YukosSibneft to orbit Russia as global player

YukosSibneft to orbit Russia as global player

Bernard Besserglik, Agence France-Presse, Moscow

Russian officials are talking up the creation of the oil
supermajor YukosSibneft in the merger last week of Russia's
second- and fifth-ranked hydrocarbons producers as a sign of the
country's growing competitiveness in the global economy.

With January-March oil production up 11 percent from a year
earlier, according to unofficial figures reported on Wednesday,
and plans for two new export pipelines to be announced shortly,
the oil industry is seen as the Russian economy's best bet for a
long-term success story.

"This is a significant event," Prime Minister Mikhail Kasyanov
said on learning of the Yukos-Sibneft merger that creates the
world's fourth-largest private hydrocarbons producer with a
market capitalization of US$35 billion (32 billion euros).

Russia needs giant companies as flagships of its economy, he
said, praising the "aggressive management" of the merged
companies, a consideration he said would help the new oil giant
to stake out a greater share of world markets.

Analysts have generally approved the $15 billion merger,
arguing that Russia's possession of a strategic player in the
global oil industry will give its businesses greater clout
worldwide.

Semyon Vainshtok, head of the Transneft company that controls
Russia's huge system of oil pipelines, noted that the advantages
of the new company would include the slashing of production
costs, technology upgrades, an increase in oil productivity and a
boost to scientific research.

"The new company will be the most energetic business in
Russia, and technologically the most aggressive," he said, as
quoted by the ITAR-TASS news agency.

Although the immediate objective may have been defensive, with
Yukos aiming to prevent Sibneft being acquired by an
international major, Troika Dialog analyst Valery Nesterov told
AFP, the merger "come at the right time, boosting the economy as
a whole."

The new company "will be able to influence global oil policy,"
he noted, while analyst Bulat Karimov with the Aton brokerage
group believed the merger meant "the Russian oil industry will be
seen differently now."

The consolidation of the Russian oil industry is proceeding
apace, analysts agreed, Pavel Kushnir of United Financial Group
predicting that there would eventually be just three Russian
majors: YukosSibneft, the BP-TNK joint venture formed following
BP's $6.75 billion investment in February, and LUKoil.

However the Russian oil industry had yet even to catch up with
the power it enjoyed in the Soviet era, Kushnir warned.

"Its main problem is the lack of export infrastructure," he
noted.

The Russian authorities have been seeking foreign investment
to upgrade infrastructure, and in November LUKoil, Yukos, TNK,
and Sibneft signed an initial agreement to build an Arctic export
terminal at the northwestern port of Murmansk that would allow
them to boost shipments to the United States.

The oil ministry is due shortly to finalize plans for the
construction of two new pipelines to Asia, one to China and the
other to the Sea of Japan, although the details are pending the
results of a feasibility study to be announced by the end of this
month.

Yukos has until now argued for priority to be given to the
pipeline from Angarsk, the easternmost point of the Russian oil
pipeline complex, to the Chinese city of Daqang, although the
route to Nakhodka, on the Pacific coast, would boost prospects of
oil sales to Japan.

Both Asian countries are keen to increase the flow of Russian
oil in order to reduce their dependence on supplies from the
Middle East.

The Nakhodka route would also open up the prospect of
increased sales to the United States, which currently takes less
than one percent of its total imports from Russia.

The Murmansk route could raise this figure to as much as 10
percent, and the Nakhodka pipeline raise this even further.

Already owning the world's third-biggest proven oil and gas
reserves, YukosSibneft will be virtually immune from hostile
takeover and free to develop new upstream projects such as
exploring for new deposits in eastern Siberia and in the Caspian
Sea region.