Bashneft is a Russian oil company formed by the transfer of the oil related assets of the Soviet oil ministry in Bashkortostan to the regional government of the Republic of Bashkortostan by Boris Yeltsin. It was then privatized during 2002-3 by Murtaza Rakhimov, the boss of Bashkortostan, a crony of Yeltsin's, with a controlling interest in Bashkir Capital, a holding company controlled by Rakhimov's son, Ural Rakhimov. In 2009 a controlling interest in Bashneft was acquired for $2 billion by Vladimir P. Yevtushenkov and placed in his holding company, Sistema, but in July 2014 he was jailed and 72% of Sistema's interest in Bashnoft seized by the Russian government. Following seizure of the company in December 2014 Yevtushenkov was released from jail, "charges not proven," but Ural Rakhimov was reported to have fled the country. It is one of the largest producer of oil products in the country. The company operates 140 oil and natural gas fields in Russia and has an annual oil production of 16 million tonnes. Bashneft owns three oil refineries located in Ufa with a combined capacity of 820,000 bbl/d and 100 petrol stations. Wikipedia.
News Article | December 20, 2016
NEW YORK--(BUSINESS WIRE)--US Upstream oil and gas M&A transaction value, till date in 2016, nearly doubled to $58.3 billion from a seven-year low of $31 billion in 2015, per oil and gas information and insight provider 1Derrick. Oil price recovery to over $45 per barrel by May 2016, triggered a surge of acquisitions in the US unconventional resource plays dominated by Permian. International Upstream M&A was at $62.6 billion a robust improvement over $34.2 billion in 2015 (excluding Shell’s acquisition of BG for $82 billion, which propelled 2015 M&A to $116 billion). Russia accounted for $27 billion, or 43% of the International value. “US unconventional basins, which are short cycle plays, benefited from higher oil prices and improved economics from significant cost cutting and operational efficiencies,” said Yashodeep Deodhar, 1Derrick Managing Partner. “Both rig counts and M&A activity rebounded as producers in premium plays, such as the Permian, received strong support from equity markets and private investors.” US M&A deal activity accelerated with stabilizing oil prices, climbing rapidly from a slow $5 billion in the first quarter to $58 billion till date in 2016. Mega-deals (valued over $1 billion) rose from 4 in 2015 to 14 in 2016 as producers and private equity investors competed to build-out larger positions in premium plays. Transactions in the Permian accounted for almost $26 billion in value, over $20 billion in the second half 2016, and represented 10 of the 20 largest deals. Overall, US unconventional plays represented 18 of the 20 largest transactions. Number of transactions over $100 million also rebounded from just 59 in 2015 to 95 in 2016, reflecting the health of the M&A markets. Despite widespread predictions of corporate consolidation, only one significant deal, the year’s largest US transaction, was a merger of two publicly traded E&Ps, Range Resource’s $4.4 billion purchase of Memorial Resource Development. Buyers overwhelmingly sought to increase positions in premium resource plays, while sellers sought to monetize previous investments as implied values surged after a long lull in M&A activity. This trend represented eight of the ten largest transactions, including EOG’s $2.5 billion purchase of Yates Petroleum, Diamondback’s acquisition of Delaware basin acreage from Brigham for $2.43 billion, RSP Permian’s $2.4 billion buy-out of Silver Hill Energy, and Rice Energy’s $2.1 billion acquisition of Vantage Energy. Private equity firms were active on both sides of the table, with 31 acquisitions and 21 divestitures. Russian corporate activity included the three largest 2016 international transactions, the $11 billion acquisition of a 19.5% stake in Rosneft by Glencore and Qatar Investment, Rosneft’s $10.4 billion purchase of an 87.6% stake in Bashneft, and an Indian consortium’s $2.9 billion acquisition of a 34.9% stake in Vankorneft from Rosneft. Canada M&A activity accounted for another $15.6 billion, topped by Suncor’s $4.54 billion acquisition of Canadian Oil Sands. According to Mangesh Hirve, Managing Director at 1Derrick, “Deal flow in North Sea, Africa, South America and Asia was virtually non-existent. Outside of Russia and Canada, only 5 deals over $1 billion were struck.” These include Statoil’s $2.5 billion acquisition of 66% interest in Carcara discovery from Petrobras, ExxonMobil’s $2.5 billion offer for InterOil, Rosneft’s $1.58 billion acquisition of 30% interest in Zohr field from Eni, KazMunayGas $1.22 billion offer for remaining 36.87% stake in KazMunaiGas EP, and BP divesting Norwegian subsidiary to Aker and Det Norske for $1.15 billion. Total Midstream transaction value was $145.7 billion ($112 billion in 2015), the second highest in the last six years. M&A activity, which had been slow since the first quarter 2015, surged in the second half of the year on two major transactions, the $51.2 billion merger of Sunoco Logistics Partners and Energy Transfer Partners, and Enbridge’s $46.6 billion purchase of Spectra Energy. Oilfield Service transaction value doubled to a six-year high of $52.6 billion ($26 billion in 2015), also on two major transactions, GE Oil and Gas’s $32 billion merger with Baker Hughes and the $14 billion Technip-FMC merger. Downstream deal value was steady at an elevated $64 billion ($51 billion in 2015). The largest transactions were the Rosneft/Trafigura-led consortium’s $12.9 billion acquisition of 98% of Essar Oil, Macquarie led consortium acquiring 61% stake in UK gas distribution business from National Grid for $10.64 billion, and Tesoro’s $6.4 billion purchase of Western Refining. 1Derrick (www.1derrick.com), is an independent oil and gas research firm with offices in Houston, New York, London, Singapore and Bangalore. For more information on 2016 upstream M&A or 1Derrick’s upcoming research, please contact Ajit Thomas.
News Article | October 25, 2016
Andrey Shishkin, vice-president of PJSC Rosneft, was appointed president and chairman of the management board of PJSOC Bashneft. Shishkin, who was Russia’s deputy minister of energy during 2010-12, will serve a 5-year term.
News Article | October 25, 2016
News Article | February 16, 2017
DUBLIN--(BUSINESS WIRE)--Research and Markets has announced the addition of the "State Regulation of the Oil and Gas Sector in 2016, Prospects for 2017" report to their offering. The researcher traditionally concludes the year with their final report that sums up main events and tendencies of the outgoing year. The report analyzes preliminary production results, main state decisions concerning the sector, the struggle for property, changes in export policies, and, certainly, forecasts of the sector development in the medium-term perspective. You will find detailed answers to the following questions: - The record high oil output: leaders and outsiders in the sector - How possible is it to grow in the repressive tax regime? - Who will be the most affected? The gas market? - Stagnation in production amid decline in demand and growth in exports - The case of selling 19.5% turns into a political earthquake - The struggle for Bashneft, the arrest of minister Ulyukayev, the failure of a buyback plan, and the selling of the stake to a Qatari fund and Glencore for Gazprombank money - everything turned out to be a very intricately woven plot - Who has won and who has lost? Who is behind the unexpected outcome? Is this case over? - What should be expected in 2017? Chapter 5. Export Strategies Of Russia: On The Way To A New World For more information about this report visit http://www.researchandmarkets.com/research/qxq2wc/state_regulation
News Article | November 15, 2016
Russia's economy minister has been arrested on corruption charges, the most senior official ever detained under President Vladimir Putin, startling a country that rarely sees top functionaries punished despite rampant allegations of government misconduct. The minister, Aleksei Ulyukaev, 60, was detained on Monday night “in the act” of receiving a $2 million bribe, according to Russia’s Investigative Committee, a law enforcement body that handles major cases. Ulyukaev is suspected of soliciting the bribe in return for approving a high profile oil deal. The sting operation that led to his arrest, followed months of surveillance by Russia’s F.S.B. service, investigators said. The Investigative Committee today charged Ulyukaev with extortion and a Moscow court placed him under house-arrest. If found guilty, Ulyukaev could face up to 15 years in jail. The case was immediately seized on by Russian state television as proof that authorities were successfully waging an anti-corruption campaign, while the Kremlin swiftly announced it was following the case closely. “These are very serious accusations, which demand very serious proof,” Kremlin spokesman Dmitry Peskov told reporters, adding that only a court could determine Ulyukaev’s guilt. Peskov said that president Vladimir Putin had been following the investigation from the beginning. The arrest and charging of a serving official of Ulyukaev's seniority is unprecedented since Putin came to power in 1999. Although police raids, asset seizures and enforced resignations are common tools in tussles among the country’s power-brokers, Ulyukaev’s high-profile arrest was seen as exceptional, prompting speculation of a struggle within the elite. It follows a series of arrests and reshuffles that have reshaped the top levels of Russian government this year; Putin has recently replaced his long-serving chief of staff, while overhauling Russia’s security agencies and appointing his former top bodyguard to oversee them. A technocrat, Ulyukaev was tasked with overseeing Russia’s economic development policies, working closely with Russia’s prime minister, Dmitry Medvedev. Not in Putin’s inner circle, Ulyukaev was still known as a seasoned adjunct in the Kremlin system, linked to a more technocratic, economically liberal group clustered around Medvedev, who are often seen as in competition with hard-line isolationists in the government. The arrest prompted immediate speculation beyond the official version. Some observers suggested that Ulyukaev's fall has lifted the curtain on a turf war between different factions in the government and that has played out around the oil deal that led to his arrest. That oil deal has been at the center of a struggle at high levels of the government for months. Top officials sought to block the buyout of regional oil producer Bashneft by Rosneft, the state-controlled energy giant that is headed by a Putin ally and one of the most powerful men in the country, Igor Sechin. Both Medvedev and Ulyukaev had come out against Sechin over the deal, questioning whether Rosneft, already majority state-owned, should be permitted to take part in what was supposed to be a privatization. Opposition to the deal was overruled by president Putin, and the struggle was finally settled last month, with Rosneft agreeing to purchase the state’s 50 percent stake in Bashneft for up to $5 billion, the Financial Times reported. Ulyukaev though is accused of trying to extort Rosneft by threatening to block the deal. Investigators arrested him at 3 a.m. in Rosneft’s Moscow offices, claiming he had sought to take the huge bribe in cash. The Investigative Committee today said the deal’s legality was not in question following Ulyukaev’s arrest. Some Russian observers, though, expressed doubts about the case against Ulyukaev, arguing it made no sense he would have tried to block a deal approved by Putin himself or to extort Sechin. “You would have to be a lunatic,” Aleksander Shokhin, the head of the Russian Union of Industrialists and Entrepreneurs, said in a radio interview, “a month after the deal was approved legally, politically, to threaten Rosneft with something and to extort $2 million from Igor Sechin, basically one of the most influential people in our country.” Aleksei Navalny, an anti-corruption campaigner and opposition activist who has endured political prosecutions, suggested the arrest’s purpose was simple, writing in a blog post: “They’re doing in such cases what all authoritarian leaders do. Periodically repressing some unexpected character, so as to frighten all the rest.”
News Article | November 23, 2016
Russia’s long planned pivot east found itself unexpectedly wrong-footed in early 2014, following the Crimean referendum and subsequent western rebuke. The global collapse of oil prices – and that of the ruble – later that same year further eroded Russia’s leverage in Asia. Fast forward to the present and we’ve seen substantially more bark than bite. That said, the fundamentals have not changed, and – with increasing uncertainty in the U.S. – Russian sights are still firmly set on the east as it seeks long-term energy investment and political relevance. The post, Russia Is Finally Making Headway In Its Pivot East, was first published on OilPrice.com. Previously, those goals largely started and ended with China, and in that regard the pivot has been a marginal success to date, though hamstrung by substantial reluctance on both sides. The much heralded $400 billion gas deal between the two countries is still on, but Gazprom has cut spending on the Power of Siberia pipeline and initial deliveries are expected to be lower than originally planned. China’s commitment to Russia’s Yamal LNG is promising and will allow the project to move forward fully financed, but Russian companies have not seen the show of solidarity that was anticipated amid western sanctions. In fact, no Russian company has raised debt or equity on Chinese capital markets in the last two years. Further – and perhaps with the realization that oil and gas from Russia’s Far East has nowhere else to go – Chinese equity investments in upstream oil and gas activities in those critical regions has been slow to develop. As the pivot evolves however, China’s position – while still central – gives way to the field. Indeed, India and Southeast Asia are rapidly growing, hydrocarbon poor, and politically receptive to Russia’s advances. Russia and India in particular have had a constructive arms relationship for several decades, but Moscow has yet to leverage that into a significant energy bond, until recently. With energy currently at the forefront of strategic talks between the two nations, a Russia-India “energy bridge” is gaining traction. Early discussions for the “bridge” have been far from humble, and include piped gas trade and substantial nuclear expansion. Related: Putin Is Ready To Join An OPEC Freeze To be clear, any pipeline between the two nations is as unlikely as it would be long. Gazprom and Russia frankly aren’t in a position to overinvest in land-based transport infrastructure, whether that’s through the resurrection and extension of the Altai pipeline, or via an extension of the Power of Siberia project. Still, other avenues for cooperation are quite viable, and have been prosperous in the early stages. Capitalizing on already strong nuclear ties, Russia’s Rosatom State Nuclear Energy Corporation recently opened a regional office in Mumbai to facilitate project expansion in India and Southeast Asia. At Kudankulam nuclear power plant, Russia and India’s largest energy project, construction is ready to begin on the third and fourth reactors and an agreement is nearing completion on an additional two units. New sites for as many as six reactors across the country are forthcoming. Within Russia’s borders, India remains active as an upstream investor. In October, India’s ONGC Videsh purchased an additional 11 percent stake in Russia’s Vankor oil fields, bringing their share up to 26 percent. Indian companies have now invested $5.5 billion in Russia’s east Siberian fields. Rosneft’s purchase of Essar Oil’s Vadinar refinery and roughly 2,700 filling stations in cooperation with Transfigura and United Capital Partners is the clear highlight of Russia’s push into emerging markets. The move challenges Middle Eastern exporters, secures Russia’s equity crude supply in Venezuela, and provides significant inroads for further market penetration in what is forecast to be the fastest-growing oil consuming nation in the world. As the pivot develops, the number of interesting subplots in the Asia Pacific region and at home have grown too great to count. Russia’s nuclear and LNG courtships of the likes of Vietnam, Cambodia, and Thailand to name a few are something to watch. As is Russia and Japan’s ongoing territorial dispute over the Kuril Islands. Relations between the two countries are warming and a resolution may only be an energy deal or two away. And back in Russia, the partial privatization of Rosneft – and the Asian buyers that it hopes to attract – deserves more scrutiny following the detainment of Russia’s Minister of Economic Development Alexey Ulyukaev on allegations of corruption in Rosneft’s acquisition of Bashneft, which itself was seized by the state from oligarch Vladimir Yevtushenko in late 2014. As China demonstrates its willingness to wait, Russia is still seeking to define what has been a meandering, hardly predictable, though moderately successful path east.
News Article | October 31, 2016
No one does privatization like the Russians. The highway robbery that was the post-Soviet privatization years is good and gone. The new wave is mainly selling shares in state controlled enterprises. Or, as is the case of the once privately held and publicly traded gas firm Bashneft, you do a reverse privatization and call it privatization. Earlier this year, Bashneft was taken over by the Russian government. In typical Russian fashion, its majority shareholder, FORBES billionaire Vladimir Evtushenkov, was accused of money laundering, stripped of his position at Bashneft, and placed under house arrest. He was later released by the government, only his shares were later sold to Rosneft, run by Igor Sechin, a ranking member of Vladimir Putin's inner circle. In mid-October, Rosneft fired the entire executive team and board of directors and put Sechin loyalists in their place. Bashneft investors were not happy with the deal. "Rosneft is not a well managed company," said David Herne, a hedge fund manager for the Russian Growth Fund, headquartered in Moscow. "This deal is the death knell to Bashneft." On Friday, Rosneft registered its offer to buy out all minority shareholders in Bashneft, which amounts to another 37.5% or around 55.4 million shares. The price per share was not disclosed. Bashneft shares have gone up over 12% as local traders are betting the government will pay handsomely apparently. Bashneft has been one of the sexiest Russian listed oil and gas stocks around. It's up over 123% in the last five years, double that of Rosneft. Gazprom, another major state controlled energy company, is down 18% in ruble terms. The offer to minority shareholders must be made at the average weighted price on the stock exchange for the last six months prior to the transaction or the price of the last transaction. The higher price prevails. When Rosneft acquired the 60.2% government stake on October 12 it paid 24% more than the weighted six month average or roughly 3,706.4 rubles per share. The stock closed at 3,264 rubles ($51.89) on Friday.
News Article | October 21, 2016
Russian federal revenue from oil and natural gas production has declined significantly in response to low oil prices. However, Russian oil and natural gas companies’ capital investment programs have been less affected, if at all. Russia’s two main hydrocarbon taxes are calculated by formulas that result in lower tax rates at lower crude oil prices. As oil prices fall, petroleum companies retain a larger share of revenue, but government revenues from oil and natural gas production fall even faster than prices. In 2015, the Brent crude oil price, measured in U.S. dollars per barrel, declined by 47% versus 2014, and the price for the first half of 2016 is down an additional 31% versus the first half of 2015. Because of changes in the exchange rate, the decline in the Brent price as measured in Russian rubles is not as dramatic: a 16% decline from 2014 to 2015, and an additional 16% from the first half of 2015 to the first half of 2016. Over the same periods, Russian federal budget revenues from oil and natural gas fell by 21% and 29%, respectively. Many Russian petroleum companies have, in ruble terms, increased investment or seen only modest declines in investment over the same period. State-owned Rosneft and independent Lukoil are Russia’s two largest oil producers. Together, the two companies account for about half of Russia’s roughly 11 million barrels per day oil production. While oil prices and government revenues declined in 2015, Rosneft increased its capital expenditure on exploration and production for projects in Russia by 30% compared with 2014. Rosneft’s exploration and production capital expenditure in the first half of 2016 was 33% higher than in the first half of 2015. In comparison, Lukoil’s spending on exploration and production for projects in Russia declined 11% in 2015 versus 2014, and expenditures in the first half of 2016 were 2% lower than in the first half of 2015. The favorable tax structure and exchange rate for Russian oil companies, the subsequent continued high investment levels at Rosneft, Lukoil, and other Russian oil and natural gas companies, and slower production declines at old fields all have helped push production to record post-Soviet levels. Considerable investment has also been made in many new fields that have recently started up or are due to start in the near future. The Russian government has implemented or proposed various measures to increase revenues that could affect companies’ future investment plans. The Russian government has changed the two main hydrocarbon taxes (minerals extraction tax and export tax) several times in recent years. The most recent changes and proposals for upcoming changes all tend to raise the taxes paid by oil and gas companies. In January 2015, the Russian government announced its intention to sell some of its shares in several Russian companies, including Bashneft and Rosneft. Bashneft was one of Russia’s 10 largest oil producers. On October 12, 2016, the federal government sold its 50.08% controlling stake in Bashneft to Rosneft, Russia’s largest oil producer, for $5.3 billion. The Russian government currently owns 69.5% of Rosneft. It also intends to sell up to 19.5% of Rosneft, retaining a controlling interest. In addition to taxes, the Russian government also collects dividends from oil and gas companies in which the state is a shareholder. In April 2016, the Russian government directed state-controlled companies to pay 50% of 2015 net income out as dividends, nearly double the dividends companies would normally pay. Oil companies have objected to the tax and dividend increases, arguing they divert money from capital investment programs.
News Article | December 7, 2016
Russian oil giant Rosneft completed a share sale on Wednesday in what it is calling its biggest 'privatization' in years. While still owned and operated by the Russian government, Rosneft CEO Igor Sechin announced today that commodities player Glencore and the Qatar government acquired a 19.5% stake in the company. The company's shares settled only 1% higher as the news came after market hours. The stock is up 40.6% year to date in rubles. Sechin had said earlier in the day that Chinese and Kazakhstan bidders were the most likely to gain shares of the company, but Glencore and Qatar's sovereign wealth fund came out of nowhere to outbid them. The deal value based on outstanding shares was estimated to be at around $11 billion. The money went right into Russia's federal budget. Rosneft took over privately held Bashneft earlier this year in what amounted to as standard fare for the Russian government. A state run enterprise goes private; it's wealthy owner is rounded up and placed under house arrest on some money laundering or tax scheme allegation and voila, the company's assets are now in the hands of Sechin and his new foreign owners, Glencore and Qatar. Rosneft has grown exponential over the years due to this kind of Russian-style acquisition of abrupt and unusual takeovers. Rosneft also acquired the assets of Yukos Oil, then owned by Russian exiled billionaire Mikhail Khodorkovsky. Find me on Twitter at @BRICBreaker
News Article | November 15, 2016
In an effort to stave off a worse-than-expected deficit this year, Russian authorities have written a decree ordering the sale of a large slice of state-run oil titan Rosneft which will, they hope, bring in funds by the end of 2016. Igor Shuvalov, First Deputy Prime Minister, signed off on the decree and stated that he wanted the sale of the 20 percent chunk of the energy firm to be completed by early next month. Economic experts at the Kremlin forecast the nation's deficit to be around 3.8 percent of gross domestic product this year; however the figure is now looking like it will be much higher than that unless more privatization deals can be pushed through in the next two months. "We've seen massive deals go through recently with large slices of oil company Bashneft and diamond specialists Alrosa being offloaded," said Steve Rogers, Director of Asset Allocation at Orix Capital Trading in an interview on Friday. "Those two sales have raised around 380 billion rubles so the government will be looking for one, maybe two more deals possibly in the chemical or coal sectors," Rogers added. Analysts say the sale of nearly a quarter of Rosneft is likely to bring in over 750 billion rubles and would be equivalent to around 700 billion rubles coming into the budget once a 0.96 coefficient had been dialled in. The idea would be for the Rosneft board to purchase the 20 percent stake themselves, with assistance from private equity firms which would be the easiest way to push the deal through in time for end-of-year reports. The company's gas arm, Rosneftegaz, currently has a 70 percent stake in the firm and according to inside sources, the company's CEO is likely to be re-elected as chairman of the Rosneftegaz board come the New Year. The deal still needs to be passed by sector watchdogs and if it does Rosneftegaz will need to raise funds quickly, with many observers saying that the only way would be to offload their minority stake in major gas company Verkhnechonskneftegaz to a Chinese interest. For more information, please contact: email@example.com