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. Last Updated: 07/27/2016

Slavneft Shuns Tyumen Oil Advances

The nation's No. 5 oil firm, Tyumen Oil, faced stubborn resistance to its campaign to become the nation's No. 4 firm when its target, Slavneft, rejected Tyumen's advances at the shareholder meeting of Slavneft's main refinery.

Tyumen Oil Co., or TNK, on Tuesday used its minority stake in the Yaroslavl refinery, Yaroslavnefteorgsintez, to block a share emission and a loan disbursal from Japan's Eximbank.

In response, managers of Slavneft, the nation's No. 10 oil firm, refused to give a seat on board to outside directors.

TNK said Wednesday that it would dispute the legality of the shareholder meeting in court. A court official who was to deliver an injunction was refused entry to the building where the meeting was held Tuesday.

"Acquisition of Slavneft would create synergy effects for Tyumen Oil," said Andrei Krivorotov, spokesman for TNK. "We voted against the emission because it would dilute our holdings."

Furious, Slavneft's managers moved the goal posts, reducing the number of seats on the refinery board to seven from 10 and voted to reappoint themselves.

"Their [TNK's] behavior was detrimental to national interests," said Slavneft president Mikhail Gutseriyev.

Additional share issuance, which would strengthen Slavneft's grip over the refinery, was one of the conditions made by Eximbank, which had agreed to lend $200 million for modernization of Yaroslavnefteorgsintez.

TNK's reluctance to comply with the terms of the loan rendered void talks that Russian authorities conducted with their Japanese counterparts for seven years, Slavneft officials said.

"The refinery could be upgraded on more advantageous terms, both financially and technically," said TNK's Krivorotov.

TNK and its partners have a 34 percent stake in Yaroslavnefterogsintez, 12.58 percent in Slavneft and 27.45 percent in its major production unit, Megionneftegaz, from local trading companies.

TNK is also eyeing the state's 19.86 percent stake in Slavneft to be auctioned before the year's end as part of the government's privatization program. That program foresees sales of state stakes in LUKoil, Onako, Rosneft and Slavneft before next year for a total $1.2 billion.

Slavneft's Megionneftegaz operates in the same area of western Siberia as TNK's Nizhnevartovskneftegaz and Chernogorneft.

"Acquisition of Megionneftegaz would be a logical step for Tyumen Oil," said James Henderson, oil and gas analyst with Renaissance Capital investment bank. "But ownership of two refineries in one region could raise questions."

TNK runs the Ryazan refinery, which supplies the lucrative Moscow market, so acquisition of a refinery in neighboring Yaroslavl could raise the hackles of anti-monopoly regulatory bodies.

"Whether acquisition of Slavneft is justified or not will depend primarily on the impact that it will have on TNK's image and, to a lesser extent, on the company's financial operations," said Yelena Anankina, corporate finance project manager with EA-Ratings.

TNK was a black knight in a hostile takeover of Chernogorneft and saw a $500 million loan program held by the U.S. Ex-Imbank under the pressure of BP Amoco, owner of a minority stake in Chernogorneft through Sidanko.

The dispute ended with TNK agreeing to hand back Chernogorneft in exchange for a blocking stake in No. 6 oil firm Sidanko, but this transaction is not yet complete.

The government owns 74.95 percent in Slavneft and Belarus authorities hold 12.58 percent.

TNK climbed to fifth spot last year overtaking Sidanko with 20.06 million tons of output, and acquisition of Slavneft with 11.9 million tons of output could push it ahead of Tatneft, which extracted 24.06 million tons, and narrow the gap on No. 3 Yukos, which produced 34.2 million tons.


Slavneft's holdings

Extraction Slavneft-


Exploration Slavneft-Megio-


Refining Yaroslavnefteorgsintez

Yaroslavl Mendeleyev Refinery Mozyr Refinery


Sales units Yaroslavl





St. Petersburg

Source: Slavneft