Russia sets date for massive oil sale

  • 2002-11-21
  • Marielle Eudes
MOSCOW

The Russian government has set a Dec. 18 date for the sale of its 74.95 percent stake in the oil company Slavneft, the country's seventh largest, in a privatization with the potential to become the nation's largest in post-Soviet history.

A minimum price of $1.7 billion has been set for the sale, Vladimir Malin of the Russian Federal Property Fund told a press conference Nov. 18. Tenders have to be registered by Dec. 15, he said.

Foreign groups are also entitled to tender, and analysts believe the sale price is likely to be considerably higher than the official minimum.

Russian news reports have said at least 10 bidders will take part in the auction for the government's stake in Slavneft. LUKoil, Surgutneftegaz, Sibneft and TNK, which rank among the top five Russian oil producers, have already expressed an interest.

A government official speaking on condition of anonymity said last week that the sale could bring in the largest ever sum for a Russian privatization.

The biggest privatization to date in post-Soviet Russia was the 1997 sell-off of the state's 25 percent stake in the telecommunications holding Svyazinvest, which brought in $1.87 billion.

Experts said the sale was likely to transform the landscape of Russia's oil industry.

According to Renaissance Capital, a Moscow investment bank, the Slavneft sale is "the last sizable acquisition opportunity for the Russian oil majors in the determinable future," providing the winner with a "huge reserve base" almost wholly located in western Siberia and helping it to "reposition itself relative to peers."

Renaissance Capital's analyst Adam Landes said it would also "help the government to meet the budgeted privatization revenue in 2002 of 35 billion rubles ($1.1 billion)," an objective that was threatened following the cancellation of the sale of a 5.9 percent stake in Lukoil.

In addition to the stakes held by the governments of Russia and Belarus, 12 percent of the capital is held by an investment trust jointly owned by the TNK and Sibneft oil groups and the remaining 2.22 percent was purchased by private investors afterward on the Moscow stock exchange.

With $4 billion in cash on hand, Surgutneftegaz is seen as being strongly placed for taking over the Slavneft shares though it will face stiff competition.

Sibneft, which coordinates most of Slavneft's exports, will consider the acquisition of the Slavneft shares to be a strategically important operation, an analyst with Aton said.