LUKOIL has a plan to sell Ukhta refinery at a discount

LUKOIL has a plan to sell Ukhta refinery at a discount


Photo: Oleg Yakovlev / RBC

LUKOIL is ready to sell cheap became a non-profit Ukhta refinery capacity of about 4 million tons per year, along with gas stations or individually to invest the proceeds in production projects in Russia, RBC reported a source in the company. Among the likely bidders for market participants referred to several structures, including RussNeft and “New Thread”

LUKOIL decided to sell a third of its gas business, the profitability of which has suffered from growth of the tax burden, is also seeking a buyer for its Ukhta refinery in the Komi Republic, processing about 4 million tons of raw materials per year. A source in the company told RBC that the production can be sold at a discount to the market price, and together with the network of filling stations (more than 700 filling stations in Central Russia). This is also knows one of the consultants for oil companies.

According to sources RBC, the likely contenders for the plant and the network of filling stations are “RussNeft” Mikhail Gutseriev, “Forteinvest” his nephew said Gutseriev, the “New thread” whose main asset is Antipinsky oil refinery (co-owners of the company are Dmitry Mazurov and fellow student of Vladimir Putin associate Nikolai Egorov) and others. A source in Luciole announced that the company has received proposals from three independent and one vertically integrated oil company. According to him, the company is also preparing proposals for foreign investors, in particular, to China’s CNPC. The proceeds from the sale of the money the company intends to invest in mining projects in Russia, which are now more cost-effective than recycling, experts say.

In a press-service of LUKOIL have not confirmed and have not denied training sales Ukhta refinery and network of filling stations and did not comment on the list of candidates for these assets. “The company is committed to optimising its assets according to the market situation,” explained her spokesman.

Analysts believe that the Ukhta refinery may cost no more than $50 million, “he Hardly is worth more than $50 million, there is still great uncertainty about the profitability of the least modernized factories; she is now at a record low, and this year, this refinery will teeter on the verge of profitability” — says the Director of the division of corporations, Fitch Dmitry marinchenko. Analyst VTB Ekaterina Rodina believes $50 million is a “very good price for that asset, although it is difficult to assess”.

Ukhta refinery

Production with current capacity of 4 million tons of crude oil was commissioned in 1934, in 1999, it became part of LUKOIL. In 2014, the Vice-President and co-owner of the company Leonid Fedun estimated the cost of the plant of $114 million, pointing to “Vedomosti”. According to the site of the plant, it annually produces 1 million tons of diesel fuel and 500 thousand tons of gasoline of Euro-5. Of the total number of products 45 per cent light oil and 37% of the fuel oil, the plant also produces bitumen. The processing depth amounts to 63%. LUKOIL in March 2015 wanted to close the plant due to unprofitability in connection with the increase of the duty on oil in the course of the tax maneuver. Net profit Ukhta refinery in 2015 amounted to about 3 billion rubles, and in 2016 fell to 450 million rubles, according to the materials of LUKOIL. Profitability of its filling stations of the company also decreased, although not significantly: EBITDA retail fuel business in the first quarter of 2016 amounted to 9.2 billion rubles, and by the end of the same period in 2017 expected to be about 1.4 billion rubles (a drop of 85%).

Potential buyers

In addition to the “RussNeft”, “Forteinvest” and “New Thread” interested in buying the Ukhta refinery can be, according to sources RBC, the structure of Yuri and Alexei Hatinh (own several medium-sized oil assets: company “Dulisma”, 29.9% stake in Exillon Energy, “Irelyakhneft”, “Negusneft ‘” and the company “the polar lights”), “Yenisei” (which owns a refinery in Usinsk with a capacity of 2.5 million tonnes of oil and oil production in the Nenets district and Komi Republic). According to SPARK, “Yenisei” is owned by Swiss and British institutions. Forbes called the beneficiaries “Yenisei” the son of the head of “Rosatom” Sergey Kirienko Vladimir, who owns about 40% of the company, and Jahan Pollyeva (head of the Secretariat of Kiriyenko when he was Prime Minister) with a package in 10%. Now Pollyeva, a former speechwriter Dmitry Medvedev and Vladimir Putin, is the head of the state Duma.

“Rosneft”, according to a source RBC in the company, is not interested in processing assets, with its own recently acquired oil refinery “Bashneft”. In a press-service “Rosneft” did not respond to a request RBC. The fact that the state company had expressed its desire to acquire assets, confirmed by the source in LUKOIL. Press-Secretary of “Gazprom oil” the company’s interest in the plant and gas station competitor has not commented. The source of RBC in the company alleges that she was not interested to purchase any plant or filling stations as a single lot, as the Ukhta refinery requires a serious investment in the production of light oil products and is far from the fields of “Gazprom oil”. Representatives “Surgutneftegaz” and “RussNeft” has not responded to a request to RBC. With the “New thread” and Hodinami could not be reached.

The load of oil

The Manager of the production unit of one of the subsidiaries of the LUKOIL claims that the plant may be of interest to the buyer in the event that the seller promised him the contract for the supply of its own oil and the sale of fuel oil for processing at the nearby oil refinery “Permnefteorgsintez”. Without providing the plant raw material he will be too expensive logistics. To repurpose it for the growth of the production of gasoline or diesel fuel, the interlocutor considers too costly.

Compared to the price level of 2014, Ukhta refinery, despite the investment of LUKOIL in its modernization, could be impaired at some times, said General Director of “Analysts commodity markets” Michael Turukalov. The main reason he calls the effects of the tax maneuver, which produce oil become unprofitable. Buy Ukhta refinery, together with filling stations in Central Russia, in his opinion, is unprofitable because of the logistics: Ukhta refinery is focused on the market of the North European part and is not present on the market of Central Russia.

Foreign investors (including Chinese) are unlikely to be interesting Ukhta refinery and filling stations of LUKOIL as a single lot or separately, says portfolio Manager Asset Management Sergey Vakhrameev. The main reasons he called the high cost of plant upgrades (cheaper to build new refineries) and the inability to supply cheap oil to plant, and sufficient quantity of petroleum products to filling when buying assets in one lot. Russian companies face exactly the same decline in the profitability of the processing units, so is unlikely to want to buy assets at the market price, reflects the expert. He believes that investment in exploration and extraction of oil for LUKOIL more efficient.