. "Mr. Alekperov, we are sincere. If you agree, we can directly purchase sufficient production from you at a fixed price..."
Duane Hurst, CEO of British Fortune (BFT), said to the Russian in front of him.
He was currently at the headquarters of Lukoil in Moscow, Russia. The Russian in front of him, Vagit Alekperov, was the President and CEO of Lukoil, Russia's largest oil company.
"If it's true as you say, this would involve nearly half of our annual production, so we need to verify its feasibility."
Upon hearing Wadgit's words, Duane Hurst smiled and said,
"This is a rare opportunity, sir. You should know that while international oil prices have been climbing, oil-producing countries around the world are also ramping up production. Therefore, no one knows when the critical point of a price drop will come. However, this order allows you to lock in the profits of high oil prices without any risk."
This time in Russia, as the head of the BFT Fund, Duane Hurst's mission was to negotiate with Russian oil companies and sign a long-term, large-scale purchase agreement.
His first stop was Lukoil, Russia's largest oil company and currently ranked among the top ten globally.
Duane's words also excited Wadgit Alekperov. As he said, no one can predict the future trend of oil prices. Currently, international oil prices have reached $90 per barrel. Perhaps by next year, prices will rise even higher, breaking through $100, an unprecedented level?
But it's also possible that international oil prices will peak and then begin to fall rapidly...
Who knows?
The other party is offering a massive $20 billion order, backed by sufficient funds. If they can secure this contract, Lukoil will be able to secure lucrative profits even at the already high oil prices.
Currently, Lukoil's annual production is only over 70 million tons, and a $20 billion order represents nearly half of their production!
However, out of caution, Vagit Alekperov still needs to discuss this with the board of directors. Even if they decide to sign the agreement, their existing customer orders will need to be adjusted and coordinated.
Vagit understands that if they increase production, they might still be able to secure the order...
but is such a gamble worth taking?
It doesn't seem like the risk is too great...
Of course, Lukoil isn't Duan's only target; other major oil companies, including Rosneft, are also Duan's next targets.
Since November, BFT Fund CEO Duan has been traveling the globe, from Russia to Indonesia to Africa, signing crude oil purchase agreements with eight major oil companies. The agreements stipulate that, starting in March of next year and continuing until September, they will purchase crude oil from these companies at a fixed price of $90 per barrel, totaling $60 billion.
The agreements are very specific, including the required monthly delivery volume and transportation methods.
The penalty for breach of contract is set at 20%.
To convince the parties to agree to the deal, BFT Fund will deposit 50% of the transaction proceeds, or $30 billion, as collateral into the oil companies' designated bank accounts.
Does Barron really intend to purchase so much spot crude oil?
Of course not—at least initially, his investments in refining and petrochemical projects, including Colo and Huaxia, will undoubtedly consume a certain amount of spot crude oil.
But when oil prices continue to rise, especially by July next year, when crude oil prices rise to an all-time high of nearly $150 per barrel, no oil company will be foolish enough to continue to implement this agreement. They would rather pay a 20% penalty and sell their crude oil at a higher price. Therefore, there's no need to wait until July of next year. By mid-March, once crude oil prices reach $108 per barrel—a 20% increase from the $90 per barrel contract price—then these oil companies will likely begin considering whether to default...
So, with the BFT Fund's $55 billion in funds, in addition to the gold purchases, the remaining $30 billion is anchored in orders worth $60 billion. Even if it defaults on some of them, it could still net $10 billion in liquidated damages...
Of course, if the other party prefers to deliver the crude oil even if it doesn't default...
that's also a good idea. Reselling most of these orders to major energy importers like China, Japan, and South Korea would yield a much higher profit margin.
Regardless, the BFT Fund will profit.
And most importantly, it won't prevent the BFT Fund from picking up bargains after the subprime mortgage crisis...
In
early November, Citigroup, JPMorgan Chase, and Bank of America announced the formation of a $75 billion reserve fund to support SIVs (Structured Investment Vehicles).
According to Barron's, Citigroup is currently facing a liquidity crisis within its $100 billion SIVs.
On November 26th, HSBC announced a $35 billion rescue of two of its SIVs.
Citigroup's stock price plummeted another 6% that day, closing at $29.80, a five-year low.
Statistics show that Citigroup's stock price has fallen 46% so far this year, wiping out $129 billion in market capitalization.
Also that day, Citigroup officially announced that the Abu Dhabi Investment Authority (ADIA), the UAE's sovereign wealth fund, would invest $7.5 billion for a 4.9% stake in the group.
This capital injection will bring the group's capital adequacy ratio back to its target by the first half of next year.
The announcement stated that Citigroup would sell equity units convertible into common stock to ADIA. ADIA, in turn, agreed to hold no more than 4.9% of Citigroup's total common stock and would not enjoy any privileges in Citigroup's management, ownership, or corporate control.
Furthermore, the Abu Dhabi Investment Authority (ADIA) was not authorized to appoint directors to Citigroup's board of directors.
While the shares purchased by the Abu Dhabi Investment Authority represented less than 5% of Citigroup's total share capital, they were sufficient to surpass the stake held by Saudi Prince Alwaleed bin Salman, currently the largest individual shareholder.
Barron had returned to Lanai by then, and they would soon conclude their vacation there and travel to Australia.
He also knew that now was not the best time to invest in American banking—everything was just beginning.