July 24, 2018 / 2:20 PM / 5 months ago

Algeria in talks with oil firms to set up trading venture

* Sonatrach in talks with BP, Shell, Vitol and others

* Oil price drop after 2014, rising fuel bill behind move

* Boston Consulting Group advising on strategy - sources

By Ron Bousso, Julia Payne and Lamine Chikhi

LONDON/ALGIERS, July 24 (Reuters) - Sonatrach is in talks with oil majors and trading firms to start a trading joint venture after the Algerian state energy company reached a deal this year to buy its first overseas refinery, its chief executive told Reuters.

A decision on forming the venture had been expected at the end of July but could be delayed by a month, two sources said.

"The foreign firm will have small shares in the trade joint venture," Sonatrach CEO Abdelmoumen Ould Kaddour told Reuters in Algiers.

Potential partners, which have held talks with Sonatrach in recent weeks, include BP, Total, Royal Dutch Shell, Chevron, Repsol and Vitol , the world's biggest independent oil trader, the sources said.

Vitol, BP and Shell declined to comment. Total, Chevron and Repsol did not immediately respond to requests for comment.

Sonatrach's expansion into refining and trading reflects a shift among national oil companies that for decades focussed on producing oil and gas, while leaving marketing to third parties.

Sonatrach's move to form a venture is one of several steps aimed at easing the burden of its hefty fuel import bill that tripled year-on-year in 2017 to a record $2.5 billion.

It signed a contract this year with Vitol to receive products in exchange for crude, the first such deal in decades, and said in May it had agreed to buy ExxonMobil's 175,000 barrel-per-day (bpd) Augusta refinery in Sicily, Italy.

One of the aims of Sonatrach's new venture would be to supply crude to the Italian refinery and help manage the sale of oil products such as gasoline, diesel and jet fuel to Algeria and other markets, the sources said.

NEW DEALS

Traders said the refinery mainly processes sour crude grades now and would need adjustment to take light, sweet oil from Algeria, a member of the Organization of the Petroleum Exporting Countries that produces a little more than 1 million bpd.

Boston Consulting Group was advising Sonatrach on its long-term strategy, the sources said.

A spokeswoman for BCG declined to comment.

Since Kaddour's appointment in 2017, the CEO has sought to resolve disputes with foreign oil firms, such as a deal reached in February with Italy's Saipem to end a row over four gas projects.

He has also worked to cut new commercial deals, such as signing an agreement to build a petrochemical plant with Total and working on plans with ExxonMobil for possible shale oil production in Algeria.

Other Middle East producers have already sought to build up trading divisions to boost income after oil prices plunged, from above $100 a barrel in 2014 to below $30 in 2016. Benchmark Brent futures are now trading at about $73 a barrel.

Saudi Aramco's trading arm announced that it was expanding business into non-Saudi crudes and would open European and Asian offices.

Iraq's state oil firm started a venture with the trading arm of Russia's Lukoil last year and Abu Dhabi's ADNOC said in April it was setting up a trading arm.

Kuwait Petroleum Corp (IPO-KUWP.KW), another state-owned firm, has also studied setting up a trading venture.

Additional reporting by Ahmad Ghaddar and Shadia Nasralla in London Editing by Edmund Blair

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