THE TIMES (UK): Oil majors cannot spurn Yukos morsels: “LIKE beetles scurrying for cover after a stone is lifted, the oil companies of the West feigned disinterest yesterday in the $8 billion (£4.3 billion) fire sale by the Russian tax ministry of Yuganskneftegaz, the main oil production subsidiary of Yukos.”: “BP, Shell and ExxonMobil either deny interest or decline to comment on the Yugansk sale. Nonetheless, each will scrutinise the assets. With their North Sea and North American wells depleting, they cannot ignore the 1 million daily barrels of crude:” (ShellNews.net) 20 Nov 04

Analysis

By Carl Mortished, International Business Editor

November 20, 2004

LIKE beetles scurrying for cover after a stone is lifted, the oil companies of the West feigned disinterest yesterday in the $8 billion (£4.3 billion) fire sale by the Russian tax ministry of Yuganskneftegaz, the main oil production subsidiary of Yukos.

Alone among the shy giants, only ENI of Italy was willing to admit yesterday there might be choice morsels in the Yukos carcass.

Talk of expropriation makes oilmen nervous, arousing unpleasant memories of assets confiscated decades ago by autocrats in Libya and Venezuela. There is the potential legal risk of suit from injured Yukos shareholders, the risk of being hauled into a New York court, accused of taking part in a fraudulent transfer of assets. And there is reputational risk.

The Italian oil major was hoisted into view this week by an indiscreet Italian government official who named ENI as a potential bidder after meetings in the Kremlin.

ENI is the wild card among the oil majors, having a history of dealings in countries where some rivals, mainly those with strong US links, fear to tread. ENI had a relationship with Libya during the period of US sanctions and has built a position in Iran. It has close links to Gazprom, the company most likely to lead the bidding for Yugansk, through their joint interest in Blue Stream, a gas pipeline under the Black Sea linking Russia to Turkey.

BP, Shell and ExxonMobil either deny interest or decline to comment on the Yugansk sale. Nonetheless, each will scrutinise the assets. With their North Sea and North American wells depleting, they cannot ignore the 1 million daily barrels of crude produced by Yugansk, nor the Priob oilfield’s 6 billion barrels of reserves. Once the disposal of Yugansk is completed, a carve-up of the remaining Yukos assets will be less controversial.

Even so, Moscow analysts reckon other players could be involved. “There is a plausible scenario whereby Gazprom’s financial risk is funded by foreign utilities,” said Christopher Granville of UFG, the Moscow brokerage. E.ON, the German utility, is mooted as a potential partner and investor. The company owns Ruhrgas, which in turn holds a 5 per cent shareholding in Gazprom and a seat in the Gazprom boardroom.

The reward for E.ON could be supplies of gas or access to the electricity sector. Gazprom has stakes in the Russian power grid and a power company.