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. Last Updated: 07/27/2016

State Vetoes Shafranik Oil Merger

Russia's former fuel and energy minister, Yury Shafranik, tried but failed to create a gigantic oil corporation by merging four privatized companies, energy sources familiar with the ill-fated proposal said Thursday.


Had Shafranik succeeded, he would have created Russia's largest oil producer, a super company of units that collectively produced more than 89 million tons in 1995 -- far more than current leader LUKoil, which produced more than 57 million tons last year.


"Shafranik had this idea and was excited about it for a while, but then it ran into big problems with government acceptance," said one source who asked not be identified.


They said Shafranik's proposal, first aired over the summer, would have merged four oil producers: Tyumen Oil Co.; Orenburg Oil Co., or ONAKO; Eastern Oil Co. and Slavneft.


The sources did not say who in the government had rejected Shafranik's initial proposal.


They said Shafranik, in search of a consolation prize, now is trying to create a financial-industrial group uniting some of the firms he wanted to merge with second-tier players.


The mega-company, had it been created, would have accounted for nearly one-third of Russia's total 1995 oil output of about 305 million tons. Russia is the world's third largest oil producer.


Shafranik had hinted at a news conference in July, when he was still energy minister, that four companies would merge, but refused to say which ones.


"Somebody will be against it, very against it, because this will be a powerful competitor," he said.


Fuel and Energy Minister Pyotr Rodionov and ministry officials have declined to comment on the scheme.


"Why don't you ask Shafranik?" Rodionov said Thursday after a cabinet meeting when asked about the failed merger.


Shafranik joined Tyumen Oil after leaving the ministry in August. The company is based in Siberia's oil-rich Tyumen region, where Shafranik was administration head before taking his ministry post in 1993.


?Russia's leading oil company, LUKoil, on Wednesday signed a wide-ranging cooperation deal Wednesday with the Kaliningrad enclave on the Baltic Sea to develop oil projects for regional and export markets.


LUKoil President Vagit Alekperov said the agreement covered oil production, sales of crude oil and oil products in the area, crude oil sales in Western markets and offshore oil equipment production