Global energy trader Vitol Group has set up a new U.S. venture to produce oil and gas called Vencer Energy, the company said on Monday, its first foray into the upstream business in the United States.
Vencer, led by industry veteran Don Dotson, will seek to buy mature, producing oil and gas assets, in key U.S. basins.
The announcement comes at a pivotal moment as the oil price crash and global economic slowdown due to the novel coronavirus laid bare the heavily indebted U.S. shale industry.
Major independent producers like Chesapeake Energy, Whiting Petroleum and California Resources are among those that have filed for bankruptcy, opening up opportunities for new entrants.
“I am looking forward to leveraging my decades of industry experience operating in multiple basins to build a large-scale oil and gas enterprise,” Dotson said in the Vitol statement.
Vitol, which is run out of London, is the world’s biggest independent oil trader, involved in trading 8 million barrels per day (bpd) of crude and refined products. In addition, it has global refining, retail, storage and logistics businesses.
Vitol already has some upstream oil operations, producing about 32,000 barrels of oil equivalent per day, but none in the United States. Its main project is the Sankofa development, offshore Ghana, where it is a partner with Italy’s Eni and Ghana’s state energy firm GNPC.
Trading firms have traditionally tried to remain asset light, preferring to hold small stakes or to enter long-term oil-backed loans whereby they provide cash in return for future physical crude cargoes.
Rivals Gunvor and Glencore both tried upstream with limited success. Gunvor wrote down an asset in 2018 while Glencore has tried to sell its fields in Chad.
Vitol’s move into upstream has not been smooth either. Last year, the trader pulled out of a $1.5 billion deal to buy a stake in two major Nigerian oilfields.