China May Get Piece of YUKOS Spoils
Thu Dec 30, 2004 08:41 AM ET
By Dmitry Zhdannikov
MOSCOW (Reuters) - China emerged on Thursday as a dark horse contender for the assets of stricken Russian oil major YUKOS as the company's state-driven break-up took yet another abrupt twist.
Amid intense speculation over who will become the ultimate owner of YUKOS's million-barrel-a-day oil unit, Yuganskneftegaz, Russian Energy Minister Viktor Khristenko said top Chinese oil company CNPC may end up with a one-fifth stake.
Khristenko's comments came after a top aide to President Vladimir Putin said Yugansk, bought at auction by state oil firm Rosneft for $9.4 billion, would not be included in Rosneft's planned merger with Russian gas monopoly Gazprom.
"The assets of Yuganskneftegaz will be spun off and transferred to a separate company, 100 percent owned by the state," Khristenko said in a statement issued by his ministry.
"Up to 20 percent of the shares in this company may be acquired by the Chinese National Petroleum Corporation. Such an option was mentioned in documents signed earlier with CNPC."
CNPC could not be reached for comment. The Yugansk auction marked the climax of a Kremlin campaign to crush YUKOS's politically ambitious principal owner, Mikhail Khodorkovsky, and seize control of strategic sectors of the economy sold off in the chaotic privatizations of the 1990s.
Yugansk, which pumped 60 percent of YUKOS's output, was sold to help recover back taxes owed by YUKOS of over $27 billion.
LEGAL RISKS
The latest turn in the saga marks an attempt to insulate the eventual owner of Yugansk from the threat of legal action by YUKOS, which has filed for bankruptcy in the United States and won a temporary U.S. court order barring the sale, analysts say.
YUKOS, in an advert placed in Russian and international newspapers on Thursday, drove home its threat to use "all available legal avenues" to recover damages it puts at $20 billion from any person or entity involved in the Yugansk sale.
"The main incentive behind this move is to protect both Gazprom and Rosneft from legal risks," said Steven Dashevsky, oil analyst at Aton brokerage, adding it was unclear how Yugansk could become a separate entity if Rosneft had already bought it.
"The sale of a stake to a foreign partner could also partly help Russia legitimize the nationalization of Yugansk in the eyes of the international community."
Earlier, Gazprom chairman Dmitry Medvedev, who is also the Kremlin chief of staff, said Gazprom's $7 billion-$8 billion takeover of Rosneft would go ahead as planned in January -- minus Yugansk's Siberian oilfield assets.
"The merger will close according to schedule, which means in January next year," Tass news agency quoted Medvedev as saying.
His statement came a day after liberal Economy Minister German Gref said the merger, originally targeted for this year, would have to be put on hold until the structure of the Yugansk purchase was clear.
CONFLICTING SIGNALS
The conflicting signals reflected possible confusion as the Kremlin reworks its strategy for building a national energy champion to rival Western oil majors and big OPEC producers.
"Unfortunately, the whole mess that is the YUKOS affair seems destined to spill over into 2005," said Matthew Thomas, an oil analyst at Alfa Bank.
Still unclear is how Rosneft, which had debts of $4.4 billion at mid-year, will pay for Yugansk. It has so far raised just $1.7 billion by selling joint venture assets to Gazprom and must pay the full sale price by early January.
Gazprom had been the initial favorite to win the Yugansk auction, but pulled out at the last minute after Western banks syndicating a 10 billion euro ($13.60 billion) loan, led by Deutsche and ABN AMRO, got cold feet.
In the merger, Gazprom will take over Rosneft in return for 10.7 percent of its treasury stock, enabling the state to regain control of the world's largest gas company and paving the way for restrictions on foreign share ownership to be scrapped.
Gazprom's local shares fell on Wednesday on concern that any merger delay could push back its share trading liberalization, but they rebounded by 1 percent on Thursday to bring year-to-date gains to 96 percent.
YUKOS shares have fallen by 97 percent from their record high, valuing the company at little more than $1 billion. ($1=.7351 Euro)
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