Oil Majors Beaten by Unknown In Tender

In a move that raised some eyebrows, a little-known company from the Far East affiliated with No. 2 oil major Yukos won a tender Tuesday to develop Siberia's Talakan oil field.

Sakhaneftegaz, a small oil firm based in the resource-rich republic of Sakha, formerly known as Yakutia, agreed to plow a whopping $1 billion into developing the field and pay a $501 million bonus that will be split 40-60 between federal and regional governments, respectively, according to Interfax.

Talakan has 120 million tons of confirmed oil reserves and 50 billion cubic meters of gas.

Sakhaneftegaz beat out oil majors Surgutneftegaz and Slavneft, as well as Orenburgeologia, which analysts say is backed by Tyumen Oil Co.

Initially, Yukos was one of the contenders, but decided to pull out of the bid at the last minute and forge an alliance with Sakhaneftegaz.

Yukos representative Maxim Puchkov said Tuesday that the company plans to buy a "blocking stake" in Sakhaneftegaz and is committed to financing the project, but declined to disclose the financial details of the deal.

Leonid Mirzoyan, an oil analyst with Deutsche Bank, said he doubts Sakhaneftegaz has the money to pay such a large bonus, so the most likely source of the cash is Yukos.

"The process of paying this [bonus] will be closely watched by Surgut and other rivals," said Mirzoyan. "Sakhaneftegaz has to do it in a transparent manner, otherwise the tender results will be challenged by competitors."

Still, some industry experts said that Sakhaneftegaz's win may not be the final word in the battle for Talakan.

Valery Nesterov, an oil analyst at Troika Dialog, said the $1.5 billion price tag is too high for a field with just 120 million tons of oil.

"That means extraction costs would run between $2.5 to $4.2 per ton [of oil], whereas on average in Russia a ton costs about $1 to produce," he said.

According to Nesterov, Yukos, which doesn't want to be criticized for making an unwise financial decision, may pull out of the agreement. That would send the tender back to the bidding block since Sakhaneftegaz does not have the cash to complete the deal on its own.

Sakhaneftegaz plans to work with other partners to finance the project, Igor Chikareyev, the company's vice president, told Interfax.

Specifically, Russia's state-owned Sberbank will give $600 million, Transneft will contribute $400 million, while diamond giant Alrosa will pitch in between $100 million and $150 million, Interfax quoted Chikareyev as saying.

The partners' respective stakes in the project were not disclosed.

Surgutneftegaz was a close runner-up in the tender, but lost mainly because of its unwillingness to cooperate with partners, analysts said Tuesday.

"This refutes the view that Surgutneftegaz is able to make better use of its $3 billion cash pile than its shareholders, which ostensibly underlies the company's skimpy dividend policy," said Troika Dialog in a morning comment.