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Russia: Minnow turns major

INDEPENDENT Russneft has bought a 49% stake in Transpetrol, the Slovakian oil-pipeline operator, from Yukos. The $106m deal follows a string of acquisitions by the country's fastest-growing integrated oil company.

Independents do not usually thrive in Russia, if they survive at all. But Russneft has amassed an estimated 0.63bn tonnes of reserves since bursting onto the oil scene three years ago. Production has risen rapidly, to 17m tonnes in 2005 from 8m tonnes in 2004 and under 5m tonnes in 2003. If this year's 25m tonnes output target is fulfilled, Russneft will overtake Yukos to become the country's seventh-biggest producer.

Transpetrol operates the Slovakian extension of Russia's Druzhba oil-export system, which feeds crude to Europe. Russneft hopes its stake in the Slovakian transit route will compliment plans to enter a long-term contract to supply crude to central European refineries owned by Hungary's Mol. Yukos bought its stake in Transpetrol in 2002 for $74m. Proceeds from the sale of the pipeline company to Russneft will be gobbled up by the federal tax service, which has collected over $20bn of allegedly dodged payments from the oil major in the past 18 months. Yukos was Russia's biggest oil producer in 2004, but crippling tax claims have forced the firm into a production decline even speedier than Russneft's ascent (see p16).

Russneft has already replaced Yukos as Mol's Russian partner in western Siberia. The company bought Yukos' 50% share in a venture tapping the 20m tonne West Malobalyk field last year. And Yukos' stake in the Geoilbent production venture, in western Siberia, was also acquired by Russneft in 2005.

Not all Russneft's gains have been at Yukos' expense. Russia's big oil corporations used to pounce on any asset that moved. But recently they have begun divesting their smaller properties. Russneft's plan is to beat a path into the big league by consolidating the scraps cast off by the country's majors. In December, Russneft bought Saratovneftegaz from TNK-BP. Saratovneftegaz produces 2m tonnes of oil equivalent at fields in European Russia. TNK-BP also sold Russneft a network of gasoline stations controlled by retailer Orenburgnefteproduct and Orsknefteorgsintez, the owner of a 6.8m t/y refinery in Siberia. Russneft is looking for more assets. Rosneft's plan to sell Dagneft, a minor producer, should provide an opportunity. Russneft also wants to expand beyond Russia into the CIS and the Central Asia.

Russneft's meteoric rise, like Yukos' fall, could not have happened without some measure of political support. The company's acquisition of Transpetrol was promoted by the Russian government. German Gref, the minister of economy, sent a letter to the Slovakian government approving Russneft's participation in bidding for the company.

Mikhail Gutsereyev, Russneft's founder, is a prominent figure in the Russian oil industry. But his relations with the authorities have not always been cordial. In 2002, Gutsereyev lost his job as president of Slavneft when the prime minister complained that the then state-controlled company was badly run. But Gutsereyev is not a quitter. Shortly after his dismissal, the former Slavneft chief mounted an armed siege of the company's swish Moscow headquarters. Troops from the Ministry of Interior eventually dispersed the invaders. Gutsereyev bounced back to found Russneft. Exactly who owns the independent has not been disclosed, which may complicate the company's plans to list on a foreign stock exchange.

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