Russia’s 2nd-biggest oil producer Lukoil is studying the possible sale of its oil trading arm, Switzerland-based Litasco, fearing that the new U.S. sanctions on Russia will make it more difficult for the oil trader to raise new financing, Reuters reported on August 30, 2017, citing industry sources.
Litasco’s sale could take place sometime at the end of this year, a senior industry source told Reuters, adding that this could be the 1st move to Lukoil selling more assets abroad to focus on upstream in Russia.
«One of the reasons behind the sale idea is sanctions. The sale will also help divert a big chunk of working capital from trading activities towards upstream projects in Russia,» Reuters quoted the source as saying.
Another source confirmed there were plans for a possible sale and added that «Gradually, Litasco will become an independent trading house like Vitol or Trafigura.»
Geneva-based Litasco was set up in 2000 as the exclusive international marketing and trading company of Lukoil, and trades Lukoil’s and 3rd-party crude and refined petroleum products.
In 2015, Litasco handled 3.2 million barrels per day.
Last year, that figure rose slightly, with the share of Lukoil and 3rd-party volumes roughly remaining 50/50, Litasco’s CEO Tim Bullock told Reuters in an interview in February this year.
It’s not clear how much money Lukoil could get from a Litasco sale, as most oil and commodity traders are not listed.
According to Reuters, the book values of Litasco’s competitors range between $2 billion and $6 billion.
Due to the additional sanctions, Italian bank Intesa Sanpaolo is said to have hit a snag in its plans to syndicate a $6.2 billion loan it had extended to Glencore and the Qatar Investment Authority to help them fund the acquisition of a 19.5% interest in Rosneft.
Lukoil - alongside Gazprom, Gazprom Neft, Surgutneftegas, and Rosneft - has been since 2014 on the U.S. Treasury sanctions list that prohibits the exports of goods, services (not including financial services), or technology in support of exploration or production for Russian deepwater, Arctic offshore, or shale projects that have the potential to produce oil.
The latest U.S. sanctions, however, are still being studied by Western banks to fully understand the possible implications of doing business with Russia and what’s permitted and what is not.
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