Lukoil deal is a clean separation

Gunvor Group CEO Torbjorn Tornqvist said that the deal to acquire the international assets of sanctioned Russian oil producer "Lukoil" PJSC represents a "clean separation" of the assets and must be approved by regulators.

"We believe that the deal meets all the requirements and concerns that may arise in a transaction of this scale and given the parties involved", Tornqvist said in an interview with Bloomberg. He ruled out the possibility of buying back the assets if sanctions against "Lukoil" be canceled.

"This is a clean breakup, the moment the deal is done, it's over.“

Last week, "Lukoil" announced that it had reached an agreement to sell its extensive international network of oil wells, refineries and gas stations, as well as its trading portfolio, to Gunvor.

If the deal is finalized, it would be a major success for Gunvor, a major oil and gas trader with long-standing ties to the Russian energy industry. In 2014, the company's co-founder Gennady Timchenko was sanctioned by the United States, which alleged that Russian President Vladimir Putin had "investments in Gunvor," which the company has consistently denied.

Tornqvist said he believes any concerns about continued Russian influence over the portfolio will be allayed. "We are quite confident that this deal meets all the important requirements," he said.

Last month, the United States blacklisted Lukoil and Russian oil giant Rosneft PJSC as part of a new initiative to end the war in Ukraine by depriving Moscow of revenue. Gunvor's subsequent deal is subject to approval by the U.S. Treasury Department's Office of Foreign Assets Control and other authorities.

As part of the sanctions, "Lukoil" and its trading unit Litasco have a short period of time in which to end their business relationship. Gunvor is in talks with U.S. regulators to secure an extension of its license to deal with the Russian company.

The U.S. license expires on November 21, and Tornqvist said he expects an extension similar to the one granted to Rosneft's German unit – six-month extension.

"It is absolutely necessary that we get an extension", he said on the sidelines of the Adipec conference in Abu Dhabi.

Tornqvist, who owns about 85% of Gunvor, believes that Lukoil's assets will help his company as oil markets become increasingly crowded and competitive. Trading margins have weakened this year, and Gunvor's profits fell 71% in the first half.

"However, some assets could be transferred to other countries", he said.

"It is clear that there are assets that we believe would be better left in other hands", he said, adding that it was "premature" to discuss further details.