Support The Moscow Times!

Vekselberg's Renova Wants Money-Losing Factory

Billionaire Viktor Vekselberg plans to renovate a money-losing, Soviet-era synthetic oil plant as President Dmitry Medvedev demands that the rich invest in towns left impoverished by dying industries.

Vekselberg's Renova Group is set to bid for the state's stake in the factory at Slantsy, near Prime Minister Vladimir Putin and Medvedev's hometown of St. Petersburg, said Yakov Tesis, Renova's director for the project. The country's 16th-richest man would spend $40 million immediately to get the plant producing oil again, Tesis said.

The country's billionaires doubled in number last year, while unemployment rose as high as 9.4 percent and the economy shrank the most since 1991. Political leaders are pushing the wealthy to invest in what are known as "monocities," where a single company or industry would provide most of the jobs and housing and fund schools. Such struggling towns are home to about 12 percent of the country's 142 million people, according to the Independent Institute for Social Policy.

"Today this asset is loss-making, there are thousands of people there, and entering this project, you take on serious social responsibilities," Tesis said in an interview. "You can't just get out of it."

The government's offer of state assets to private industry will be "hard to refuse" politically, said Natalya Zubarevich, head of regional studies at the Moscow-based institute.

Renova owns 40 percent of the Zavod Slantsy plant, which was built to produce a petroleum-like fuel from shale rock containing oil. Renova has mines near St. Petersburg that contain oil shale and plans to buy the state's 56 percent stake in the factory. The government will auction its share May 31, according to the Federal Property Management Agency's web site.

Putin publicly berated Oleg Deripaska and other business owners in Pikalyovo, a town of 23,000 near St. Petersburg, in June last year for "lack of professionalism and perhaps simply greed" after idled factories and wage arrears sparked protests.

"We are waiting for a true owner of the plant, someone who would worry about solving the plant's problems," said Alexander Khopersky, mayor of Slantsy, which is home to 35,000 people. "It is closely connected with the town's development: its stability, stable jobs, stable salaries."

Russia will spend 27 billion rubles ($880 million) this year to support single-industry towns, Putin said at a government meeting May 20.

While the Zavod Slantsy plant is the only hope for the town's economy, the potential for "innovation and efficiency" sparked Vekselberg's interest, Tesis said. Renova aims to upgrade the plant and produce synthetic fuel that can compete with petroleum, he said.

Shale oil is a cheaper alternative to fuel oil, at about 8,000 rubles ($260) per metric ton, freezes at lower temperatures and contains less sulfur, Tesis said. By 2012, Renova plans to produce 1 million metric tons of shale per year and process that into 140,000 metric tons of shale oil at Slantsy, where production has been suspended since 2004.

Vekselberg, 53, said in April that he would step down as executive director of TNK-BP after Medvedev asked him to lead a new technology center near Moscow.

Inter RAO spokesman Anton Nazarov said the state-run power utility is interested in shale projects. The press office at Rosneft, another potential bidder, declined to comment.

Renova, which bought into Slantsy in 2007, resumed mining, which had been shut in for three years at Leningradskoye, the country's largest shale mine. The deposit holds reserves of as much as 1 billion metric tons.

Unlike U.S. shale projects, Leningradskoye holds no gas reserves, Tesis said.

LUKoil, the country's biggest nonstate oil producer, and Polish, Finnish and Estonian companies have expressed interest in buying the fuel, Tesis said. LUKoil spokesman Dmitry Dolgov declined to comment.

Estonia, the only country that now uses oil shale as a primary energy source, stopped buying Russian shale in 2005, Tesis said. The Nazi army used Estonian shale oil to fuel battle tanks and air bombers during World War II.

During the Soviet era, as much as 9 million tons of shale per year was extracted at Leningradskoye and turned into fuel for ships and boiler houses.

Renova sees the sale of the state's stake in the plant as the first step to reviving the local economy, Tesis said. "Without a private investor in the plant, the town will die, there is nothing else there."

… we have a small favor to ask.

As you may have heard, The Moscow Times, an independent news source for over 30 years, has been unjustly branded as a "foreign agent" by the Russian government. This blatant attempt to silence our voice is a direct assault on the integrity of journalism and the values we hold dear.

We, the journalists of The Moscow Times, refuse to be silenced. Our commitment to providing accurate and unbiased reporting on Russia remains unshaken. But we need your help to continue our critical mission.

Your support, no matter how small, makes a world of difference. If you can, please support us monthly starting from just 2. It's quick to set up, and you can be confident that you're making a significant impact every month by supporting open, independent journalism. Thank you.

Continue

Read more