Mercuria Energy Group, an energy-trading firm, is nearing a deal to acquire a refinery along with hundreds of gas stations in Argentina that are currently being offered for sale by Raizen SA, as reported by sources. According to several individuals, who requested anonymity due to the confidential nature of the negotiations, a deal may exceed US$1 billion. In November, a source indicated that Mercuria was one of the contenders in the bidding for the assets. A contract has not been executed at this time, and a transaction may not occur. Ongoing negotiations are still in progress, according to sources. Raizen, the leading producer of ethanol fuel from sugarcane in Brazil, is strategically divesting assets in response to rising concerns regarding its increasing debt levels. The company experienced a significant downgrade in its credit rating by Fitch Ratings and S&P Global Ratings, which pointed to an increasing cash crunch. This development has triggered a sell-off in its bonds, resulting in a nearly 50% decline in prices over the past week.
Mercuria aims to enhance its footprint in the refining sector, anticipating that President Javier Milei will expedite his deregulation initiatives. During the initial phase of his administration, Milei removed restrictions on crude and fuel pricing. According to the US Energy Information Administration, Raizen’s Dock Sud oil refinery in Buenos Aires boasts a daily capacity of 101,000 barrels, positioning it as the third-largest facility in Argentina. According to market leader YPF SA, Raizen’s network of approximately 700 gas stations represents 19 percent of the nation’s gasoline and diesel sales. Officials from Mercuria and Raizen opted not to provide any comments.
Mercuria holds oil assets in Argentina via its majority ownership in Phoenix Global Resources, which is currently engaged in drilling within a shale area in Patagonia. Mercuria’s bid for Raizen’s assets exemplifies the trend of commodity-trading houses seeking to acquire oil facilities in order to sustain profitability amid the energy crisis triggered by Russia’s invasion of Ukraine.
Raizen, a collaboration between Shell Plc and Brazilian conglomerate Cosan SA, obtained the assets in 2018 from Shell, which had full ownership, during Argentina’s previous attempt at market-driven reforms. Recently, Raizen has faced challenges due to elevated debt levels following substantial investments in waste-based biofuel plants, which have not yielded expected returns due to weaker demand.