Gunvor Eyes Lukoil Assets but Acquisition Faces Financial and Regulatory Hurdles
Swiss trading firm Gunvor is considering purchasing Russian energy group Lukoil’s foreign assets, the company’s largest potential acquisition, but bankers and industry insiders say the deal far exceeds Gunvor’s financial capacity.
Lukoil began marketing its foreign holdings on October 27 following new US and UK sanctions and entered preliminary talks with Gunvor three days later. The Russian firm is approximately three times the size of Gunvor by equity and owns a vast international portfolio, including refineries in Europe, stakes in oilfields in Kazakhstan, Uzbekistan, Iraq, and Mexico, plus hundreds of fuel stations worldwide.
Its Vienna-based subsidiary, Lukoil International GmbH, reported $22 bn in equity in 2024, with $18.8 bn in fixed assets such as property and equipment, and $3.2 bn in cash. Sources close to Lukoil said the asset composition and values have not changed since 2024, and the company carries no debt.
Financial Challenges Could Stall the Deal
Gunvor reported $6.8 bn in equity in 2024, including $4.3 bn in cash and $2.5 bn in fixed assets. Despite a strong cash position, the company would need to borrow nearly $18 bn to fund a $22 bn deal, an amount bankers say would be difficult to secure. A loan of this size would push Gunvor’s debt-to-equity ratio above 2, exceeding the typical 1.5 limit acceptable to lenders.
Regulatory and Political Hurdles
The acquisition would also face regulatory and political scrutiny. Authorities in countries where Lukoil operates, including Iraq, Kazakhstan, and Azerbaijan, would need to approve the transaction. Lukoil produces around 500,000 barrels of oil per day outside Russia, representing roughly 0.5% of global output. Gunvor has no prior experience managing large oil projects. In Bulgaria, lawmakers are preparing legal measures to seize control of Lukoil’s Burgas refinery and seek a new owner with no Russian ties.
Historical Context and Joint Ventures
Gunvor maintains operations in the US and has distanced itself from Moscow. The firm was previously one of the largest traders of Russian oil, co-owned by founder Torbjorn Tornqvist and Russian businessman Gennady Timchenko until Timchenko exited in 2014 amid US sanctions. The US Treasury had suggested potential links between Gunvor and Russian investments, which Gunvor denied.
Complicating the deal further, Lukoil’s foreign projects involve joint ventures with major oil companies, including Chevron, BP, Eni, and Shell. Existing partners have pre-emption rights, which may allow them to purchase assets if Lukoil decides to sell. Gunvor is awaiting US regulatory approval, and Tornqvist confirmed the company does not plan to sell assets back to Lukoil even if sanctions are lifted.
