RUSSIA - Tyumen Oil Co. (TNK).

Founded on Aug.15, 1995, TNK aroused great interest because of its big oil producing units, like Nizhnevartovskneftegaz, and the Ryazan refinery close to Moscow. But soon after the group was formed, it became known that Nizhnevartovskneftegaz had huge debts from outstanding taxes, which resulted in a complaint filed with the prosecutor general's commission in Nizhnevartovsk. With the company having bribed its way through the local authorities, however, the commission said TNK's management did not violate the law. Now TNK is producing about 540,000 b/d of oil and has recoverable reserves of about 6.6 bn barrels.

TNK's CEO Semyon Kukes, a Russian who in the US worked for Phillips Petroleum and Amoco, in 1999 tried to grab the most valuable assets of bankrupt Sidanko at a fraction of their real worth. In the end he got a deal with BP under which TNK returned the oil producing Chernogorneft to a revived Sidanko in exchange for a blocking 25%-plus one share stake in the latter firm. But TNK kept the other oil producer, Kondpetroleum (see Gas Market Trends).

Thanks to high oil prices, TNK made a $210m net profit in 1999 on a turnover of $1.87 bn, compared with a net loss of $235m in 1998 on a turnover of $1.75m. But its operating expenses remained stubbornly high, declining by only 13%.

TNK has a bad reputation, both among the Russians and in the West. It is jointly owned by the Alfa Group (a financial-industrial conglomerate which includes Russia's largest private bank, Alfa Bank, and controlled by ex-foreign trade minister Piotr Aven) and US-based investment group called Access Industries/Renova of Leonid Blavatnik (a Russian US citizen). The shareholders in 1999 boosted their stakes from a combined holding of 50.2% in a tender for the government's remaining 49.8% equity. They paid a mere $90m for this, with the tender widely regarded as tailored to ensure their control. Through bribes and obscure dealings, TNK in 1999 ruthlessly exploited Russia's labyrinthine bankruptcy laws in a bitter battle with BP for control of Sidanko (see the next profile). TNK's campaign to take over Tura Petroleum, a 50-50 JV of its Tyumenneftegaz and Black Sea Energy of Canada, which also involved bankruptcy proceedings, was another example. On June 28, 2000, police raided TNK's offices in Nizhnevartovsk. This was linked to TNK's battle with Slavneft, in which the Alfa Group had bought a minority stake. Semyon Kukes, who spent ten years in the US working for Phillips and Amoco, has intimate links with the top authorities in Tyumen. TNK's board chairman, Leonid Roketsky, is the region's governor.

On the other hand, the April 2000 decision of US Ex-Im Bank to go ahead with a $500m loan to TNK has helped offset some of the negative publicity about this company. The loan is to help finance a major upgrading of the 370,000 b/d Ryazan refinery and rehabilitate the giant Samotlor field. TNK signed the PSA for this in 1999. The field contains 1 bn barrels of oil. Cost oil will be shared 78:22 between TNK and the state. Profit oil will be split evenly. Among its other projects, TNK in early 2000 won the right to explore and develop the Synatyskaya block in the northern republic of Komi which includes ten oil structures. In April TNK got two blocks in Irkutsk, in the Russian far east, near the border with China. Khanda and Yuzhno-Ust-Kut are said to have 10 TCF of gas and 135m barrels of condensates. Kukes has approached BP about possible co-operation deal over the adjacent Kovykta gas field, a giant in which the British major has a big stake and which will be the source for a 2.4 BCF/d pipeline to China. Kukes, who in 1999 said his aim was to turn TNK into the most efficient oil company in Russia, hopes chances of co-operating with BP are strong. He is also offering BP co-operation in other fields.

Downstream, TNK has 100 gasoline stations in the Moscow and Ryazan areas. It is supplying them with diesel which complies with EU Auto Oil specifications, containing 0.034% of sulphur.TNK, which has 650 petrol stations in Russia, is to spend $270m on upgrading the Ryazan refinery. It co-operates with Texaco in marketing, trading and retailing in Russia, Belarus and Ukraine. Since the beginning of 2000 the two firms have had a lubricants marketing JV. In April they signed an accord under which Texaco was to provide commodity risk management advice and related support to TNK. In mid-2000, TNK won a bid for 67.41% of Ukraine's 320,000 b/d Lisichansk refinery. It paid $9.76m and assumed $63m in debt, which TNK would pay out in five years. TNK said that, with this acquisition, it will become the top producer of fuels in Ukraine.