the RUSSIA oil & gas competitive intelligence report - Report Buyer

Russia Oil and Gas Competitive Intelligence Report 2010
processed about 105,000b/d, giving it a utilisation rate of less than 80%. The company also owns a
network of 96 petrol stations (end-2009) and a crude oil terminal producing 140,000-b/d in the Bryansk
region.
Russneft was breaking the mould of an increasingly state-dominated industry, until its shares were frozen
by a district court in August 2007, after owner Gutseriyev was charged with tax evasion. Gutseriyev then
sold the company to a Basic Element (Basel) investment vehicle controlled by Oleg Deripaska, a major
businessman generally seen as a Kremlin ally. The Kremlin's removal of an international search warrant
for Gutseriyev in November 2009 enabled Russneft’s founder to resume ownership of the company. In
January 2010 Gutseriyev agreed to take over Russneft from Deripaska, in return for assuming the
company's US$6bn worth of debts and US$600mn in cash.
Strategy
Now that Gutseriyev's relations with the government have apparently been mended at present, we expect
the businessman's extensive experience in the oil sector to spur Russneft's development in the next few
years. Following his return, Gutseriyev agreed to farm out 49% of Russneft to conglomerate Sistema for
an undisclosed amount. The Russneft stake will allow Sistema to balance out its downstream-heavy
portfolio, helping it fill its refineries.
In May 2010 Gutseriyev said Russneft was considering merging with Sistema subsidiary Bashneft in two
to three years. According to Gutseriyev, the merged company would then conduct an IPO. He added that
Russneft intends to increase its annual oil production to 400,000b/d of oil in the next few years and to
make an annual profit of US$1.5bn (RUB45.9bn).
Recent Developments
In September 2010 Sistema announced the process of restructuring Russneft’s debt was nearly complete.
The announcement followed remarks by Sistema President, Leonid Melamed, in May 2010 that once
Bashneft covers debts of US$7bn, Sistema would allow the two companies to merge.
In August 2009 Russneft and its partner MOL settled an internal dispute over the jointly operated
Zapadno-Malobalykskoye (ZMB) field in West Siberia. According to the Interfax news agency, Russneft
agreed to pay RUB6.3bn (US$201mn) debt for the oil it bought from ZMB. Although the settlement has
diffused internal tensions, Russneft's stake in the project remains threatened by a competing ownership
claim from Rosneft.
Gazprom Neft suspended talks over the purchase of Russneft in April 2009. Gazprom Neft appears to
have baulked at Deripaska's reported valuation of the company, according to Vedomosti’s sources.
Gazprom Neft wanted to buy Russneft by assuming its debt, which is estimated at US$5.6bn, while
Deripaska valued the company at US$7.5-8bn, excluding debt. The negotiations broke down after the
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