Mercuria is close to buying Raizen assets in Argentina

Energy-trading firm Mercuria Energy Group is close to acquiring a refinery and hundreds of gas stations in Argentina being sold by Raizen SA, according to people familiar with the matter.

A deal could be worth more than US$1 billion, some of the people said, asking not to be named because negotiations are private. Bloomberg reported in November that Mercuria was among the finalists in the bidding for the assets.

No contract is signed yet and a transaction might not happen. Active negotiations are still ongoing, the people said. 

Raizen, Brazil’s largest producer of ethanol fuel from sugarcane, is divesting assets amid concerns about its mounting debt. The company’s credit rating was cut deeply into junk by Fitch Ratings and S&P Global Ratings, which cited a growing cash crunch, fueling a sell-off in its bonds that’s cut the prices nearly in half over the past week.

Mercuria is looking to build its presence in the refining industry amid expectations that President Javier Milei will accelerate his deregulation efforts. In the first half of his tenure, Milei eliminated controls on crude and fuel prices. 

Raizen’s Dock Sud oil refinery in Buenos Aires has a daily capacity of 101,000 barrels, making it the third-biggest facility in Argentina, according to the US Energy Information Administration.

Raizen’s network of about 700 gas stations accounts for 19 percent of the country’s gasoline and diesel sales, according to market leader YPF SA.

Representatives for Mercuria and Raizen declined to comment. 

Mercuria has oil assets in Argentina through its majority stake in Phoenix Global Resources, which is drilling in a shale patch in Patagonia. 

Mercuria bidding for Raizen’s assets is the latest example of commodity-trading houses looking to snap up oil facilities to maintain profits from the energy crisis that followed Russia’s invasion of Ukraine.

Raizen, a joint venture of Shell Plc and Brazilian conglomerate Cosan SA, acquired the assets in 2018 from Shell, which owned them outright, during Argentina’s last experiment with market-led reforms.

More recently, Raizen has been rattled by high debt after making big investments in waste-based biofuel plants that haven’t paid off because of softer-than-expected demand.