BP mulls long-term oil deal with Rosneft: sources

Mon Sep 30, 2013 1:18pm EDT
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By Dmitry Zhdannikov

LONDON (Reuters) - BP (BP.L: Quote) is working on becoming the first oil major with a long-term deal to buy seaborne crude from Rosneft (ROSN.MM: Quote), trade sources said, after a number of trading houses this year secured large volumes from the Kremlin energy champion.

While trading houses Glencore (GLEN.L: Quote), Vitol and Trafigura agreed to lend Rosneft $11.5 billion in exchange for oil supplies over five years, oil majors have largely stayed on the sidelines, preferring to buy Russian crude at spot tenders.

BP has already received some volumes of Russian Urals crude under the deal, which is still being finalized, three trading sources told Reuters. BP and Rosneft declined to comment.

"BP is exploring options that are available to it as a major shareholder in Rosneft. The deal will be somewhat different from what Rosneft has with trading houses," a source familiar with details of the deal said.

BP owns a fifth of Rosneft, which became the world's largest listed oil firm by output after acquiring BP's venture in Russia, TNK-BP, in a deal valued at more than $50 billion.

That left Rosneft, in which the Kremlin owns a controlling stake, heavily indebted and looking for deals with the likes of Glencore to lighten the burden on its balance sheet by reducing debts to banks as the money is being borrowed by the traders.

Rosneft also hopes to obtain up to $70 billion from China in prepayment for oil, in an attempt to cut its debt further. The company has kept buying assets aggressively even after the TNK-BP purchase.

Rosneft currently sells its oil from major ports via two methods - long-term loan-for-oil schemes with traders, and short-term, six-month tenders open to traders and majors.   Continued...

The fuel price board of a Rosneft petrol station in St.Petersburg October 23, 2012. REUTERS/Alexander Demianchuk