Chinese energy company purchases from Glencore, Qatar
Privately-held CFEC China Energy announced the purchase of a 14.16% stake in Rosneft today, buying from Glencore and the Qatar Investment Authority.
Glencore, Qatar only bought in nine months ago
CFEC will pay about $9.1 billion for its share, paying a premium of about 16% beyond the current 30-day average Rosneft price. Glencore and Qatar will not sell all their stake, but will retain about 0.5% and 4.7% respectively. These companies only bought in to Rosneft nine months ago, when the Russian giant sold 19.5% for about $11.3 billion.
According to Bloomberg, Glencore and Qatar will likely use the proceeds from this sale to pay down the debt each incurred when they bought in to Rosneft in December.
This sale makes the initial Rosneft purchase somewhat confusing; why would Rosneft sell, and Glencore buy, if the deal was going to change just nine months later. According to Reuters, the initial sale may have been quickly put together so the proceeds could be applied to the governmental budget. Glencore also received a side-deal with Rosneft to trade Russian crude oil. This deal has been retained, and according to Bloomberg the company currently trades about 400,000 BOPD of Rosneft oil.
The American sanctions imposed on Russia earlier this year may have also contributed to the sale, discouraging Glencore and other European companies from holding a Rosneft stake.
CFEC was founded in 2002 and has since expanded from a small fuel oil trading operation into one of the largest private companies in China, owning assets in Asia, Europe and Africa. The company has recently established several stakes in other markets. In February CFEC received a 4% stake in an onshore venture with Abu Dhabi national oil co, and in March the company purchased a stake in the broker Cowen Group Inc.
According to Bloomberg, this marks a change from standard Chinese methods, as the country has previously used CNPC and SINOPEC to buy stakes in foreign energy companies.
CFEC Chairman Ye Jianming commented on the sale “We are delighted at the opportunity of becoming a strategic shareholder of the world’s largest public oil producer and to develop strategic cooperation with Rosneft across the board in exploration, refining, storage, logistics, and sales of the upstream oil and gas resources. The transaction will consolidate and elevate the position of CEFC China in the oil and gas sector with incremental 2P reserves of more than 20 billion barrels.”
