Gutseriev Shares his Crude

Glencore has got big shares of RussNeft’s production assets.
Glencore, a company covering 3 % of all the oil sales in the world, has become a co-owner of oil production assets in Russia. The company has bought big stakes in three subsidiaries of RussNeft.
Glencore International is a private Swiss company involved in producing and marketing oil, metals and agricultural products, its turnover being about $60 billion. Glencore used to own a number of metallurgical assets in Russia, specifically big stakes in Mechel and Dalpolimetal, but sold them a few years ago. Presently the company covers 3 % of the world’s sales of oil and oil products.
It took the former president of Slavneft Mikhail Gutseriev only three years to create RussNeft. In the beginning his statements regarding the plans to produce 10 million tons of crude oil were related to his excessive impulsiveness. However many were astonished when the company started to actively acquire new assets. Currently it comprises 22 small oil producers with total reserves exceeding 600 million tons. And the oil production last year hit 10 million tons indeed. Recently a co-owner of RussNeft’s oil production assets has become an international trading company. As Glencore advised in February at its Internet site that the company had bought stakes in RussNeft’s three subsidiaries ranging from 39.8 to 49%; they are Varieganneft OAO, Ulyanovskneft OAO and SP Nafta-Ulyanovsk ZAO. According to the information of the Fuel and Energy Complex’s Central Dispatcher Board, last year these enterprises produced 2.3 million tons of crude, their feed reserves approximating 80 million tons.
It has not been disclosed who was the seller. Most likely it was RussNeft. Previously Russneft’s representatives said that the company owned 100 percent stakes of Ulyanovskneft  and Nafta-Ulyanovsk, and 91.24 percent stake of Varieganneft was in nominal possession of ‘BIN’ AKB close to Gutseriev. Close partnership with Glencore started as early as he worked in Slavneft. Being a state company Slavneft exported some of its oil via this trader and in 2001 Glencore arranged for a $160 million credit from European banks for the company.
Right away Glencore started to export the crude oil of Gutseriev’s own company, RussNeft. And as it was later found out, Glencore did a lot to promote RussNeft expansion lending it money to enable purchase of oil producing companies. Thus in December 2003 and in February 2004 an affiliate of the international  company gave two credits to RussNeft  for the total amount of $295 million to enable purchase of more than 60% of Belkamneft’s shares worth of $456 million and two other small producers in Komi and Novosibirsk oblast.
Neither at RussNeft nor at Glencore any information has been given concerning the deals that made the trader a co-owner of RussNeft’s shares. A source well-familiar with the situation in both companies, assumes that the shares of RussNeft’s subsidiaries have been handed over to Glencore in the framework of reconfiguration of the loans received by Gutseriev’s company.
FIM Securities analyst Lev Snykov estimates RussNeft’s assets that have passed over to Glencore as equal to $400-500 million basing on $0.8 crude price per barrel of the reserves and $20-30 price per barrel of the crude produced. The analyst assumes that Gutseriev had to share his stocks by way of repaying credits, and Glencore may look upon these assets as financial investment because the price of crude oil reserves keeps growing. Snykov also thinks that RussNeft might have needed money to buy refining capacities that may be useful for the company with quickly growing production volumes.
And Sergey Suverov of Gazprombank estimates the assets bought by Glencore much higher as approximating $300 million for the Ulyanovsk enterprises and $400 million for Varieganneft. In Suverov’s opinion the means left after debts repayment will be used for purchase of new producing enterprises.