The Reticent Swede Strengthens His Role in the Oil World

How can one close a deal for the acquisition of oil assets worth around ten billion dollars in just a few days? The answer to this question can be provided by the oil trader Gunvor from Geneva, which at the end of October was sold Lukoil International by the Russian oil company Lukoil. This company controls the foreign assets of the Russian giant responsible for two percent of global oil production, and in the portfolio of Lukoil International, there are very interesting ‘items’ from an oil perspective.

Specifically, it concerns assets in Europe, Central Asia, South America, the Middle East, and Africa, which account for one-fifth of Lukoil’s total production and employ 15,000 people. A jewel in this portfolio is the Iraqi oil field West Qurna 2, one of the largest deposits in the world, with a current capacity of 480,000 barrels per day. In this project, Lukoil holds a 75 percent stake. It is also worth mentioning the refinery in Burgas, Bulgaria, the largest in the Balkans, as well as the refinery in Romania.

Connection with Timchenko

Russian analysts have estimated the value of these assets at 12 billion dollars, noting that the sale price was likely much lower, by 20 to 30 percent. The discount that Gunvor received is not surprising given the long-standing ties of the company with Russia. The very news that Lukoil quickly found a buyer for assets that came under American sanctions due to the Kremlin’s reluctance to end the aggression in Ukraine supports this. Until now, Gunvor was completely unknown to the general public, although it is one of the more important players in the global oil trade.

The company’s history tells us that it was founded by the Swede Törbjorn Törnqvist, an economist educated in Stockholm. His career led him towards trading crude oil after his studies, and at the end of the 1990s, he decided to establish his own company. Fate had it that his partner in this entrepreneurial venture was Genadij Timčenko, a Russian billionaire and owner of the investment company Volga Group. This company owns a quarter of the shares of Novatek, the second-largest Russian gas producer, after the state-owned Gazprom.

By 2000, just three years after its founding, Gunvor became the largest trader of Russian oil in the West. The Swedish-Russian business partnership functioned excellently until 2014, when ‘little green’ soldiers occupied Crimea. Due to the Russian annexation of that peninsula, Timčenko, with his close ties to Putin, became a target of American sanctions. At that time, Törnqvist served for the first time as a solution to the problems of Russian businessmen with the West. Namely, just a day before the imposition of sanctions, Timčenko sold Törnqvist 44 percent of his stake in Gunvor. Besides the connections with people close to the Kremlin, other controversies have arisen around the company over the years. One of them is a corruption scandal in Ecuador, where American and Swiss investigations found that the company paid nearly 100 million dollars from 2012 to 2020 to obtain contracts for purchasing oil from Petroamazonas. The dispute was resolved last year with a 662 million dollar settlement between Gunvor and the American court.

Post-Pandemic Renaissance

Törnqvist has turned 70 years old, and in a recent interview with the Financial Times – one of the few media appearances – he stated that he is not in a hurry to retire. However, he announced that he would increasingly transfer the business in the company to his 33-year-old son Fredrik, who now leads green energy projects. In addition to energy commodities, the company also trades copper and iron ore. Törnqvist holds 85 percent of Gunvor’s shares, and in recent years, the company has experienced a true renaissance. In 2019, it was valued at two billion dollars, and today it is worth 6.5 billion dollars. Three years ago, Gunvor employed 200 people; today, it employs 1,700. The reason is, of course, the enormous profit growth that the largest oil traders – Vitol, Trafigura, Glencore, and thus Gunvor – have reaped from the surge in energy prices during the pandemic, and subsequently from the Russian aggression against Ukraine.

For instance, in its first public announcement of business results for the first half of 2021, Gunvor reported that it had doubled its revenues to 47 billion dollars, trading 28 percent more oil. Admittedly, the trend of explosive revenue growth is slowly weakening, but it remains strong. Last year, Gunvor reported annual revenues of 136 billion dollars, which is the fourth-best result in the company’s history and still above pre-pandemic levels. An important piece of information in the context of financial potential for acquiring Lukoil’s assets is that at the end of last year, Gunvor had 3.7 billion dollars in cash on its balance sheet.

Today, it has become a hunter by acquiring Lukoil’s foreign assets, but interestingly, just a few months ago, Gunvor was supposed to be the prey. Namely, as early as 2022, Törnqvist began negotiations with the state oil company of the Emirate of Abu Dhabi (Adnoc), which wanted to acquire part of Gunvor’s oil trading to diversify its revenues. However, the negotiations failed in March, and the reason was, of course, the price. The reticent Swede told the FT that he is nonetheless pleased that his company has maintained its independence and that the business growth over the past three years has resulted in the company no longer necessarily needing a strategic partner.

Investment in Upstream

That Gunvor has grown into a serious company is also evidenced by its investment plans. In addition to investing in renewable energy through its subsidiary Nyera, Gunvor secured an additional market in 2023 by purchasing a 75 percent stake in the gas-fired power plant Bahía de Bizkaia Electricidad in Bilbao. Earlier this year, the company announced that it intends to invest for the first time in oil and gas extraction (upstream). However, the goal is not to engage directly in production but to acquire stakes in oil and gas fields that would bring additional volumes for trading. Törnqvist believes that such an investment makes sense – the energy transition is not happening quickly enough to significantly reduce demand for oil in the near future. Thanks to the acquisition of Lukoil’s assets, this has become a reality.