Sale of Slavneft stake spells out evolution of Russian oil market

The recent partial privatisation of the integrated oil company Slavneft has been conducted and executed in a fairly low-profile and undramatic manner. A stake in Slavneft was acquired by a group of shareholders in Tyumenneft (TNK), namely Novy Holding, Novy Prioriteka (which recently acquired the 49.1 % held by the Russian state) and Novy Petroleum.
All of these are closely allied with Access/Renova, one of TNK's main shareholders. However, even though the sale was only partial, the disposal of shares in the Russian-Belarussian company is a highly significant development for various reasons.

First, the sale may rule out any prospect of unifying Slavneft with other Russian state players ahead of any privatisation. Market speculation had been flying around for months that the company would be merged with Rosneft and Onako to form a Russian national oil company.
Following this process, the company would then be offered on the market as a giant enterprise. However, market opinion that this will happen is now likely to subside. There would be no logic in selling some of Slavneft to TNK and then merging the rest with Rosneft and Onako.
Also, the sale of stock to TNK affiliates brings Slavneft (and Belarus) closer into Russian economic and political influence. This process has arguably been going on for some time, but the corporate sector carries more than its fair share of weight in these affairs. No details of where TNK affiliates bought their shares has been disclosed, but it would appear likely that the Russian government sold some of its holding to TNK affiliates.

TNK has of course emerged as a highly acquisitive player in the Russian market and elsewhere. Its strategy of growth through take-over has of course brought the former Sidanko subsidiary Kondpetroleum under its control and has linked the company with various other enterprises including the LINOS refinery in Lysychansk, Ukraine, and now Slavneft. TNK's CEO Semyon Kukes mentioned his company's interest in the Russian-Belarussian company last year. At the same time, TNK's shareholders have also acquired a stake in Megionneftegaz, Slavneft's main production unit.
Slavneft is an interesting partner for TNK. The company's production interests complement those of TNK, and as a large-scale refiner dominating the Belarussian market, Slavneft would give TNK many new angles of opportunity. In addition, Slavneft's somewhat under-developed market image can benefit from association with TNK.

Regarding other state-controlled companies, Yukos has taken a significant stake in Onako, an Orenburg-based integrated concern. These two also fit together logically given their southern concentration. So if TNK is ultimately destined to acquire a majority stake in Slavneft, and if Onako may be similarly destined to become a subsidiary of Yukos, this leaves one fairly critical question -- namely, that of what will become of Rosneft.
Officials reported recently that interest among foreign investors in the three remaining Russianstate-controlled companies was strong. Since subsequent developments at Slavneft and Onako do not involve foreign investors, it may be that Russia is considering selling a stake in Rosneft, now 100 % state-owned, to a non-Russian company.

No great surprise there, but how about a majority stake? Politically, the move could be a gamble from the point of view of internal reactions, but then again, the company is only one of several integrated companies.
In addition, from a commercial perspective, the move would be a master stroke and would send a message to the International Monetary Fund (IMF), European Bank for Reconstruction and Development (EBRD) and everyone else that confidence in Russian industry and investment prospects has not only returned to pre-crash levels but surpassed them. And, although now resolving itself, how better to erase the market's memory of how BP-Amoco regarded its decision to buy into Sidanko?
Rosneft could be in line to assume control of certain pipeline assets from Transneft and hence, a company with existing production interests in Russia might get some mileage out of closer cooperation with the evolving Russian firm.
Conoco may regard the possibility as promising, given its interest in Polar Lights and the Northern transportation issue -- and its statement that it would be interested in investing still more in Russia. Exxon, which through its presence in Timan-Pechora has a keen interest in the transport situation in Northern Russia, could be another candidate.