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. Last Updated: 07/27/2016

Rosneft Wins Final Purneftegaz Case




Rosneft's lawyers won the fourth and final court case Wednesday in the battle over a controlling interest in Purneftegaz, a production subsidiary that was mysteriously sold off in mid-September to four unknown companies for a price tens of times beneath the asset's real value.


The Moscow Arbitration Court overturned European-Siberian Oil Co.'s acquisition of a 9.5 percent stake in Purneftegaz, completing a series of similar decisions against each of the buyers. Now the entire controlling stake in Purneftegaz, 38 percent of all stock and 51 percent of common shares, is ready to be returned to Rosneft.


The court also demanded that the bank that sold the shares, Dialog-Optim, return the buyers their money. The $10 million they paid, which was supposed to cover outstanding claims against Rosneft, is now frozen in an account with the Bank of Moscow.


Elated with the victory, Rosneft management has made a play for control of Russia's oil pipeline monopoly Transneft. But the Purneftegaz buyers and analysts said the state oil company's troubles are far from over.


The buyers said they are not going to give in without a fight. A series of appeals is being prepared, according to a source in International Economic Cooperation, an oil trader that is closely linked to the four companies.


"There will be four appeals in higher courts," the source said. "After that, four more appeals to a different branch of the judicial system will also be submitted."


A final denouement to the ownership standoff is a minimum of 2 to 3 months away, the source said.


A source close to PAKK-Invest, one of the four buyers, was optimistic that the tide could change in favor of the new shareholders now that the case would be heard both in a higher court and in an altogether different court.


Rosneft President Sergei Bogdanchikov, however, may have reasons to believe he is on a lucky streak.


He recently scored a victory by staving off bankruptcy proceedings against Purneftegaz in the Yamal-Nenets District, the West Siberian region where the company is located. Creditors agreed Dec. 1 to prolong an external oversight committee at the company for 2 months.


Besides, on Tuesday four government-owned oil companies - Rosneft, Slavneft, Onako and Zarubezhneft - signed a memorandum expressing their intention to proceed with a merger that would create a single integrated oil producer that would be the fourth largest in the country. Rosneft is the largest of the signatory company and would play a leading role in the holding.


The four firms now want Transneft to become an integral part of the expanded state company, a Rosneft spokesman said Wednesday.


Analysts, however, scoffed at the idea, and a source in Transneft said that including a monopoly pipeline into any company - whether state-owned or private - made little sense in terms of long-term development of the industry.


"This is just a wild idea," said Marina Dracheva, an analyst with the Energy Intelligence Group. "There is no way that Transneft can be incorporated into that company."


She said that merging Transneft with any oil producer would automatically place that producer in a position of unfair advantage over its competitors.


Generally, however, Transneft management supports the idea of creating a larger, stronger state oil company among oil producers.


"We understand the difficult position of the industry," Transneft president Dmitry Savelyev said in a telephone interview. "In current conditions, it will be difficult to survive without a merger."


The Transneft president said it would make more sense to merge the state oil companies together rather than to let them merge with private companies like LUKoil and Yukos, which are actively lobbying for such a takeover.