Nationalization in the oil sector is expanding in scope. Just like Yuganskneftegaz, a former YUKOS subsidiary, Sibneft may also be acquired by a state-owned company. Progress on this seems to be good, since the deal hasn't escaped President Vladimir Putin's attention. According to Putin, he is not only aware of the upcoming sale of Sibneft to Gazprom, but has even discussed this issue personally with Sibneft's owners. Previously, Putin was fully informed about the Yuganskneftegaz auction (he was the only state official who admitted to knowing the identities of those who established the Baikalfinansgrupp company to buy the YUKOS subsidiary).
It's worth noting at the start of Putin's first term, state-controlled oil production in Russia amounted to only a few tens of millions of tons a year. Once the Sibneft acquisition is complete, the authorities will have regained control of almost 30% of the oil sector, with production volumes around 125 million tons a year. In money terms, that's about $50 billion based on current oil prices. And analysts say the nationalization process will continue.
The next oil company might be Surgutneftegaz, which is entirely loyal to the authorities. Along with Sibneft, this company has been recommended for purchase by Dresdner Kleinwort Wasserstein (DrKW), consultant to Gazprom. Moreover, according to sources at Gazprom, Gazprom is also interested in the remnants of Mikhail Khodorkovsky's empire - Tomskneft and Samaraneftegaz, as well as the Mazeikiu Nafta refinery in Lithuania.
Meanwhile, the authorities are making every effort to demonstrate that the concentration of assets in state-owned companies is not nationalization. According to Putin, Gazprom's intention to gain control of the Sibneft oil company does not mean that the state is interested in this company: "I'll admit that I have discussed this with the owners of Sibneft, telling them that they should regard this as a market deal - if they want to go ahead with it at all. The fact that a state-owned company is expressing the wish to acquire these assets does not mean that the state intends to do the same. This should be a purely market-driven transaction."
The biggest obstacle to any further nationalization will be money. At present, both Rosneft and Gazprom are already several tens of billions of dollars in debt, and they can't keep borrowing indefinitely, even with their high credit ratings. Gazprom will already have to borrow a couple of billion to buy Sibneft.
Grigori Vygon, managing partner at 4D Consult, told us: "Based on Sibneft's market value [around $16.2 billion - editor's note], the deal could be worth over $8 billion." In Vygon's view, Gazprom's own resources won't suffice to pay for Sibneft's assets: of the $7 billion which Gazprom will receive from the state for its own shares, just under $2 billion will be spent on gasification and taxes. "Gazprom will have a shortfall of $2-3 billion," says Vygon, "and it will need to borrow that sum."
Gazprom is working on coming up with the money. Tomorrow it will start the road show for its new Eurobonds issue. Two tranches are planned: $1.2 billion and $1.9 billion. Gazprom's press statement says that the money raised from the Eurobonds issue will be used to refinance loans taken out by Gazprom between 1993 and 2000 for building the Blue Stream pipeline, valued by Gazprom at $3.2 billion. But analysts maintain that only the first tranche will be spent on the gas pipeline, while the second will go towards gaining control of Sibneft.
The subsequent fate of Sibneft remains unclear as yet. Previously, Gazprom said that it planned to set up a separate subsidiary (provisionally named Gazpromneft) and transfer all its oil assets to that company.
"I can't see any synergy from merging Sibneft assets with Gazprom's other oil assets," says Grigori Vygon. "After all, Sibneft enterprises have no technological connection with Gazprom's enterprises. So it would be more logical to leave Sibneft as a separate entity."
Moreover, Vygon doesn't rule out the possibility that Gazprom might use Sibneft in a future exchange with Shell, to gain shelf assets and a stake in the Sakhalin 2 project. Vygon says: "As yet, it is hard to predict the state's policy regarding such exchanges. Presumably, however, Gazprom would swap small pieces of Sibneft (around 25%) for stakes in the Sakhalin 2 project."
Actually, the option of exchanging stakes in assets acquired by state-owned companies for the assets of foreign companies (or simply selling those stakes to foreign companies) could become one of the major financing methods for nationalization. This option is already well-tested and quite viable.
Translated by Denis Shcherbakov
Nu, zayats, pogodi!
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