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Vitol Ups Cash-for-Oil Deals With Kazakhstan To $5B

Kazakhstan

Commodity trader Vitol has raised its export prepayment loans to Kazakhstan’s state oil firms to US$5 billion, boosting further its primary position in lifting Kazakh oil at a time when the central Asian country’s output is expected to grow, the Financial Times reported on Monday.

At the end of December 2015, Vitol agreed to extend US$3 billion in advance payments to Kazakhstan’s state-held oil firm KazMunaiGas while the Kazakh company was looking for ways to secure new financing in the face of plunging oil prices. In return, KazMunaiGas agreed to have Vitol lift oil from the Kazakh firm’s stake in the giant Tengiz oil field.

Last month, Vitol extended by US$1 billion an existing US$1billion-deal with KazMunaiGas (KMG) and Kazakhstan’s sovereign wealth fund for oil supplies from the Kashagan oil field over five years, according to FT.

According to a press release by KMG Kashagan BV from August 15, the company signed additional agreements “for upsizing of the amount of the Prepayment transaction between KMG Kashagan B.V. (KMGK) and Vitol S.A. dated November 29, 2016.” In the November deal, KMG Kashagan successfully signed a US$1-billion 5-year export prepayment facility with Vitol as offtaker. Earlier in August, KMG Kashagan had received additional prepayment in the amount of US$600 million.

Vitol, the world’s largest independent commodity trader, as well as its closest competitors Trafigura and Glencore, are increasing their export prepayment deals to secure more oil trade with cash-strapped producers.

Earlier this year, Iraq’s semi-autonomous region of Kurdistan negotiated deals with Russia’s Rosneft and with trading houses to secure US$3 billion in loans as pre-payment for crude oil exports.

Related: Does Russia Really Need The OPEC Deal?

Rosneft has made such cash-for-crude deals popular. In one deal in 2013, for example, Rosneft signed long-term oil supply contacts with Glencore and Vitol, in which it received a prepayment of US$10 billion to use for corporate and investment purposes.  

However, according to FT, Vitol’s contract with Rosneft is not expected to be extended once it expires—not only because of the latest Russian sanctions, but also because the Russian company has since built much closer ties with Vitol’s rivals Glencore and Trafigura. 

By Tsvetana Paraskova for Oilprice.com

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