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KazMunaiGaz snaps up Rompetrol

KAZAKHSTAN'S state-owned oil and gas company, KazMunaiGaz (KMG), has bought Romanian oil company Rompetrol, furthering its international ambitions. The August deal, estimated to be worth $2.7bn, doubles the refining capacity of KMG and gives it access to 630 filling stations in seven European countries – from Georgia to France. Netherlands-based Rompetrol Group is the majority shareholder of Rompetrol Rafinare, which holds a majority stake of the Petromidia refinery – in an advantageous strategic location on the Black Sea Coast – and the smaller Vega refinery, in southern Romania, with a combined capacity of 110,000 barrels a day.

KMG will pay €1.96bn to Rompetrol's two owners, local tycoon Dinu Patriciu and US businessman Philip Stevenson, who held 75% and 25%, respectively. By comparison, Romania sold a 51% stake in Petrom, at the time an oil company much bigger than Rompetrol, to Austria's OMV in December 2005 for €1.5bn. Petrom is still Romania's biggest refiner, followed by Rompetrol.

The deal represents a remarkable comeback for Rompetrol, which was acquired by Patriciu in 2000 for just $50.5m, as it teetered on the edge of bankruptcy. The government was even close to shutting down the Petromidia refinery in the mid-1990s on advice from the World Bank. The government had tried to sell the refinery several times to save it from closure, but each time the deal fell through in the final stages.

Typically for this part of the world, the deal leaves many questions unanswered. Why, for example, did Patriciu sell a majority stake when just earlier this year he said he would sell only a minority stake in Rompetrol? Gazprom Neft, at that stage, had been tipped as the buyer of a minority share. Analysts say the answer lies perhaps in Patriciu's legal problems, which began in 2005 when he was indicted on seven different counts, ranging from the misappropriation of funds and money laundering to embezzlement, tax evasion and fraud, during the privatisation of Rompetrol.

The timing of the deal's announcement was also botched, as the company left a large gap between striking the deal and informing the stock exchange, creating an opportunity for people with inside knowledge to trade the shares in the listed Rompetrol subsidiaries. Romania's National Securities Commission has launched an investigation into the suspicious trading of the shares ahead of the announcement.

The sniff of corruption will irritate the European Commission, which is already taking Romania to task for its weak efforts to stamp out graft. However, more pleasing for the European Union will be that Rompetrol remains out of Russian hands.

Patriciu said nine oil companies and investment funds originally entered the private bidding process, which was organised by Morgan Stanley, an investment bank. Patriciu claimed to have received better offers from some of the investment funds. But he also said he was "not interested in providing Rompetrol with liquid money but liquid oil" and that he wanted to build the company "as an alternative to Russia's Gazprom". That suggests Russian organisations were behind some of the investment funds.

While the deal does indeed keep Rompetrol out of Russian hands, analysts point out that to eliminate Russian influence, oil export routes from Kazakhstan to Romania would also need to avoid Russia. For now, that seems a far-from-certain prospect: KMG depends on Russian transit for most of its oil and gas exports and, for the time being, it can deliver the oil to Romania only through Russia's Black Sea port of Novorossiysk.

On 5 September, President Traian Basescu said Kazakhstani oil should be delivered to Romania through Georgia, to which KMG has access across the Caspian Sea and through Azerbaijan. Basescu will discuss the issue with Kazakhstan's President Nursultan Nazarbayev, who is expected to visit Romania in November for a summit. n

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