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. Last Updated: 07/27/2016

Sidanko Lets Rosneft Hold On to Purneftegaz

Rosneft and Sidanko have signed a settlement allowing Rosneft to retain ownership of disputed oil company Purneftegaz, putting to rest a two-year court battle for possession of the production unit, Rosneft managers said Wednesday.


The agreement ensures Rosneft will be privatized with Purneftegaz, which provided 60 percent of Rosneft's crude oil last year.


Sidanko and Rosneft have gone to court eight times since 1995 over ownership rights to Purneftegaz.


What Sidanko and its controlling shareholder, Uneximbank, have received in exchange for the settlement is unclear.


"Our compromise only was that we understand the conditions of the agreement and won't pursue further lawsuits," said Valery Arefyev, head of Rosneft's legal department.


Rosneft president Yury Bespalov said Sidanko gets "nothing" in exchange for giving up Purneftegaz because the company rightfully belongs to Rosneft.


Sidanko spokeswoman Olga Sergeyeva maintained Wednesday that Sidanko and Uneximbank forfeited Purneftegaz to enable the government to raise the maximum amount of money from the Rosneft sale.


Analysts have speculated that Uneximbank, which has announced its intent to participate in the Rosneft auction, could get favorable treatment in exchange for giving up its claim to Purneftegaz.


Oil major Exxon and several Russian banks are among the companies that have approached Rosneft for more information about the upcoming privatization, Bespalov said.


Bespalov added that he is not certain which companies will participate in the sale.


Bespalov repeated earlier statements by the company that the privatization of Rosneft most likely won't begin until the second quarter of next year.


Two oil privatization sales set to take place before the end of the year for Tyumen Oil Co. and Eastern Oil Co. could tie up the financial resources of parties likely to bid on Rosneft, Bespalov said.


The privatization plan does not as yet place any limits on foreign participation.


Bespalov said the company would like to partner with "whoever pays the most," whether a Russian or a foreign investor.


Russia's State Property Committee last month approved a plan calling for 63 percent of Rosneft to be sold through cash auctions and 33 percent through a commercial tender with investment conditions, with the remaining 4 percent to be given to Rosneft employees.


The property committee said the sale would be carried out between the fourth quarter of this year and the second quarter of next.


Bespalov said Rosneft is considering issuing some form of debt in 1998, possibly Eurobonds or veksels. But any decision on the debt issue will depend on the company's future owners, he said.