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. Last Updated: 07/27/2016

Rosneft Considers Bid For Coveted Norsi Oil

The state-owned oil firm, Rosneft, is considering entering a heated race for Norsi Oil by placing its own bid for the Nizhny Novgorod refinery.

Gennady Khodyrev, governor of the Nizhny Novgorod region, first voiced the possibility Monday while briefing journalists on talks he conducted with Rosneft management in Moscow.

Rosneft spokesman Alexander Stepayenko confirmed the company's interest.

"The subject has been brought up and is now being examined by management," Stepayenko said.

No. 1 LUKoil and No. 6 Sibneft have already submitted bids.

On Aug. 15, the Federal Property Fund announced a two-part auction for the sale of Norsi Oil, a holding company that includes a refinery with a capacity of 350,000 barrels a day. A 40 percent stake is to go on the block for a starting price of $10.4 million. Another 45.36 percent is up for a starting price of $11.6 million.

The fund is accepting applications until Oct. 16. The results are to be announced Oct. 19.

Norsi refinery general director Viktor Rassadin said the company is the region's biggest taxpayer, and Norsi's new owner will have to take this into account.

"No matter how the auction turns out, the refining business in Nizhny Novgorod has to be maintained," Rassadin said in an interview on the Intertek.ru web site.

Norsi has the largest oil refinery in European Russia.

Norsi Oil was created by a 1995 decree signed by then-Prime Minister Viktor Chernomyrdin. About 15 percent of the holding was sold at a special cash auction the following year.

Further privatization plans were thwarted in 1997, when the Federal Property Fund postponed the sale of Norsi due to lack of interest. Another auction, conducted in 1998, fell flat when the fund was only able to find buyers for 0.5 percent of the shares while 14.5 percent were offered.

Norsi has also been subject to bankruptcy proceedings during its brief, turbulent existence. It came under fire from the regional administration in 1997 because of large tax arrears. Norsi's total indebtedness stands at about 82.8 million rubles ($2.8 million), most of which is owed to the federal and regional budgets.

Apart from the government's share in Norsi, LUKoil holds 8 percent and Tatneft controls 6 percent.