Trading minnow emerges as top contender for Uniper's Fujairah refinery: sources

Little-known Swiss commodity trader Montfort is set to beat much larger rivals to acquire German utility Uniper SE's refining and related businesses in the Middle East for nearly $80 million, several sources familiar with the matter said.

The sale of Uniper Energy DMCC businesses that includes a 70,000 b/d topping refinery in the Middle East trading hub of Fujairah is part of assets Uniper is expected to sell as part of a financial aid agreement with European Commission in December 2022.

Other bidders for the business included European trading giants Glencore and Vitol as well as Middle East based BB Energy, sources said.

Spokespersons at Uniper and Montfort declined to comment.

The deal is expected to leapfrog Montfort to the league of top suppliers of shipping fuels in the bunkering hub of Fujairah. Uniper Energy DMCC's Fujairah crude processing units have the capacity to produce up to 5 million mt/year of low-sulfur marine fuels, giving the company a nearly 50% share of the local bunker market, according to Uniper's website.

The facility is located on land owned by Fujairah Oil Industry Zone, but leased out to VTTI, which is co-owned by Vitol Group, IFM Investors and ADNOC, according to VTTI website.

"To be able to get into the LSFO business, and in a big way, through this takeover, is a very good opportunity," a Fujairah-based bunker trader said.

Montfort's presence in the downstream marine fuels business at the Middle Eastern port has hitherto focused on high sulfur bunker fuel, with the company said to be a relatively small player -- with an estimated supply of around 10,000 mt/month of product -- in a market that sees between 650,000 mt and 700,000 mt of bunker sales each month, traders said.

Others in the market pointed to the other uses of the Fujairah refinery. While Uniper has traditionally run the facility on expensive low-sulfur crude oils to produce IMO-compliant marine fuels at the location, traders said the refinery could be repositioned to take advantage of a market awash with much cheaper crude oil from Russia that's increasingly looking for homes in markets East of Suez.

"The whole process is still in its finalization process, and since we are not involved in it anymore, we are also waiting to see what they [Montfort] do with it and how they will go about it," a source from one of the four companies that is said to have participated in the tender said.

Besides Uniper, Vitol is the only other producer of LSFO at the UAE port with a 82,000 b/d refinery that can produce some 45,000-50,000 b/d of IMO-compliant bunker fuels.

"They [Montfort] do seem to have a handle over the [Arab Gulf] flows, so I would like to think they do know what they're getting into," a source at another company that participated in the bidding process said.