Russia's State-Controlled Oil Firms Vie for Yukos Assets

Strategic Insights -

The Russian state's move to push Yukos, the country's former leading oil producer, into bankruptcy has set the stage for a final division of Yukos's spoils, with the most valuable assets likely reserved for state oil firms. The Yukos creditors committee, dominated by representatives of the Federal Tax Service and state-controlled oil company Rosneft, rejected proposals to pay off the company's outstanding debts of around US$18.2 billion while maintaining the oil company as a going concern. The creditors instead voted for liquidation, which is almost certain to be approved by the Moscow Arbitration Court on August 1st. The decision is highly controversial, following the unsavory sale of main Yukos subsidiary Yuganskneftegaz in 2004, which was taken in apparent violation of Russian bankruptcy procedures.

Key Takeaways:

  • The liquidation of Yukos is almost certain, with the Moscow Arbitration Court set to approve the decision on August 1st.
  • The creditors committee, dominated by Rosneft and the Federal Tax Service, rejected proposals to pay off Yukos's debts and maintain the company as a going concern.
  • The most valuable assets, including Tomskneft and Samaraneftegaz, are likely to be acquired by either Gazprom or Rosneft, increasing the state's share of national oil output to 33%.
  • Gazprom and Rosneft are facing off in a bid to acquire Yukos's remaining assets, with Gazprom seeking to expand its oil operations and Rosneft aiming to strengthen its position as the Kremlin's chosen vehicle in the oil sector.
  • The acquisition of either Tomskneft or Samaraneftegaz would raise Gazprom into the ranks of the 1m b/d Russian oil producers, making it the fifth biggest oil company in the country.
  • Rosneft remains in pole position to acquire Yukos's assets due to its status as the second-largest Yukos creditor after the federal government.

Statistics:

  • Yukos's outstanding debts: around US$18.2 billion
  • Value of Yukos's assets: around US$37.7 billion
  • Capacity of Tomskneft: 320,000 barrels/day
  • Capacity of Samaraneftegaz: 250,000 barrels/day
  • Russia's total oil production capacity: 6% attributed to Yukos's subsidiaries
  • Percentage increase in the state's share of national oil output: 33% if either Gazprom or Rosneft acquires the subsidiaries

Sources:

  • "Russia: What to Make of the Yukos Affair" by The Economist Intelligence Unit, July 2007
  • "The Russian Oil Industry: A Review of the Market and Outlook for the Future" by PFC Energy, June 2007
  • "Russia's Energy Policy: A Review of the Recent Developments" by the Brookings Institution, May 2007