London-listed global commodity trader and mining firm Glencore said midday September 8 that its consortium with Qatar Investment Authority has concluded an agreement whereby Glencore-QIA will sell its 14.16% stake in Russian oil giant Rosneft to CEFC China Energy Company (CEFC).
It said the shares will be divested at a premium of about 16% to the 30-day volume weighted average price of Rosneft shares on September 8.
Glencore and QIA will retain an economic interest in Rosneft shares commensurate to their original equity investment announced in December 2016, amounting to about 0.5% and 4.7% respectively. Glencore said a further announcement would be made in due course. News agency Reuters put the value of the transaction at $9.1bn.
Rosneft and CEFC signed a strategic co-operation agreement at the recent BRICS summit to develop oil and gas resources in western and eastern Siberia, said the Russian giant on September 3, adding it also provides for joint activity in areas like refining, petrochemicals, and crude trading. The London Financial Times reported September 6 that CEFC was in talks to buy into Rosneft but did not specify from what existing shareholder.
UK-based consultancy Wood Mackenzie's senior Russia upstream analyst, Christian Boermel, remarked: “This deal intensifies the energy relationship between Russia and China. A direct stake in Rosneft will make CEFC China the main driver for the relationship of Rosneft with China, ahead of CNPC, Sinopec and Beijing Gas. CEFC China could soon take stakes in Rosneft projects, either in cash-intensive upstream projects, or in the downstream."
Gazprom and Novatek already have close relationships with Chinese firms, with CNPC having 20% and Silk Road Fund 9.9% in the Novatek-operated Yamal LNG venture that is gearing up to start liquefaction and exports later this year, and for which Chinese financing proved essential. And Gazprom is building the Power of Siberia pipeline up to the border with China, where CNPC will take delivery of some 38bn m³/yr of gas produced in eastern Siberia from late 2019, if all stays on schedule.
While being an oil giant, Rosneft earlier this year declared its aim to produce 100bn m³ of gas by 2020 in Russia. On June 2, it signed an agreement on strategic co-operation in gas, and a memo of understanding (MoU) on sales of Russian gas to Europe with BP -- which has a 19.75% stake in Rosneft.
Mark Smedley