Gazprom, Rosneft to finalize merger in January

Paula Dittrick
Senior Staff Writer

HOUSTON, Dec. 30 -- The merger of OAO Gazprom and OAO Rosneft is expected to be finalized early in 2005, and the assets of OAO Yukos unit Yuganskneftegas will not be involved in the initial consolidation as was earlier reported, a Russian official said.

Russian Industry and Energy Minister Viktor Khristenko posted a commentary on the ministry's web site Dec. 30 following news reports that the merger would be delayed. Kristenko also suggested that a Chinese company might buy into Yuganskneftegas, but one analyst told OGJ that he doubted it.

Khristenko's comments came after Russian Economic Development and Trade Minister German Gref told reporters that the Gazprom-Rosneft merger would be temporarily delayed (OGJ Online, Dec. 29, 2004).

"The consolidation of Gazprom and Rosneft assets is proceeding in a planned fashion and will be completed in January 2005 in accordance with the decisions made," Khristenko said. "Yuganskneftegas will not be among the assets being consolidated."

Khristenko's comment echoed that of Dmitry Medvedev, Gazprom chairman, regarding the Yuganskneftegas assets.

In September, Rosneft announced that it would become a Gazprom subsidiary. Following a swap of Gazprom and Rosneft stock, the state's stake in Gazprom is slated to increase to 50% from the current 39% stake, analysts have said.

Khristenko said Dec. 30 that the state, as the majority Gazprom shareholder, has no intention of increasing its direct participation above the controlling stake.

"Yuganskneftegas assets will be set aside and handed to a separate company 100% owned by the state," Khristenko said. "Up to 20% of this company's shares may be offered to China National Petroleum Corp."

CNPC had made no immediate comment regarding Khristenko's statement.

Yukos, Russia's key oil supplier to China, still has remaining oil units from which Russian Railways officials have said that they expect Yukos will continue supplying oil to China.

Oil traders meanwhile have expressed concerns about Russia's oil exports given the Yukos controversy.

Last week, Rosneft announced that it is buying 100% of Baikal Finance Group, giving Rosneft control of Yuganskneftegas. BFG bought Yuganskneftegas at a Dec. 19 auction conducted by the Russian government (OGJ Online, Dec. 23, 2004).

BFG bought 77% of Yuganskneftegas for $9.37 billion. No Western companies were involved in the bidding, and Gazprom also did not submit a bid. Rosneft has not said how much it paid for BFG, whose only asset is Yuganskneftegas.

Yukos faces billions of dollars in delinquent tax claims. The company's problems began with the Oct. 25, 2003, arrest of Mikhail Khodorkovsky, its former chief executive, on fraud and tax evasion charges.

Once Russia's most aggressive oil company, Yukos filed a voluntary petition for reorganization on Dec. 14 in the US Bankruptcy Court for the Southern District of Texas, Houston Division (OGJ Online, Dec. 15, 2004). The next bankruptcy court hearing is slated Jan. 6.

Michael Lelyveld, senior advisor to PFC Energy, said it was "hard to believe" that CNPC would get involved. "I can't imagine that CNPC wants to be vulnerable to a lawsuit," he said, referring to earlier comments from Yukos that it will sue anybody having anything to do with the attempted transfer of its shares out of Yuganskneftegas.

Lelyveld noted that CNPC can afford to invest in Russia, but it also will want to avoid a worldwide controversy and international lawsuits.

"CNPC would love to get involved in Russian oil, but I think it wants to get involved in uncomplicated Russian oil," Lelyveld said. "CNPC would love to get a foot in the door in Russia."

Meanwhile, Russia "made a big show of not being concerned about the legal implications of a ruling in the US court. Russia said the court had no jurisdiction, but Russian officials have gone to great lengths to avoid any possible negative consequences of the ruling," Lelyveld said. "They tried to structure this so that Rosneft would be out of reach as the buyer. It's not clear to me that Rosneft is out of reach."

OPEC News Agency reported Dec. 30 that Russia's crude oil output for 2004 is expected to total 9.3 million b/d, up 9.2% from 2003. The Russian government estimates the country's oil output will grow to 11.2 million b/d by 2015, OPECNA said.

"Preliminary government estimates suggest that in order to achieve this goal, up to $140 billion will need to be invested in Russia's oil sector from 2005 to 2015," OPECNA said.

In related news, the Associated Press said Gazprom bought a 49.95% interest in a joint venture to develop fields in the Barents and Pechora seas from Rosneft. Gazprom also bought a 50% interest from a Rosneft subsidiary in a joint venture to develop Shtokman gas and condensate field in the Barents Sea and Prirazlomnoye oil field in Pechora Sea, AP reported.

Gazprom did not disclose financial terms. The Kommersant newspaper reported Rosneft was to receive $1.7 billion by selling its stakes in those properties.

Rosneft reportedly is in the process of arranging the financing with which to pay for BFG.

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