Algeria’s Political Turmoil Hits Oil-Trading Deals From Athens to Geneva

(Bloomberg) -- The dramatic upheaval in Algeria’s top political office has sideswiped a host of pending deals involving the North African country’s national energy company and some of the world’s biggest oil-trading firms.

State-run Sonatrach this week suspended plans to set up a trading joint venture, according to people familiar with the matter. The company had been at the final stage of choosing a partner among firms including Vitol Group, Gunvor Group Ltd., Total SA and Eni SpA, before Algeria’s long-serving president Abdelaziz Bouteflika resigned amid national protests.

The political turmoil may have also helped scupper Greece’s plans to sell a 50.1 percent stake in the country’s biggest oil refiner, Hellenic Petroleum SA. Vitol and Sonatrach comprised one of two consortiums short-listed to bid, but Greece said this week that no binding offers were submitted. The nation’s state asset-sales fund attributed the lack of bids to “reasons related to the short-listed parties and recent developments in the international environment.”

Officials from Sonatrach didn’t immediately respond to requests for comment.

The botched deals underscore the political risks and uncertainties facing energy traders as they battle to secure long-term supplies of crude and refined products amid shrinking profit margins. Vitol, based in Rotterdam with major operations in Geneva, is the biggest independent oil trader, handling more than 7.4 million barrels a day. Gunvor handles about 2.7 million barrels of crude and products a day.

Political Upheaval

The setbacks also highlight the key role oil revenues play in Algeria’s economy as the country faces its biggest political change in a generation.

While the upheaval hasn’t hurt oil production, mainly because the country’s energy facilities are in remote areas, there’s a risk that changes to oil and gas officials could affect deals with international companies. Sonatrach has been at the heart of multiple corruption probes and has had six chief executives since 2010. Algeria has also just replaced its energy minister -- taking the number to six over the same period.

The Sonatrach process to pick a joint-venture partner has slowed but not been completely abandoned, the people said, asking not to be identified because the decision hasn’t been made public.

The majority stake in Hellenic Petroleum was valued at about 1.16 billion euros ($1.3 billion) when Greece’s energy minister said in January that the country was nearing a sale. Swiss trader Glencore Plc and CIEP Participations S.a. r.l. SICAR of Carlyle Group made up the other consortium in the running for the stake.

--With assistance from Eleni Chrepa.

To contact the reporters on this story: Andy Hoffman in Geneva at ahoffman31@bloomberg.net;Salah Slimani in Cairo at sslimani2@bloomberg.net;Salma El Wardany in Cairo at selwardany@bloomberg.net

To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net, Amanda Jordan, Helen Robertson

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