Traders withdraw from Russian Arctic megaproject

Global commodities trader Trafigura has sold its 10% stake in the Vostok Oil megaproject in the Russian Arctic, becoming the latest international firm to quit Russia's oil sector in light of Moscow's invasion of Ukraine. The announcement by the company on July 13 comes days after it was revealed that another major trader Vitol is also preparing to withdraw from the project.

Vostok Oil consists of a group of large oil and gas fields mostly in the north of the Krasnoyarsk region, and has been touted as the next frontier for Russia's hydrocarbon industry, comparable in scope to the development of the Western Siberian basin in the 1970s. Prior to the war, Rosneft was predicting that its oil output would reach 100mn metric tons/year, or 2mn barrels/day, by the end of the decade, and it believes there is also potential to export as much as 50mn mt/yr of LNG from the project.

Rosneft brought on board Trafigura and a joint venture between Vitol and Mercantile & Maritime as investors at Vostok Oil in 2020 and 2021, selling shares of 10% and 5% respectively. The company's reasoning was that these traders could help it find markets for production from the project, the primary target of which is Asia.

However, days after Moscow launched its invasion of Ukraine, Trafigura said it was reviewing its shareholding at Vostok Oil, and in late April it said it was ceasing all oil purchases from Russia as soon as stricter EU rules came into effect. It initially invested €1.5bn ($1.6bn) of its own equity in the purchase, and has since said it had written off all investments in the project.

"Following a review of options in respect of its 10% non-operational, passive shareholding in Vostok Oil, Trafigura has now exited its investment," the company said in a statement on July 13. "Trafigura's shareholding in Vostok Oil, including the associated non-recourse bank debt, have been acquired by Nord Axis Limited, an independent Hong Kong-registered trading company."

Nord Axis Ltd was incorporated as a private company on February 15 this year. No further information about the company is known.

Meanwhile, Vitol was reported by Bloomberg and others earlier this month as also planning to withdraw from Vostok Oil. It is "in the process of completing formalities," media reported. Yet Mercantile & Maritime is yet to reveal its intentions.