. Last Updated: 07/27/2016

Court Rules Rosneft to Keep Control of Purneftegaz

Russia's Rosneft oil firm won a new lease on life Monday after a Moscow court ruled it could keep its crown-jewel asset, a key Siberian oil producer coveted by a major rival.


An arbitration court said prize producer AO Purneftegaz would stay at Rosneft, ending a high-stakes tussle between Rosneft and the big Sidanko oil company for control over the enterprise.


"The decision is key to Rosneft's survival," said Dan Lubash, managing director of European emerging markets at Merrill Lynch in London.


Rosneft, the state oil holding company that is slowly being privatized, lost most of its assets in recent years when President Boris Yeltsin carved up the formerly government-owned oil industry into vertically integrated, privatized companies.


Monday's ruling could help keep Rosneft -- once Russia's No. 1 producer but now near the bottom of the list -- alive by letting it keep a company sitting on big untapped reserves.


"Purneftegaz is not just a promising producer now -- it has a lot of promising reserves," said Rosneft press director Vladimir Tumarkin. "We consider today's decision an act of legal justice in Russia and a victory for Rosneft."


Attractive Purneftegaz, a West Siberian enterprise that pumped over eight million tons of crude in 1995, has long been the object of a corporate wrangle between Rosneft and Sidanko.


Under Yeltsin's sweeping oil industry restructuring, a 1994 government resolution awarded Purneftegaz to Sidanko (the Siberian-Far Eastern Oil Co.) -- but a 1995 executive order shifted ownership back to Rosneft. Vladimir Vetluzhky, an arbitration court member, said the body had ruled against Sidanko's lawsuit to have the 1995 decision reversed.


Purneftegaz's output accounted for about two-thirds of Rosneft's production of 13 million tons last year.


"Purneftegaz is much more important to Rosneft than it is to Sidanko," said Stephen O'Sullivan, associate director of oil and gas at MC Securities in London.


Spokesmen at Sidanko, one of Russia's top five oil companies in terms of output, were not available for comment.