The company will include west Siber-ian oil production associations Tyumenneftegaz and Nizhnevartovskneftegaz, the Ryazan refinery in central Russia, research organization Obneftegazgeologia and four oil-products-marketing firms.
The move brings the number of Russian vertically integrated oil companies to 12 but does not complete an ongoing restructuring in the oil industry. The government has put off an announcement about the final reorganization of Russia's oil companies until mid-September, Interfax reported last week.
"The main purpose of the company will be development of the Western Siberia region," said Nikolai Pavlov, vice president of Tyumenneftegaz. Plans to recover lost production at the region's rich Samotlor deposit are a priority, Pavlov said. Samotlor is the biggest oil deposit in Russia and was previously under the supervision of Nizhnevartovsneftegaz, he said.
Tyumenneftegaz's general director will be the new company's president, and the head of Nizhnevartovskneftegaz will be chairman of the board of directors, Pavlov said.
The state will retain a 45 percent stake in the new company for three years, Pavlov said. The administrations of Tyumen, Khanty-Mansiisky and Yamalo-Nenetsky regions will divide a 10 percent stake among themselves, and the remaining 45 percent will go to the subsidiary companies, he added.
"This is a natural process of vertical integration in the oil industry, started by LUKoil in 1991," said Olga Gavrina, manager of the Center for Foreign Investment and Privatization, a private consultancy. "It's important that the newly formed companies are big enough to compete with each other."
In May, Nizhnevartovskneftegaz produced 1,791,500 metric tons of crude and Tyumenneftegaz produced 134,000 metric tons, ranking the Tyumen Oil Co. sixth among the other holding companies. Ryazan's refining capacity is over 100,000 barrels per day.
Pavlov said the Ryazan refinery -- located 100 kilometers south of Moscow -- was integrated with producers 2,000 kilometers east of the capital because the state oil company Rosneft lacked a west Siberian refinery that could be assigned to the new organization.
The refinery stands to gain from its association with a big oil producer like Nizhnevartovskneftegaz, observers said.
"With the kind of cash flow that comes from oil production, it should be easier for Ryazan to make capital improvements and get financing," said a Western oil executive who requested anonymity.
In addition, association with the two producers should bring some guarantee of crude supply, he said. A possible disadvantage for the formerly independent Ryazan could be that oil production concerns could dominate the new conglomerate at the expense of refining.
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