Oil Majors Share Belarus

TNK-BP and Gazprom neft have split Slavneft commodity streams. TNK-BP and Gazprom neft, parity partners in Slavneft, are about to complete the split of Slavneft commodity streams, a project which lasted for almost seven years. The last decision in this area was to change the scheme used to deliver crude to Belarus. Now Slavneft shareholders will switch to direct crude exports which will enable them to grown their own cash flows.

As a source at TNK-BP commented yesterday, the company plans to change the scheme used to deliver crude to Belarus Mozyr Refinery where Slavneft is a major shareholder (Gazprom neft and TNK-BP each hold 49% in the company). Gazprom neft has similar intentions. "Gazprom neft plans to revise the contractual arrangements for Belarus crude deliveries," a company source said. Until this time, both companies delivered crude to Belarus Mozyr Refinery (in which Slavneft holds 42.5%) via a Slavneft's subsidiary, without maintaining direct presence on the market. This shift to new arrangements evidences that Gazprom neft and TNK-BP have completed the split of commodity streams in this country, a source at TNK-BP comments.

Vadim Yakovlev, Gazprom neft's Deputy Management Board Chairman, announced Wendnesday that Slavneft owners have also completed the split of the company's retail network in Belarus which comprises 75 retails sites and 12 oil depots. "Whereas previously Slavneft shareholders directed their marketing activities in Belarus via the company, they now do it themselves," the top manager said, "We have split the retail sites, oil depots and personnel in approximately equal halves." New owners will take the assets under their control by mid-October. Until present, Slavneft refined the crude at the Mozyr Refinery in Belarus on processing terms, then marketing the oil products via retail sites. Now Slavneft shareholderswill do the processing themselves.

Slavneft was privatized in December 2002; the company was jointly acquired by TNK-BP and Sibneft (converted to Gazprom neft in 2006). New owners began with agreeing on a parity split of the company's producing entities. However, after developing several schemes they understood that a fair division of Slavneft's fields would be impossible to arrive at. In 2005, the shareholders embarked on a lengthy procedure of Slavneft commodity stream split. All crude produced by the company (19.6 million tons in 2008) was equally split between the shareholders' traders. They further became entitled to supply equal amounts of feedstock to Slavneft's Yaroslavl Refinery, taking the resulting oil products. The last and the most lengthy project was the split of Slavneft's 550 retail sites. The process of their transfer to TNK-BP and Gazprom neft was completed only last year. Besides Russia, Slavneft operates in Belarus only.

Indeed, this last stage in the split process will not produce any material effect, as both companies already recognized Slavneft-related operations in their financials and received dividends from the company, analyst Denis Borisov of "Solid" investment company says. Natalia Milchakova of "Otkrytie" investment and financing company adds, however, that once the shareholders take these operations under their control, they will be able to increase their cash flows by receiving proceeds directly, rather than via Slavneft.

Source: Kommersant



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