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. Last Updated: 07/27/2016

Rosneft Price Deters Oil Companies




The head of the oil major Yuksi said his company may not bid in the privatization sale of Rosneft because the starting price is $800 million too high, while two other potential bidders, LUKoil and Gazprom, say they are still mulling over the price tag.


Depressed world oil prices have made Rosneft a less attractive property given the $2.1 billion that the Russian government is asking, Yuksi President Mikhail Khodorkovsky said in a Saturday statement.


"We think that in the situation of the collapse in world prices, to participate under the conditions that have been proposed is not prudent," Khodorkovsky said.


Russia began accepting bids March 25 in the auction of a 75 percent-plus-one-share stake in Rosneft. In addition to the $2.1 billion price tag, the tender requires $400 million in investments.


But in the wake of collapsing world oil prices, some of the bidders previously keen to win Russia's last state-owned oil giant say they are reconsidering the contest.


Another of the competitors that has stated its interest in bidding -- a consortium comprised of LUKoil, Gazprom and Shell -- has not yet submitted a bid, a LUKoil spokesman said.


"In the next two weeks, we will form our position," the spokesman said of the consortium. "The price is high. That is why the question is being decided now."


Gazprom on Monday echoed this noncommittal stance. Andrei Vavilov, adviser to Gazprom's chairman on financial issues, told reporters that the drop in world oil and gas prices significantly influences potential Rosneft bidders, saying Gazprom may take part in the auction, Interfax reported.


A spokesman for Uneximbank, which is considering a bid with strategic partner British Petroleum, said he could not comment on whether the duo has submitted an offer.


Rosneft bids will be accepted through May 26, giving potential investors some breathing room to consider their offers.


In an effort to conduct a fair Rosneft auction, the Russian government hired investment bank Dresdner Kleinwort Benson to evaluate the company's worth. The bank earlier this month judged Rosneft's total value at $2.3 billion to $2.4 billion.


The government then set the starting price for the 75 percent stake at $2.1 billion, saying it needed to charge a premium for the shares since it would be difficult to sell the remaining 25 percent.


The bidders' criticism of the price is somewhat predictable but also understandable, said Stephen O'Sullivan, an oil analyst with MC Securities in London.


"You'd expect them to say it's rather a lot," O'Sullivan said. Still, the price tag is "rather high in comparison with most people's valuation of Rosneft's subsidiaries," he added.


Yuksi's Khodorkovsky said the company could bid if a "serious investor" interested in buying the stake for the set price appears. Yuksi last week sold a 5 percent stake in the company to the French oil major Elf Aquitaine and is seeking another Western partner to buy a second 5 percent stake.