RUSSIA - Part 2 - The Oil & Gas Producers

There are 21 Russian groups and companies accounting for the bulk of the Russian Federation's crude oil output of 6m b/d. Gazprom, the biggest firm in Russia, produces more than 96% of the federation's natural gas requirements and exports.

The integrated groups own most of Russia's 28 oil refineries. Firms in relatively more autonomous member-republics include Tatneft of Tatarstan and Bashneft of Bashkortostan. There are also independent Russian oil refining and distribution companies (see profiles on following pages and Downstream Trends). There are two categories of oil producing joint ventures: JVs operated by foreign companies, like Polar Lights involving Conoco, and JVs operated by Russian companies. The second category includes Ortneft, Vatoil, LUKoil-AIK and Yoganoil.

                     THE MAIN RUSSIAN OIL COMPANIES*

          Market Captln  Production       Mkt Cap/  Reserves

Company      (US$m)      ('000 b/d)     Production  (m barrels)

LUKoil         13,187       1,235          29.3       11,640

Yukos           4,832         708          18.7        9,728

Surgutneftegaz  4,191         675          17.0        5,460

Sidanco         3,719         445          22.9         9,633

Tatneft         2,601         488          14.6         6,090

Sibneft         2,439         361          18.5         4,145

Slavneft        2,373         257          25.3         1,300

Eastern Oil Co. 1,907         229          22.8         2,100

Tyumen          1,687         420          11.0         5,770

Onaco           1,061         159          18.3         1,430

KomiTek           395         102          10.6         1,625

* By Feb.9, 1998. Source: Natwest Markets Europe as published by FT Energy Economist in April 1998.

                RUSSIA'S MAIN INTEGRATED OIL COMPANIES

     LUKoil            Producing Units     Refineries

     Langepasneftegaz     Volgograd

     Uraineftegaz         Perm

     Kogalymneftegaz      Novoufimsk

     Permneft             Ufa

     Niznevolzhskneft

     Astrakhanneft

     Kaliningradmorneftegaz

    Arkhangelskgeoldobycha

LUKoil crude oil/condensate production Mid-Aug. 1998:

 1.3 million b/d LUKoil's usable refining capacity: 400,000 b/d

     Yukos             Yuganskneftegaz     Novokuibyshev

     Samaraneftegaz    Kuibyshev

     Syrzan

Crude oil/condensate production Mid-Aug. 1998: 730,000 b/d

 Usable refining capacity: 590,000 b/d.

     Surgutneftegaz     Producing Units     Refineries

     Surgutneftegaz     Kirishi

Crude oil/condensate production Mid-Aug. 1998: 685,000 b/d

 Usable refining capacity: 390,000 b/d

     Sidanko            Varyeganneftegaz     Saratov

     Kondpetroleum      Angarsk

     Chernogorneft      Khabarovsk

     Udmurtneft

     Saratovneftegaz

Crude oil/condensate production Mid-Aug. 1998: 460,000 b/d

 Usable refining capacity: 750,000 b/d

     Tyumen Oil Co.     Nizhnevartovskneftegaz     Ryazan

     Tyumenneftegaz

     Obneftegazgeologiya

Crude oil/condensate production Mid-Aug. 1998: 450,000 b/d

 Usable refining capacity: 360,000 b/d

     Sibneft     Noyabrskneftegaz     Omsk

Crude oil/condensate production Mid-Aug. 1998: 400,000 b/d

 Usable refining capacity: 566,000 b/d

     NK Rosneft         Dagneft       Komsomolsk

     Kalmneft           Krasnodar

     Krasnodarneftegaz  Tuapse

     Purneftegaz

     Sakhalinmorneftegaz

     Stavropolneftegaz

     Termneft

Crude oil/condensate production Mid-Aug. 1998: 270,000 b/d

 Usable refining capacity: 270,000 b/d

     Slavneft     Megionneftegaz     Mozy (Belarus)

     Yarolavl

Crude oil/condensate production Mid-Aug. 1998: 260,000 b/d

Usable refining capacity: 680,000 b/d

     East Oil Co. (VNK)     Tomskneft     Achinsk

     Tomskneftegazgeologiya

Crude oil/condensate production Mid-Aug. 1998: 235,000 b/d

 Usable refining capacity: 300,000 b/d

     Orenburg Oil (Onako)     Orenburgneft     Orsk

Crude oil/condensate production Mid-Aug. 1998: 160,000 b/d

 Usable refining capacity: 200,000 b/d

     KomiTek     KomiNeft     Ukhta

Crude oil/condensate production Mid-Aug. 1998: 110,000 b/d

 Usable refining capacity 150,000 b/d:

AUCTIONS OF FEDERAL OIL SHARES: NOVEMBER-DECEMBER 1995

               % Of Shares  Floor     Price

Company          Offered    Price      Paid     Winner

Surgutneftegaz     40       $66.6m     $88m     SNG Pension Fund

Lukoil              5       $35m       $35.01m  Lukoil Via

Imperial Bank

Yukos              45      $150m      $159m     Bank Menatep

Sidanko            51      $125m      $130m     International

Finance Corp

Sibneft            51      $100m      $100.3m   Stoiochny Bank

Sberezhny

Nafta Moskva       15       $20m       $20.01m  Nafta Moskva

As this table shows, the amounts of money paid for large shares in these companies in the first privatisation wave were ridiculously low (see background in the 1996 survey of Russia, Vol. 47).

The oil industry in Russia is facing enormous problems. These range from a deep financial crisis in the country to lack of modern equipment and technology. As a result, the average production per well - excluding more than 40,000 wells made idle in recent years - is less than 70 b/d. To compare, the average production per well in Saudi Arabia is 5,780 b/d. For completely different reasons, the average in the US is 12 b/d and in Canada it is 33.5 b/d.

The oil producing companies, from LUKoil down to the smallest one, have all been hit hard by the fall in world crude oil prices this year. They have also been hit by higher taxes and excise fees imposed on them by the Moscow government. Costs of crude oil being produced, together with government taxes and pipeline fees, have risen to almost $10/barrel. This is the level to which the market price of Urals, Russia's main export blend of crudes, has reached in recent months.

The Russian oil companies have sought "strategic alliances" and partnership deals with Western majors. Following LUKoil's JVs with Arco and Agip, a strategic link was agreed in November 1997 between Gazprom and Shell and between BP and Sidanco. An Elf-Sibneft link is under negotiation in parallel to a Yukos-Elf link being negotiated separately as an alternative. A Yukos- Sibneft merger, in which Elf and Mobil were to be involved as partners to

create the biggest oil group in Russia called Yuksi, was agreed in late 1997, but this collapsed in May 1998. Each of the other companies is negotiating some form of alliance with a Western major (see Downstream Trends).