CEFC China buy 14.16 pc stake in Rosneft $9 bn

CEFC China to buy 14.16 pc stake in Rosneft for $9 bn

9:16 AM, 12th September 2017
Rosneft logo at Moscow, Russia. (File photo)
Rosneft logo at Moscow, Russia. (File photo)

MOSCOW, RUSSIA/BEIJING, CHINA: Chinese conglomerate CEFC will buy a 14.16 percent stake in Russian oil major Rosneft for $9.1 billion (£6.9 billion) from a consortium of Glencore plc and the Qatar Investment Authority, strengthening the energy partnership between Moscow and Beijing.

CEFC China Energy has grown in recent years from a niche oil trader into a sprawling energy conglomerate and the transaction will allow China, the world’s second largest energy consumer, to boost cooperation with the world’s top oil producer.

The deal comes as US imposes a new round of economic sanctions on Russia, making it difficult for large Western firms such as Glencore to develop partnerships and increase ties with state-owned firms such as Rosneft.

Glencore said in a statement that CEFC will buy shares at a premium of around 16 percent to the 30-day volume weighted average price of Rosneft shares without naming the price. A CEFC spokesman said the company would pay $9.1 billion.

Glencore and QIA will retain stakes of 0.5 percent and 4.7 percent in Rosneft respectively.

Impervious deal

Glencore and QIA agreed to buy a 19.5 percent stake in Rosneft in December 2016 for over 10.2 billion euros (£9.3 billion) to help the Kremlin plug budget holes.

The transaction concurred with expectations of political detente between Moscow and Washington after Donald Trump became US president and pledged to improve ties with Moscow.

Rosneft is run by Igor Sechin, a close ally of President Vladimir Putin, who awarded special state decorations to the head of Glencore Ivan Glasenberg for executing the transaction.

“It always looked as if the Qatar-Glencore deal was hastily arranged so as to allow the privatisation to take place by the end of last year and the proceeds booked to the federal budget,” said Chris Weafer from Macro Advisory consultancy.

Sechin said QIA and Glencore cut the stakes partially because of a decline in the US dollar against the euro, which made debt servicing more expensive.

Sechin told reporters CEFC would get access to Rosneft’s oil fields and petrochemical projects in East Siberia to guarantee bigger synergies.

“From Rosneft’s point of view, the arrival of such a partner is positive as it shows that the foreign investors still keep their interest to the Russian oil industry,” said Alexander Kornilov from Aton brokerage in Moscow.

CEFC said the deal would give it annual equity oil production of 42 million tonnes (840,000 barrels per day) and access to oil and gas reserves of 2.67 billion tonnes (20 billion barrels).

The deal will be China’s second largest oil and gas acquisition after the $15.1 billion purchase of Canada’s Nexen by CNOOC in 2013. Earlier this decade, Beijing also loaned $25 billion to Russia to help it build a pipeline from Siberia.

© Reuters News

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