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. Last Updated: 07/27/2016

Bidders Grow Wary of Rosneft Sale




Two of the three main groups planning bids in the privatization of the state-owned oil company Rosneft distanced themselves from the auction Thursday with remarks that appeared carefully crafted to change the government's plan for the sell-off.


LUKoil said the alliance it has formed with Gazprom and Royal Dutch/Shell may back out of the Rosneft auction if the government approves its current plan for the oil company's privatization.


The group objects to a plan calling for 50 percent plus one share of Rosneft to be sold at a commercial tender with investment conditions because a stake that size wouldn't give the winner enough control over the company, LUKoil said in a statement. Shell issued its own statement Thursday echoing this belief.


And Uneximbank President Vladimir Potanin, whose oil company Sidanko has joined with British Petroleum to plan a bid, told journalists that Uneximbank is more keen on winning an upcoming Svyazinvest auction than it is on winning Rosneft.


"We are calmer with regard to Rosneft," Potanin said at a news conference in Yaroslavl, Interfax reported. The bank's interest in Rosneft will depend on the price of the shares, he added.


Privatization Minister Farit Gazizullin presented a privatization plan Jan. 6 calling for 50 percent plus one share to be sold through a tender and 46.15 percent in a cash auction. The scheme supplanted an earlier plan calling for 75 percent to be sold to one bidder through a tender, a format LUKoil and Shell said was preferable to their consortium.


Both groups have made statements in previous months indicating strong interest in acquiring the last major state-owned oil company.


Thursday's remarks probably don't represent a wholesale change in investors' attitudes toward Rosneft, but are cleverly designed campaigns to force the government to sell Rosneft on more favorable terms to the bidders, analysts said.


"The real purpose of the statement could be not quite related to the reason LUKoil states," said one oil analyst who asked not to be identified. "There must be something else; maybe LUKoil is displeased with the consortium."


LUKoil spokesman Dmitry Dolgov said the consortium is united in its unhappiness with the potential tender format but wouldn't comment on whether there is discord among LUKoil, Gazprom and Shell on other matters.


Andrew Seck, a business analyst with Shell in Moscow, said, "There is no discord among the consortium members."A meeting planned for Monday between Uneximbank's Potanin and LUKoil President Vagit Alekperov has fueled speculation that the two oil companies may be planning a merger, or that LUKoil could switch teams to bid on Rosneft with Sidanko and Uneximbank.


"Maybe the group is disagreeing on how to break up Rosneft," said a second oil analyst who asked not to be identified. Or perhaps the meeting with Potanin "is LUKoil's way of pushing Shell and Gazprom to the wall to get them to agree to one last point," he said.


Why Gazizullin proposed a 50 percent plus one share tender is not clear, although it was not the first time the government has changed its tack in an auction that has been delayed and reformatted several times.


Another Gazizullin idea that has rankled bidders is the proposal that Russia be allowed to keep a "golden share" in Rosneft, allowing it to veto any management proposal it found unacceptable.