Two more traders sign up to Russia's Vostok Oil project

Commodities traders Vitol and Mercantile & Maritime have signed a heads of terms agreement to take a 5% stake in the Vostok oil and gas project that Rosneft is developing in the Russian Arctic.

Vostok Oil consists of several large oil and gas fields that Rosneft estimates could one day flow 2mn barrels/day of oil and produce enough gas to supply up to 50mn metric tons/year of LNG. It is expected to flow 1mn b/d of crude as soon as 2027. Rosneft is seeking partners to provide investment and marketing capabilities to take the development forward. It closed the sale of a 10% interest in Vostok Oil to another trader Trafigura in December.

"Definitely, the project is interesting to the companies focused on feedstock supply, trading and logistics with an extensive client base and distribution channels around the world, those that consider the future need for 'green' oil supply," Rosneft CEO Igor Sechin said in a statement.

Rosneft has not said how great a stake in Vostok Oil it is willing to divest. But the company has held talks with Asian investors, including from China, India and Japan.

The growing oil markets of the Asia-Pacific region are expected to be the main destination for Vostok Oil's supplies. Its crude is understood to be very sweet, with a very low sulphur content of only 0.01-0.04%. This means it could sell at a significant premium to Brent, which is also considered sweet but with a higher sulphur content of 0.37%.

Rosneft has said that, depending on oil prices, the project is worth somewhere between $70bn and $150bn. It has embarked on a divestment drive to raise funding for the venture. It recently sold shares in four more oil and gas producing subsidiaries working in south Russia to a private local company, and it is reportedly in talks to divest its operations in Vietnam to Russia's state-owned Zarubezhneft.