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. Last Updated: 07/27/2016

Yukos, Sibneft Form Joint Company




Laying to rest a long-running feud that dated back to before their ill-fated merger attempt last year, Yukos and Sibneft have set up a joint company to supervise oil products trading in the Novosibirsk region, company officials said Thursday.


Shareholders in Novosibirsk retail trader Novosibirsknefteprodukt voted Thursday to approve the creation of Novosibirsk Oil Management, which will be shared 50-50 by Yukos and Sibneft, Yukos officials said.


Novosibirsknefteprodukt's revenues are as much as 100 million rubles ($4 million) a month, said Yevgeny Svistunov, the firm's acting general director.


A Sibneft representative will be appointed as general director, while the chairman of the board of directors will be nominated by Yukos. The board will consist of either two or four directors.


"In general, this is the conclusion of an amicable settlement and the elimination of all conflict," spokesman Andrei Krasnov said Thursday. "All the decisions will be taken in consensus."


A Sibneft spokesman confirmed the creation of the new company.


Thursday's extraordinary shareholders meeting at Novosibirsknefteprodukt also approved changes to the company's charter, some of which were necessary for the creation of Novosibirsk Oil Management.


The retail trader voted to transfer management powers to Novosibirsk Oil Management. It also agreed that important decisions at Novosibirsk Oil Management must be made by 75 percent of the board directors or by consensus, Svistunov at Novosibirsknefteprodukt said Thursday in a telephone interview.


Novosibirsk Oil Management and Novosibirsknefteprodukt will sign a management power-transfer agreement within the next two weeks, Svistunov said.


"The idea of the management company is to represent the interests of Yukos and Sibneft," he explained.


Novosibirsknefteprodukt supplies about 25,000 metric tons a month of oil products to the local market, satisfying about 95 percent of regional demand and about 25 percent of oil-product consumption for the city of Novosibirsk.


The key element in the peace pact between Yukos and Sibneft is a provision that Novosibirsknefteprodukt will receive equal fuel deliveries from Yukos' Achinsk and Sibneft's Omsk refineries. The retail trader runs some 23 tank farms and equally splits its fuel deliveries between Novosibirsk and the surrounding region.


Novosibirsknefteprodukt is formally a retail subsidiary of Eastern Oil Co., or VNK. Yukos secured a controlling stake in VNK in 1997.


Because the Novosibirsk region is placed right between the Achinsk and Omsk refineries, Sibneft had long been keen to sell oil products from its Omsk refinery to Novosibirsknefteprodukt.


Sibneft managed to snap up a significant stake in Novosibirsknefteprodukt, but most of the shares were nonvoting preferred shares.


However, when Novosibirsknefteprodukt failed to pay dividends on its preferreds for 1997, those shares became voting ones under the provisions of Russian legislation. That allowed Sibneft to challenge Yukos for control.


Both sides filed numerous court claims and even set up competing management teams and offices.


With neither Yukos nor Sibneft being able to win any decisive victory, some kind of compromise had been seen as inevitable.


In early 1998, Yukos and Sibneft announced a merger that would have created Russia's biggest oil firm and one of the world's major players.


However, the merger, christened Yuksi, ran into difficulties when Sibneft took a closer look at Yukos' books and then fell apart altogether in mid-1998 as the Russian economy lurched toward collapse.