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. Last Updated: 07/27/2016

Tyumen Backs Plans For State Oil Giant




The Russian government's dream of a national oil giant took a step closer toward reality Monday when Tyumen Oil Co. lent its support to the state's recently proposed structure for the merger.


Tyumen "supports the actions of the government on the merger ... and again expresses its wish to participate in it," spokesman Dmitry Ivanov said, citing deputy chairman Viktor Vekselberg.


Tyumen last month sent the government the terms under which it would agree to join the merger, and Deputy Prime Minister Vladimir Bulgak on Friday revealed details of a proposal that appeared to be identical to Tyumen's.


Speaking to reporters after a government working group meeting, Bulgak said a new holding company would be formed in the middle of this year that would consolidate the government's stakes in Rosneft, Slavneft and Onako.


He also said the Fuel and Energy Ministry had been instructed to talk with Tyumen and the Eastern Siberian Oil Co. about joining the merger.


"If the desires are symmetrical, then agreements will be signed. If not, everything will be as before," he was quoted by Reuters as saying.


The state owns 100 percent of Rosneft, 77 percent of Slavneft, 85 percent of Onako and 49 percent of Tyumen.


Bulgak said the merger would happen in two stages: first, the formation of a single holding company and, second, the consolidation of the subsidiaries' shares into a single stock a year later.


Although the plan is a near match to the one proposed by Tyumen, spokesman Ivanov said the oil company would have preferred the immediate merging of all the companies because it could be done more quickly. Tyumen proposed the holding company variant "because it was clear that that was the only [method of merger] that was going to be viable," he said.


Tyumen President Simon Kukes has said the benefits of a national oil giant would be in the synergy it could generate, allowing the various partners to use their resources more efficiently. As an example, Kukes said that Tyumen's refinery in Ryazan, central Russia, could potentially be more easily supplied by a Slavneft or Rosneft production company and that Tyumen's main production facility, Nizhnevartovskneftegaz in western Siberia, could in turn supply a closer refinery.


Analysts, however, have been skeptical about Tyumen's participation. Their objection centers around the feeling that a national oil company is being created not for the purpose of having an efficient operation, but so that the government can gain better control of its unruly properties. Some analysts have even accused Bulgak of having "oligarch-like" ambitions. Tyumen's orientation toward profitability will clash too strongly with the bureaucratic reality of an oil giant, they say.


"[Tyumen] will only merge if it has clear guarantees of control at key levels of management," said Ivan Mazalov, oil analyst at Troika Dialog. "Otherwise, it simply doesn't meet their needs."


But the company may feel that it doesn't matter too much what it commits to now.


"If it looks like it isn't working out the way [Tyumen] wants it to, [it] can always just pull out," said one industry insider, speaking on condition of anonymity.