Energy trading giants Mercuria Energy Group and Vitol Group are among finalists for a refinery and hundreds of petrol stations in Argentina being sold by Raizen SA, according to people familiar with the matter.
A deal would be worth more than US$1 billion, said the people, who aren’t authorised to talk about private negotiations. One of them valued the assets at as much as US$1.6 billion. A spokesperson for Mercuria declined to comment. Vitol and Raizen didn’t immediately reply to requests for comment.
The two trading firms are looking to build their presence in the refining industry as Argentina President Javier Milei – emboldened by his victory in midterms last month – is expected to accelerate his deregulation crusade. In the first half of his tenure, Milei ripped away controls on crude and fuel prices.
Raizen, Brazil’s largest producer of ethanol fuel from sugar, is divesting assets under mounting debt and new management. Its Dock Sud oil refinery in Buenos Aires has a daily capacity of 101,000 barrels, making it the third-biggest facility in Argentina, according to the EIA. Raizen’s network of about 700 gas stations accounts for 19 percent of the country’s gasoline and diesel sales, according to market leader YPF SA.
Mercuria has upstream oil assets in Argentina through its majority stake in Phoenix Global Resources, which is drilling in a burgeoning shale patch in Patagonia. Vitol has a port close to Buenos Aires for fuel trading.
Their bidding for Raizen’s assets is the latest example of commodity trading houses looking to snap up downstream oil facilities to maintain windfall profits from the energy crisis that followed Russia’s invasion of Ukraine.
Vitol has been rapidly expanding in recent years by buying into fuel distribution in South Africa and Turkey, as well as an export refinery in Italy. It also bid in the multi-billion-dollar auction of Citgo Petroleum Corp’s parent company. Mercuria doesn’t currently own any crude refining operations.
Raizen, a joint venture of Shell Plc and Brazilian conglomerate Cosan SA, acquired the assets from Shell, which owned them outright, in 2018 during Argentina’s last experiment with market-led reforms.
More recently, Raizen has been rattled by high debt after making big investments in waste-based biofuel plants that haven’t paid off amid softer-than-expected demand.
Declining sugar prices and lacklustre harvests have also hurt the company. Its net debt jumped 49 percent in the third quarter from a year ago, standing at about US$10 billion. And on Thursday, Moody’s lowered Raizen’s credit rating.
To help right the ship, Raizen is divesting assets and selling its Argentine business is considered a key step.
by Jonathan Gilbert, Nicolle Yapur & Cristiane Lucchesi, Bloomberg