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Vista Projects
Copper Tip Energy
Vista Projects

Germany Seizes Assets of Russian Oil Giant Rosneft

These translations are done via Google Translate
(Bloomberg) Germany seized the local unit of Russian oil major Rosneft PJSC as Berlin moves to take sweeping control of its energy industry, secure supplies and sever decades of deep dependence on Moscow for fuel.Alongside its move for the Rosneft unit, Chancellor Olaf Scholz’s administration is in advanced talks to take over Uniper SE and two other major gas importers, Bloomberg reported on Thursday. Germany is pressing ahead with an historic overhaul of its economy just two and half years after the Covid-19 pandemic, grabbing control over a huge chunk of its industrial base to prevent shortages and blackouts this winter.

A decision on the next moves could come within days. The need for action is urgent with Uniper losing 100 million euros ($99.7 million) a day as it tries to replace Russian gas to maintain deliveries to local utilities and manufacturers.

“Over the next few months, we’ll have to continue to preserve critical infrastructure in order to achieve energy independence,” said Verena Hubertz, a leading lawmaker for Scholz’s Social Democrats. “Further measures will follow.”

Germany has been particularly hard hit by the economic standoff with the Kremlin because of its reliance on Russian gas and oil. Sanctions and Moscow’s efforts to punish Europe economically for its support of Ukraine risk tipping Germany into recession. Its energy sector is reeling from the squeeze on supplies, and government bailouts are quickly being dwarfed by the scale of the crisis.

On Friday, the government announced it was taking over Rosneft’s German unit, including stakes in three oil refineries. The move also affects holdings in France, Italy and Austria, highlighting how interconnected Europe’s energy system is.

Scholz’s administration pulled the trigger after months of talks. Because of sanctions related to the war in Ukraine, Germany is preparing to stop buying Russian crude by the end of the year and needed to make sure Kremlin involvement in its key refineries didn’t become a threat.

“This is a very important step for energy supply in Germany,” Scholz said at a press conference in Berlin. “We are making ourselves more independent from Russia, and also from decisions that are taken anywhere there.”

The swoop for the Rosneft unit is an escalation of the economic standoff with Russia as Berlin unwinds decades of tight collaboration. One of the most critical assets in the deal is the Schwedt refinery near the Polish border, which supplies Berlin and much of eastern Germany with fuel.

The facility has, until now, got its crude via the Druzhba pipeline from Russia. As long as the plant remained significantly in Russian hands, it was hard to see how the facility could keep going.

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The German Economy Ministry said the move “counteracts the impending threat to the security of energy supply and lays an important foundation for the preservation and future of the Schwedt location.”

The refinery is now preparing for potential retaliation from Russia, such as short-term restrictions in the crude supplied via the Cold War-era Druzhba link, operator PCK Raffinerie GmbH said in a statement.

The Schwedt oil refinery, Germany.

To supply the refinery, a pipeline linking it to the east German port of Rostock will be upgraded to cover the majority of Schwedt’s crude needs. Others deliveries could come via Poland, and talks with the government are under way.

“Purchasing shares in the refinery is one of the options” being discussed, Polish Climate Minister Anna Moskwa told Bloomberg in Vilnius.

Scholz was tight-lipped about what changes might still be coming, saying only that the move is a trusteeship and there hasn’t been a change in the ownership structure.

Grid regulator BNetzA will become the trustee of Rosneft Deutschland GmbH and RN Refining & Marketing GmbH, which account for around 12% of Germany’s oil-processing capacity, through stakes in refineries in Schwedt, Karlsruhe and Vohburg. The process is similar to the takeover of Gazprom Germania earlier this year.

Germany has the power to take over the administration of an energy company by issuing an order through the German Energy Safety Act. The trusteeship runs until March 15, 2023, but could be renewed. Rosneft can challenge the order in German courts.

Scholz said the trustee structure is designed to maintain oil refining in Schwedt next year and Germany’s energy supplies are secured through this winter, even if Russia halts crude deliveries.

Overall, a long-term support package for the Schwedt site and the surrounding region totals more than 1 billion euros.

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