November 4, 2012
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№ 10 (October 2012)

Rosneft set to boost its NOC stake to 60%

Surgutneftegaz plans to quit the National Oil Consortium (NOC) and sell its 20 percent stake to state-owned Rosneft. According to Russia’s business daily Kommersant, the deal has already been approved by the Federal Antimonopoly Service (FAS).

By Lada Ponomareva

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After Rosneft acquires TNK-BP, Rosneft will have increased its share in the NOC to 60 percent share. Russia formed the National Oil Consortium (NOC) in 2008 for the purpose of collaborating on oil development projects outside of Russia. TNK-BP, Rosneft, Surgutneftegaz, Gazpromneft and Lukoil each hold a 20 percent interest in the NOC. But that will change as Rosneft acquires the shares of Surgutneftegaz and TNK-BP.

Rosneft will also replace Gazpromneft as the designated operator of projects within the consortium’s remit. Among the is the Junin-6 development in Venezuela.  

Russian media is speculating that Rosneft’s new acquisitions confirm the state’s intent to control the country’s oil and gas industry. However, Vasily Tanurkov, deputy head of equity research at Veles Capital in Moscow, told Oil&Gas Eurasia that such rumors are unfounded because, as he put it, "sooner or later the state-owned company will be privatized; the state has no plans to nationalize the oil and gas sector.”  Tanurkov told OGE that the deal between Rosneft and BP is an example of mutually beneficial cooperation. "Among foreign companies, BP is the most attractive for us,” Tanurkov said. “Options of a partnership with China are unclear; they have a very powerful lobby, which means direct cooperation with the state; nobody wants that. As for India, India has none of the technologies we require. Only the United States and Britain remain. Cooperation with the British is more political than anything else”, Tanurkov said.

Commenting the decision by Surgutneftegaz to leave Russia’s NOC, Tanurkov noted that the move is not related to the company’s slide in net profits.

However, Surgutneftegaz has just published its nine-months financial statement; and it does show that the company’s net profit (calculated by RAS, Russian Accounting Standards) fell to 119.12 billion rubles, or 39.7 percent when compared to the same period in 2011. It is just the opposite with the operating results – here the figures show improvement: for example, revenue for the period grew almost 10 percent (up to 616.937 billion rubles), while gross profit increased by 6.4 percent (up to 217.833 billion rubles).

According to Kommersant, analysts attribute the disappointing side of the results to the sale last year of the company’s stake in the Hungarian company MOL coupled with the strengthening of the ruble. In the past nine months, the ruble has gained 2.5 percent against the dollar.

Tanurkov said that Surgutneftegaz is confident about its market position, despite the lower net profits. "Of course, the fall (in net profit) by 40% is not very nice, but the company has shown positive operating results and has increased its total production, so it do not focus on financial statements,” he said.

The departure of Surgutneftegaz from the NOC, and the sale of its share to state-owned Rosneft are not trend-setting events, either. According to open sources, the company had from the beginning, joined the project only reluctantly. So why did it join? As Tanurkov explained: “it is totally unclear just why the company decided to enter into this project because Surgutneftegaz is, above all, a company aimed to Russia-based projects, there is no point in its involvement in overseas projects”. Tanurkov said that Rosneft has significantly boosted its leverage and Surgutneftegaz has other aims, none of which include competing with Rosneft.


Copyright 2012, OGE. All rights reserved.

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