State-owned Rosneft buys up key Yukos production unit

Dec 22, 2004 01:00 AM

Russian state-owned oil company Rosneft has bought the mysterious buyer of Yukos' most important production unit, in a deal that appeared to move the unit one step closer to ownership by state-controlled gas giant Gazprom. Rosneft bought 100 % of shares in the little-known company, BaikalFinansGroup.
With that purchase, the agencies said, Rosneft gets more than three-quarters of the shares in Yukos' Yuganskneftegaz production unit, which BaikalFinansGroup bought at a government auction for $ 9 bn. It was not immediately clear why Rosneft would not receive the entire 100 % of shares in Yuganskneftegaz, which pumps about 11 % of Russia's oil.

Alexander Stepanenko, spokesman for Rosneft, confirmed the deal.
"The owners of BaikalFinans made us an offer to sell their company, and we took it," Stepanenko said. A spokesman for Yukos in Houston said the company will pursue actions against anybody who participates or is involved in the sale.
"Essentially, it doesn't matter to us," spokesman Richard Mintz said. "It is the world's most expensive game of hide-and-seek."
"We are going to sit back and see what develops and take appropriate action after we see what happens," Mintz said.

The deal, if confirmed, moves Gazprom nearer to controlling Yuganskneftegaz and is the latest in a web of legal actions and international manoeuvring by Russia government and the country's energy giants.
In the past several months, the Russian government had announced it would fold Rosneft into the oil assets of Gazprom and form a new company. That company, called Gazpromneft, had been widely expected to purchase Yuganskneftegaz at the auction, which the Russian government arranged to pay off more than $ 28 bn in back taxes it says Yukos owes. But Gazpromneft was stopped just days earlier by an US bankruptcy court injunction in Houston, where Yukos lawyers were seeking Chapter 11 bankruptcy protection.

The virtually unknown company, BaikalFinansGroup, was registered to bid in the auction. It made the winning bid for Yuganskneftegaz. Yukos has said Yuganskneftegaz is worth much more.
"The impact, if any, Rosneft's actions will have on the bankruptcy court proceedings is something we are currently assessing," said Tony Davis, an attorney representing Gazpromneft at the Houston bankruptcy hearings. The hearings were set to resume in January.

If Yuganskneftegaz is folded into a Gazprom-Rosneft structure, it would give Gazprom daily oil production capacity of 1.6 mm barrels, putting it in the pantheon of some of the world's largest international oil companies, according to Washington-based consultancy PFC Energy.
The Russian government's targeting of Yukos and its owners has been seen as a Kremlin-driven effort to seek retribution for former CEO Mikhail Khodorkovsky's funding of opposition parties and complaints of government corruption. President Vladimir Putin has characterized it as a crackdown on corruption and dubious accounting. Khodorkovsky is being tried for fraud and tax evasion, and has been jailed for 14 months.

Robert Ebel, director of the energy program at the Centre for Strategic and International Studies in Washington, said Putin appears to be trying to leverage Russia's vast oil and natural gas resources "to restore Russia as a power among nations."
"Certainly the overall strategy is not only to punish Khodorkovsky," Ebel said. "I think Putin has finally come to realize the power of oil, not only as a means of financial power but that there's political power as well. There's leverage he can use."

Source: Associated Press
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