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The planned sale of a majority stake in state-owned oil company Bashneft has been postponed until 2017. Among the reasons cited for the decision was the unfavorable oil market as well as a conflict between the two main bidders for the stake: Rosneft and Lukoil.
According to Bloomberg, the Kremlin was not in favor of Rosneft acquiring its smaller peer, although no details emerged as to what the reason for this stance was. Russian daily Kommersant, however, reports that the final decision for the delay of the stake sale was prompted by a conflict between Rosneft and Lukoil related to their respective bids for Bashneft.
Kommersant cites a federal government official as saying that the decision for the delay was made by the PM, Dmitriy Medvedev, because the situation around the bidding process had become too tense, creating conflicts between government and presidential officials. Kommersant’s source added that the main problem was President Putin’s position: he had not made it clear one way or the other at the meetings that discussed the pros and cons of a stake sale.
It looks like Rosneft and Lukoil were in a heated bidding war, with Lukoil emerging as the winner. Bloomberg, however, cited Russia’s largest private oil company as saying the stake was overvalued in the current market environment. This may well be a defense reaction, since Kommersant’s sources believe the delay is in fact a victory for Rosneft and a direct result of the efforts of Igor Sechin, its chief executive to tip the scales in favor of Rosneft.
Earlier, when reports emerged that Putin doesn’t want Rosneft to win the bid for Bashneft, media said that Sechin’s main argument was that the acquisition would make Rosneft itself a much tastier morsel – Moscow is putting up for sale 20 percent of the state giant. If those who say the delay is a direct result of Sechin’s actions are right, then we may indeed see a bigger and more expensive Rosneft next year.
If it’s the current market environment that is to blame for the delay, then the bidding war may be delayed even longer, if prices don’t recover sufficiently.
Moscow is selling 50.08% in Bashneft as part of efforts to plug its budget hole. The deal has been valued at about 315 billion rubles (US$5 bln).
By Irina Slav for Oilprice.com
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Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.