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Tyumen Oil Co. (TNK) has a well-earned reputation for being one of the most aggressive players in Russia's big -- sometimes bruising -- oil sector. In a controversial 1999 bankruptcy auction, TNK made headlines by seizing a control of a choice subsidiary of Siberian oil producer Sidanco over the strong objections of international oil major BP Amoco, a 10% Sidanco shareholder and a newcomer to the Russian market. (Welcome to Russia, BP.)
Now it looks like that move was just the start for TNK. BusinessWeek Online has learned that the company is now seeking to swallow all of Sidanco. To achieve that goal, it's trying to close a deal with shareholders besides BP that would give it a controlling stake. Such an acquisition would make TNK the third-largest oil producer in Russia, behind Lukoil and Yukos, and the 11-largest producer in the world.
A final deal is "very close," Moscow financial magnate Viktor Vekselberg, who
owns 25% of TNK through his Renova holding company, told BW Online in an exclusive interview on May 30. Under the scheme outlined by Vekselberg, TNK would purchase a 44% stake in Sidanco held by the Interros Group, controlled by Moscow oligarch Vladimir Potanin, and a 40% stake held by Cyprus-based Kantupan Holdings. Kantupan investors include billionaire investor George Soros.
UNCLEAR SENTIMENT. This package could cost TNK owners as much as $1.25 billion in cash, Vekselberg says. The privately held company's other owners are Alfa Group in Moscow, with a 50% share, and New York-based Access Industries, run by Russian-American investor Leonard Blavatnik, with 25%. Together the owners have invested some $1 billion in TNK since first acquiring a stake in the formerly state-controlled company in 1997. Last year TNK reported sales of $1.9 billion.
And what about BP? Vekselberg says TNK has informed the oil giant of its plans
to acquire control of Sidanco but has yet to receive a clear indication -- friendly or hostile -- of BP's sentiments. "I'm not sure how BP feels about this," Vekselberg says. "We would like to keep BP in Sidanco, and put Sidanco inside of TNK."
The outcome will likely depend on the ultimate disposition of the disputed Sidanco
subsidiary that TNK acquired for $176 million in the bankruptcy auction two years ago. The subsidiary holds the Chernogorneft oil field, producer of 65 million barrels of crude oil per year. TNK has denied charges of manipulating Russia's convuluted bankruptcy process to win control of Chernogorneft. In Dececmber, 1999, after lots of wrangling, TNK and BP announced an agreement in principle under which Sidanco would get back Chernogorneft in return for TNK receiving a 25% blocking stake in Sidanco.
"NO TALKS"? So far, TNK has not returned the field to Sidanco -- much to BP's frustration. Asked to comment on a deal that could give TNK a controlling stake in Sidanco, BP Amoco spokesman Peter Henshaw in Moscow says, "let's not have that derail the process of returning Chernogorneft."
BP may yet get some breathing room. Notwithstanding Vekselberg's assertion that
a deal was nearly at hand, a spokesman for Potanin's Interros Group says "at the moment there are no talks discussing the possible sale of Interros shares in Sidanco to TNK."
TNK management declined to comment on any transaction to acquire Sidanco. Notwithstanding the clash with BP over Chernogorneft, TNK is hopeful of working
cooperatively with BP in a big gas project in Eastern Siberia, known as Kovytka, in which both companies have a stake. This is part of a broader strategy of cultivating ties with top players in the Western oil industry.
GO WEST. TNK President Simon Kukes, an American citizen born in Russia who formerly worked for Amoco and Phillips Petroleum, sees Western knowhow as crucial to the company's future. Houston-based Halliburton is advising on drilling strategy at TNK's big Samotlor field in Western Siberia, now producing some 400,000 barrels per day -- about half of the company's total production.
TNK is also working with Texaco to produce lubricants at TNK's Ryazan refinery, as well as developing Texaco Star Mart convenience stories around Mosow. Indeed, TNK's long-term goal is to sell a large piece of the company, possibly all of it, to a major Western oil company. "We need to give control to the West," Kukes declared in a May 28 interview with BusinessWeek. And for a company that wants it all, TNK is certainly acting that way.
By Paul Starobin in Moscow Edited by Douglas Harbrecht
Copyright 2001 , by The McGraw-Hill Companies Inc. All rights reserved.
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