Abu Dhabi National Oil Company has held talks with Gunvor about acquiring all or part of the trading house in a deal that would significantly increase the United Arab Emirates’ reach in global commodity markets.
The talks are at an early stage and may not result in a deal, according to two people familiar with the discussions. However, any investment in Gunvor would be in line with the UAE state oil producer’s strategy of diversifying its revenue streams and building out its trading division.
Gunvor chief executive Torbjörn Törnqvist, who controls almost 90 per cent of the company, has been considering a sale for some time. He held unsuccessful talks in 2019 with Algeria’s state-backed energy company Sonatrach and has discussed potential tie-ups with other trading houses in the past, according to people familiar with the discussions.
In March he told an FT conference that he would consider selling part of the company to help fund its growth.
“For us to go and really, shall I say, exploit the potential of the company, it would be desirable to explore additional equity,” he said. “We are open to find an alliance which could increase the size of the company.”
He added: “It has to add something — it may be adding capital . . . or you can find some other strategic relationship, somebody who adds another dimension to the business itself.”
Adnoc established its own trading arm two years ago and chief executive Sultan Ahmed Al Jaber has frequently stated a desire to improve margins through investments in refining and trading capacity.
Jaber told the FT last year that he wanted to “stretch the value” of every barrel of oil and help the UAE to future-proof its economy through diversification.
Adnoc and Gunvor both declined to comment on the talks, which were first reported by Bloomberg.
Gunvor, founded in 2000 by Törnqvist and Russian businessman Gennady Timchenko, is one of a handful of large-scale independent commodity traders, including Trafigura, Vitol and Mercuria, that play a significant role in global energy trading, acting as middlemen and operators of infrastructure such as terminals and refineries.
Last year Gunvor’s trading volumes grew 25 per cent to 240mn tonnes, earning $726mn in net profit on turnover of $135bn. It enjoyed an even stronger start to this year, earning net profit of $841mn in the first six months of 2022, boosted by soaring volatility in oil and natural gas markets following Russia’s invasion of Ukraine.
In 2014, shortly before Timchenko was sanctioned by the US government for his alleged ties to President Vladimir Putin, the Russian trader sold his stake to Törnqvist and has since left the company.
Törnqvist awarded himself a special dividend of $1bn in 2016, which he used to pay off a debt to Timchenko related to the sudden sale of his co-founder’s stake two years earlier.
While the company’s roots lie in Russian oil dealing, it is has diversified in recent years and is one of the world’s largest traders of liquefied natural gas. In the past five years, Russian-origin commodities have accounted for just 6-11 per cent of Gunvor’s trading activities.
Gunvor has faced some financial pressure, however, from soaring margin calls related to volatility in the market even as it has churned out large profits.
The company cut trading positions last autumn after a gas price surge triggered demands for extra cash to cover its hedging positions from brokers and exchanges, but it has since bolstered its credit facilities.
“Scale is important [in commodity trading],” Törnqvist told the FT in March. “If you’re a small player, it’s going to be awfully difficult to move forward.”
Additional reporting by Harry Dempsey and Arash Massoudi in London