The nation?€™s No. 1 oil firm, LUKoil, looks close to removing the last obstacle to its plan to take control of northern Russian oil production unit and diamond firm Arkhangelskgeoldobycha, or AGD.
LUKoil already effectively controls AGD through its subsidiary LUKoil-Garant, but hopes to acquire 100 percent of the company?€™s shares.
At the start of the year, LUKoil vice president Leonid Fedun announced that his company intended to buy out the other AGD shareholders. It has persuaded all other shareholders except state oil firm Rosneft to sell.
In exchange for the 25.5 percent stake in AGD, LUKoil offered Rosneft the choice of LUKoil stock or a share in its projects in the north Caspian Sea and Iraq, but Rosneft managers refused to play ball, saying selling its stake would not be in Rosneft?€™s interests.
In April 1998, Rosneft?€™s 25.5 percent stake in AGD was valued at $81 million by the Dresdner Kleinwort Benson bank. However, the shares might fetch as much as $150 to $200 million, Nikoil analyst Gennady Krasovsky said.
Having failed to come to any agreement with Rosneft?€™s management, LUKoil applied directly to its owner ?€” the state.
And it seems it has been successful.
However, after the government announced it is considering auctioning state oil firm Rosneft?€™s 25.5 percent stake in AGD, the way seems clear for LUKoil?€™s plan to consolidate its hold in the oil and gas rich Timan-Pechora province in the far north Komi republic and in the Nenetsk autonomous district in western Siberia.
A State Property Ministry spokesman, who declined to be named, said the question of transferring the AGD shares into federal ownership might be considered at the next meeting of Rosneft?€™s board of directors.
AGD holds licenses for the majority of oil deposits in the Nenetsk autonomous region, the reserves of which exceed 250 million metric tons of oil, as well as for the Verkhotinsk diamond deposit ?€” one of the largest in the northern hemisphere.
LUKoil representatives have a majority on AGD?€™s board of directors, and the general director is a former LUKoil employee.
Rosneft said Wednesday that it is prepared to carry out any instructions from the state, but it still considered that the sale of the AGD stake would be unwise. AGD?€™s shareholders comprise the firm V.A.-Invest, with 57.8 percent, U.S. oil firm Conoco, with 15.7 percent, and Rosneft, with 25.5 percent.
V.A.-Invest was established by LUKoil-Garant, which has a 50.5 percent shareholding and the investment company Interfin, with 49.5 percent.
Interfin?€™s shareholders are natural gas monopoly Gazprom, with 20 percent, Oskolsky EMK, with 20 percent, the British company Middlesex Holdings PLC, with 40 percent and Interfin managers, who hold 20 percent.
LUKoil has already reached an agreement to buy out Conoco and Interfin.
Their representatives confirmed Wednesday that specific provisions of the deal are already being discussed.
"Traditionally we have been interested in the diamond business while LUKoil has been interested in the oil, therefore we can always come to a mutually beneficial agreement," said Valery Dikevich, deputy general director of Interfin.
Since Rosneft is entirely state-owned, the state can dispose of its property as it chooses.
"We are talking about optimizing the mix of Rosneft?€™s holdings. The block in AGD does not give it the ability to control the company, it can only block certain resolutions. At the same time the state could make a tidy sum from its sale," the State Property Ministry spokesman said.
He did not say whether Rosneft would receive any kind of compensation for the transfer and subsequent auction.
The possible loss of the stake in AGD is not the first time Rosneft has faced losing assets. Two years ago, Rosneft narrowly won back control over its major Purneftegaz western Siberian production unit after its controlling stake was sold off for a fraction of its true worth by the unit?€™s management.
Rosneft said Wednesday that it is prepared to carry out any instructions from the state, but it still considered that the sale of the AGD stake would be unwise.
"If our assets are to be sold off bit by bit, then why not start with Purneftegaz straight off? I?€™m sure they?€™d find buyers," said the head of the Rosneft press center Alexander Stepanenko.
He said that after the AGD shares were sold, the state would have little influence in the Timan-Pechora province.
"This is a region, which, in the future, could take care of the nation?€™s energy worries," Stepanenko said.
"Only by holding on to its blocking stake can the government guide the activities of the companies the way it needs.
"Also, the shares will be worth a lot more in several years?€™ time when AGD starts to implement major oil and diamond projects."
LUKoil already effectively controls AGD through its subsidiary LUKoil-Garant, but hopes to acquire 100 percent of the company?€™s shares.
At the start of the year, LUKoil vice president Leonid Fedun announced that his company intended to buy out the other AGD shareholders. It has persuaded all other shareholders except state oil firm Rosneft to sell.
In exchange for the 25.5 percent stake in AGD, LUKoil offered Rosneft the choice of LUKoil stock or a share in its projects in the north Caspian Sea and Iraq, but Rosneft managers refused to play ball, saying selling its stake would not be in Rosneft?€™s interests.
In April 1998, Rosneft?€™s 25.5 percent stake in AGD was valued at $81 million by the Dresdner Kleinwort Benson bank. However, the shares might fetch as much as $150 to $200 million, Nikoil analyst Gennady Krasovsky said.
Having failed to come to any agreement with Rosneft?€™s management, LUKoil applied directly to its owner ?€” the state.
And it seems it has been successful.
However, after the government announced it is considering auctioning state oil firm Rosneft?€™s 25.5 percent stake in AGD, the way seems clear for LUKoil?€™s plan to consolidate its hold in the oil and gas rich Timan-Pechora province in the far north Komi republic and in the Nenetsk autonomous district in western Siberia.
A State Property Ministry spokesman, who declined to be named, said the question of transferring the AGD shares into federal ownership might be considered at the next meeting of Rosneft?€™s board of directors.
AGD holds licenses for the majority of oil deposits in the Nenetsk autonomous region, the reserves of which exceed 250 million metric tons of oil, as well as for the Verkhotinsk diamond deposit ?€” one of the largest in the northern hemisphere.
LUKoil representatives have a majority on AGD?€™s board of directors, and the general director is a former LUKoil employee.
V.A.-Invest was established by LUKoil-Garant, which has a 50.5 percent shareholding and the investment company Interfin, with 49.5 percent.
Interfin?€™s shareholders are natural gas monopoly Gazprom, with 20 percent, Oskolsky EMK, with 20 percent, the British company Middlesex Holdings PLC, with 40 percent and Interfin managers, who hold 20 percent.
LUKoil has already reached an agreement to buy out Conoco and Interfin.
Their representatives confirmed Wednesday that specific provisions of the deal are already being discussed.
"Traditionally we have been interested in the diamond business while LUKoil has been interested in the oil, therefore we can always come to a mutually beneficial agreement," said Valery Dikevich, deputy general director of Interfin.
Since Rosneft is entirely state-owned, the state can dispose of its property as it chooses.
"We are talking about optimizing the mix of Rosneft?€™s holdings. The block in AGD does not give it the ability to control the company, it can only block certain resolutions. At the same time the state could make a tidy sum from its sale," the State Property Ministry spokesman said.
He did not say whether Rosneft would receive any kind of compensation for the transfer and subsequent auction.
The possible loss of the stake in AGD is not the first time Rosneft has faced losing assets. Two years ago, Rosneft narrowly won back control over its major Purneftegaz western Siberian production unit after its controlling stake was sold off for a fraction of its true worth by the unit?€™s management.
Rosneft said Wednesday that it is prepared to carry out any instructions from the state, but it still considered that the sale of the AGD stake would be unwise.
"If our assets are to be sold off bit by bit, then why not start with Purneftegaz straight off? I?€™m sure they?€™d find buyers," said the head of the Rosneft press center Alexander Stepanenko.
He said that after the AGD shares were sold, the state would have little influence in the Timan-Pechora province.
"This is a region, which, in the future, could take care of the nation?€™s energy worries," Stepanenko said.
"Only by holding on to its blocking stake can the government guide the activities of the companies the way it needs.
"Also, the shares will be worth a lot more in several years?€™ time when AGD starts to implement major oil and diamond projects."
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