RIGA - Reports have surfaced that TNK-BP, the Russian-U.K. oil conglomerate that was formed earlier this year, might be interested in buying a controlling stake in the Ventspils Nafta oil terminal.
Citing a report by Petroleum Argus FSU, an analytical publication, Troika Dialog, Russia's largest brokerage, wrote that TNK-BP was "close to buying a 50 percent plus 1 share stake" in the oil terminal "by the end of this year."
Baltic News Service reported that Ventspils Nafta council member Uldis Pumpurs had said he had no information regarding the possibility of TNK-BP buying a controlling stake in the terminal. No negotiations were being held at the moment, he added.
A TNK-BP spokeswoman however was quoted by the Baltic News Service as saying that the company planned to visit Ventspils in the near future to discuss business development opportunities.
Asked if TNK-BP was considering buying a stake in Ventspils Nafta, the spokeswoman told BNS, "It would be incorrect to speak about it yet as right now only the company business plans are being developed."
Ever since Russia ceased supplying Latvia with oil via pipeline at the beginning of this year numerous companies have been names as possible buyers of a controlling stake in Ventspils Nafta. Two of the included the Russian oil companies Yukos and state-owned Rosneft, while the third, the oil pipeline monopoly Transneft, recently said it was uninterested in the terminal.
TNK-BP however would be an ideal candidate for Ventspils Nafta. Armed with Russian crude, Western management expertise and a good deal of cash, the newly formed company - a $7 billion merger - could bring an end to the oil terminal's declining fortunes.
According to Troika Dialog, TNK-BP is Ventspils Nafta's largest supplier of crude, shipping some 73,000 barrels per day (3.5 million tons per year) of crude by rail.
But as the Moscow analysts point out, the biggest hurdle for TNK-BP would be getting Transneft's approval for any Ventspils Nafta acquisition, since Transneft, which is owned and controlled by the state, would likely regard such a purchase as competition for domestic ports.
In order for any deal to go through, Transneft, speculated the analysts, could demand investments of up to $140 million to modernize the part of its pipeline that runs up to the Latvian border.
Ventspils Nafta shares soared 20 percent last week on small turnover. Although it was unclear what pushed up the price, there was speculation that someone may have been buying on insider information about a possible sale of the terminal to a strategic investor.
To prepare for an eventual sale, Ventspils Nafta in October transferred all oil handling operations at its terminal to its newly founded subsidiary, Ventspils Nafta Terminals.
Ventspils Nafta is 44 percent owned by LNT, which also has the rights to purchase back a 9 percent stake it sold earlier this year. The state owns 38 percent in the terminal.
On Dec. 5 the terminal announced that it had handled 10.1 million tons of oil and oil products in the 11 months of the year, or 23.5 percent less year-on-year. In 2002 Ventspils Nafta posted 13.8 million tons of crude and oil products throughput, which was 38.1 percent less than in 2001. Russia began phasing out deliveries to the port in the second half of 2002.
