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. Last Updated: 07/27/2016

Future Looking Up for Severnaya Neft

The future of former Deputy Finance Minister Andrei Vavilov's oil enterprise Severnaya Neft looks rosy.

Not only will the company have a strong new owner, but it may get to keep disputed licenses to operate the Val Gamburtseva oil fields in the Nenetsk autonomous district in northern Russia. The fields contain more than half of Severnaya Neft's 120 million metric tons of extractable reserves.

State-owned oil company Rosneft, which applied to the Anti-Monopoly Ministry for permission to acquire the company, Vedomosti reported, may be the only buyer with enough political muscle to end the ongoing battle with the Natural Resources Ministry and oil majors over the licenses.

Severnaya Neft and Rosneft have neither confirmed the deal nor denied it.

The Economic Development and Trade Ministry has stepped in to lobby the Supreme Arbitration Court on behalf of Severnaya Neft and its new owner, Vedomosti quoted deputy minister Mukhamed Tsikanov as saying. The ministry had earlier received information that Rosneft was the buyer and would pay the market price for the Val Gamburtseva licenses, he said.

Severnaya Neft won a much-debated tender for the licenses in March 2001. The oil majors it beat out later claimed they offered bonuses to the state of up to $100 million, while Severnaya Neft offered only $7 million. Severnaya Neft said it secured a victory by presenting the most efficient development blueprint for Val Gamburtseva, with a promise to produce the first oil in just a year, which it did. The company said the bonus bids were never opened. "It wasn't an auction, it was a tender to get the field into production," Severnaya Neft spokeswoman Yelena Prorokova said.

Nonetheless, the Natural Resources Ministry, which ran the tender, has been locked in fierce legal battles to revoke the license from Severnaya Neft.

As the law sets out no clear, working mechanism for revoking licenses, battles over Val Gamburtseva have been raging at all court levels across the country. Meanwhile, Severnaya Neft continues to operate Val Gamburtseva.

Leonid Mirzoyan, oil and gas analyst with Deutsche Bank, said the main problem is imperfect legislation on natural reserves.

At present, he said, the system does not allow the state to cash in on license distribution and is not coherent and transparent enough for investors.

The Natural Resources Ministry on Thursday was unable to provide information on the current status of its attempts to revoke the licenses.