Russneft

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Russneft

Type	Public Joint Stock Company
Traded as	MCX: RNFT
Industry	refining
Founded	2002
Founder	Mikhail Gutseriyev
Headquarters	Moscow, Russia
Key people	Mikhail Gutseriyev (major shareholder) Vladislav Soloviov (CEO)
Revenue	$2.21 billion[1] (2017)
Operating income	$219 million[2] (2016)
Net income	$28 million[2] (2016)
Total assets	$4.33 billion[2] (2019)
Total equity	$1.18 billion[2] (2019)
Number of employees	10,000 (2020)
Website	http://www.russneft.ru/eng/

PJSC Russneft (Russian: Русснефть) is a Russian oil company headquartered in Moscow established by businessman Mikhail Gutseriev in 2002. RussNeft is a member of the SAFMAR industrial and financial group.^[3]

Background[]

RussNeft is the only major oil company in Russia which was formed from the consolidation of privately-owned assets on the market, in contrast to the privatization of state-owned companies in the early 1990s. The company was founded in September 2002 by Mikhail Gutseriev, a Russian businessman and philanthropist, with the support of Glencore, a Swiss trader.^[4]

Early on, RussNeft included oil production operations in West Siberia, Ulyanovsk, Saratov and Penzaregions, the Udmurt Republic, and the Komi Republic. In 2006 RussNeft purchased oil processing and distribution plants in the Orenburg and Krasnodar regions, becoming a vertically-integrated oil holding company. RussNeft is currently in the top ten vertically-integrated oil companies in Russia, with a production output of 10 million tons and processing output of 9 million tons.

Some of RussNeft's assets were transferred to the oil processing holding Forteinvest and NK Neftisa, both companies owned by Mikhail Gutseriev.^[5] The Khanty-Mansi oil company and Nazymskaya Oil and Gas Exploration Expedition, both in West Siberia, merged into RussNeft in December 2014.^[6]

RussNeft Case[]

The Company owned by Mikhail Gutseriev promptly made it into Top-10 of the major oil companies in Russia, however in late 2006 a criminal prosecution started against it. In November 2006 the Investigative Committee of the Russian Federation initiated a criminal proceeding related to operations of the three subsidiaries of RussNeft — ZAO Nafta-Ulyanovsk, OAO Ulyanovskneft and OAO Aganneftegazgeologiya. According to investigation information in 2003-2004 Aganneftegazgeologiya in course of development of the fields located at Zapadno-Mogutlorskoye and Roslavlskoye licenses, produced above the allowed output and received an excessive profit in the amount of RUB 5 bn. Similar violations were discovered by the General Prosecutor's Office and during the investigations in terms of ZAO Nafta-Ulyanovsk and OAO Ulyanovskneft. The managers of these companies exceeded the quotations allowed by the subsoil licenses. The income of ZAO Nafta-Ulyanovsk from the sale of oil produced with violations made up around RUB 700 million, and the income of OAO Ulyanovskneft reached RUB 2 bn.^[7]

In late January 2007 the law enforcement authorities started investigation of the company in terms of the fact of evasion of taxes on a massive scale. On February 12, 2007 M. Gutseriev was faced a charge due to Part 2 Article 199 of the Criminal Code of the Russian Federation (Evasion of Taxes from the Legal Entity on a Massive Scale). In June 2007 that the Tax Inspection No. 1 made a tax claim to RusNeft in the amount of RUB 17.1 bn (taxes and surcharges in the amount of RUB 14.5 bn and penalty in the amount of RUB 2.6 bn).^[8][9]

On May 4, 2017 Mikhail Gutseriev also faced a charge in terms of illegal business activity (par. «a», «b» part 2 Article 171 of the Criminal Code of the Russian Federation — illegal business activity performed by a organized group of persons and referred to receiving a profit on an unprecedently large amount). The pre-trial restriction was the travel restriction.^[7]

In April 2007 the Federal Tax Service submitted eight claims to the companies, ex and current shareholders of RussNeft. Tax Authorities think that the stocks of the oil company sold its securities at the low price to evade the taxes. Acc. to the Russian Laws these transactions can be recognized as insignificant and the income from them (in this case — the shares of RussNeft itself) will be charged for the benefit of the state.^[10][11]

Late July 2007 Mikhail Gutseriev officially reported he was being pressured by the Russian government and declared he is going to sell the company to Bazoviy Element, the holding owned by Oleg Deripaska who was loyal to the Kremlin. Gutseriev left the President's position and said he is going to cease his business activity (apart from RussNeft he also owns a 50% stake in Russian Coal, etc.) and to go into research. On July 31, 2007 Lefortovo Court arrested 100% of NK RussNeft shares.^[12][13][14]

On November 9, 2007 the Arbitration Court of Appeal left the order of the Arbitration Court of Moscow unchanged, the court confirmed the legitimacy of additional tax and sanctions charge to RussNeft for the second half of 2004 and 2005 around 17 bn RUB. After this decision tax authorities will start the procedure of charging arrears.^[15]

In January 2010 Gutseriev got back a 100% control in the oil company. By the middle of April 2010 all the charges against the businessman were dropped, and the criminal cases were ceased.^[16]

Opinions[]

Apart from official reasons of initiating the cases against RussNeft, the analysts highlighted a range of others as well. One of the sources close to the government of Ingushetia said that one of the reasons is that he could arouse the anger of security services by preventing development of Rosneft in Ingushetia. Kommersant does not also include the Ingush trace in initiating a criminal case. The sources in RussNeft explained that the criminal case was preceded by the conflict of M. Gutseriev with one of the high rank executives in the Kremlin. It was less related to the oil business, but more to the political initiatives of M.Gutseriev. One of the talkers of RBC Daily reminded, that once RussNeft purchased a range of assets from YUKOS, which could have not been approved by the Kremlin, but refused to purchase Transpetrol, the Slovakian pipeline company which was of strategic significance to Russia.^[17]

Also a range of experts named one of the reasons for pressure on M. Gutseriev was his refusal to sell the company to one of the state companies for US$1 billion in 2006 – this amount seemed to be absurd to the businessman. Acc. to some information the pressure on RussNeft and Mikhail Gutseriev from the governmental authorities in Russia is connected with his financing of the opposition to Murat Zyazikov, the president of Ingushetia at that time.^[18][19]

Owners and Managers[]

Mikhail Gutseriev and his partners were the initial founders and owners of RussNeft. As of March 2009 the actual control over RussNeft was taken by to the companies Bazoviy Element, the holding owned by Oleg Deripaska, who paid 3 bn for the company, though formally the deal was not closed because it was not approved by the Federal Antimonopoly Service. Glencore also had an option for purchasing a blocking stake in RussNeft.^[20]

In January 2010 Mikhail Gutseriev managed to get back the control over the company. In April 2010 it was announced that Gutseriev is selling 49% of the company to the structures of AFK Systema, 2% of shares were sold to Sberbank. In July 2013 AFK Sistema sold 25% of shares to Bradinor Holdings Limited and 24% were purchased by Cromeld Management Limited (the Gutseriev family members were the beneficiaries of the companies).^[16][21]

M. Gutseriev owned 60% of ordinary shares of RussNeft shares, Glencore, the Swiss trader held 25%. M. Gutseriev has been the chairman of the board since February 2015.^[22] Eveginiy Tolochek is the president of the company.

On August 2021, Mikhail Gutseriev sold his share of 37,15% in RussNeft to Vemonar Holdings Ltd, a Cyprian company, owned by his brother Sait-Salam Gutseriev. According to RussNeft, the deal was made on June, 10th, 0f 2021, before the sanctions of the UK in August 2021 and of the European Union on June, 21st, of the same year, due to Mikhail Gutseriev`s connections with Belarus president, Alexander Lukashenko.^[23]

IPO 2016[]

On November 25, 2016 Belyrian Holdings Limited, owned by Mikhail Gutseriev started trading 20% of the ordinary shares at MOEX (15% of charter capital) by 550 Rub per a share. RussNeft's capitalization was evaluated at 161,8 bn RUB., 32,4 bn RUB. were attracted during IPO.

Activity[]

West Siberia Group:

• ОАО Mokhtikneft
• ОАО Varioganneft
• ОАО MPK Aganneftegazgeologiya
• ООО Beliye Nochi
• ЗАО Chernogorskoye
• ОАО NAK AKI-OTYR
• ST Golioil

Volga Group:

• ОАО Saratovneftegaz
• ОАО Ulyanovskneft

Central Siberia Group:

• ООО Tomskaya Neft^[24]

RussNeft is developing above 120 oil and gas oilfields. Oil reserves of the company as of late 208 were evaluated at the level of 600 bn tons.^[20]

“RussNeft” also owns a railway oil terminal at Zhecha in Starodubsky district in Bryansk region.

Performance Indicators[]

In 2019 the production output of the holding made up 7.2 million tons of oil per year. The increment of reserves amounted tp=o 15 million tons with the total volume of 600.8 million tons of oil equivalent.

The company has above 15.5 thousand employees (2019).

In 2018 RussNeft broke the record in geology, thus becoming a leader in the industry in terms of reserves increment (+40 million tons). In 2018 the revenue of the holding made up 176.365 bn RUB, (growth by 43% by 2017), net 11.752 bn RUB (growth by 8.7%), EBITDA — 18.276 bn RUB (growth by 39.1%).

In 2016 RussNeft performed a public offering at MOEX of ordinary shares of the Company in the amount of 20% of the total amount of ordinary shares. The received money were allocated to pay back the long-term loans and debts. In the year of offering the revenue of the holding made up 105 bn RUB, the net profit was14 bn RUB. The company maintains high performance indicators against the other oil companies in Russia.^[25]

In 2019 the producing companies of Safmar, incl. RussNeft increased oil production by 5% against 2018 up to 17.28 million tons and decreased production of gas by 1.9% down to 3.14 bcm.

In 2020 RussNeft will continue drilling at the perspective sites of Verkhne-Shapshinskoye and Tagrinskoye fields, having a significant value for development of commodities and producing strategies of the holding.

In November the Board of RussNeft approved the target plan of production for 2020 in the amount of 7.035 million tons, should the restrictions of OPEC+ will be extended after March 2020. Should the restrictions be dropped the company is ready to increase this indicator. Mikhail Gutseriev said that the company can increase production up to 9 million tons, in case OPEC+ abandon the restrictions.

Perspective projects[]

Development of Shapshinskaya Group of fields in Khanty-Mansi Autonomous Region[]

RussNeft started the development from scratch in 2004. During these times the engineering facilities were built, which allowed to start commercial operation of the field.^[26]

In 2019, the company made fully processed and re-interpreted the performed seismics and the well data of these group of fields, which allowed to improve the geological model of neokomian deposits. The results of production drilling program proved high efficiency if the geological and exploration works performed. In 2019 the cumulative increment of the resources in Ach, formations and Verkhne-Shapshinsky formation made up 1.6 million tons of oil, and 10 million tons at Tagrinskoye field а of high margin oil.

In 2019 within the fame of geological survey of Khanty-Mansi field survey of Khanty-Mansi field the Company processed and interpreted the seismics, which showed the area for further study and performing derailed studies.

Gas Projects[]

RussNeft devoted special attention to implementing the projects targeted at increasing the level of efficient use of APG, it also focuses on the programs of production of natural gas, gas processing and gas energy.^[27]

Within the program of APG utilization the Company formed and approved the strategies of gas complex of the holding. All the necessary measures were taken for implementing the Order of the Russian Government dd. 08.01.2009 No. 7 On the measures for reducing the air pollution with flaring products, in particular serious capital investments were made targeted at building the facilities of engineering infrastructure of all the subsidiaries.

According to 2019 the actual gas production in the company made up 2.451 million cm, among them natural gas is 258 million cm. Totally 2.193 million cm of APG were produced at the fields of RussNeft. The gas utilization was maintained at the 95% level, thus satisfying the requirement of the government targeted at reducing the effect of the production on the environment.

Nowadays the holding maintains the reasonable APG utilization, increases oil production, reduces the greenhouse effect. In 2019 to maintain the gas production output, the Company continued the works for the upgrade and expansion of gas infrastructure. RussNeft subsidiaries focused on environmental issues in oil production. The complex of technical and technological and organizational activities, providing the steady and no accident work at oil field facilities.^[28]

International Projects[]

RussNeft successfully implements international projects.

In Autumn 2006 the Company signed an agreement with the Azerbaijani company SOCAR on cooperation within the oil producing project Zyh-Govsani in the South of Apsheron peninsula. In May 2007 RussNeft obtained 37.5% in Binagady project which involves rehabilitation of old fields near Baku.^[29] Nowadays, the production in Azerbaijan makes up 500 thousand tons from such major fields as Binagadi, Kirmaki, Chakhnaglyar etc., the oil reserves (as of late 2018) shall be estimated at 12 million.^[30]

Awards[]

RussNeft has been the awardee of many professional awards:

• The award of the contest Black Gold of Yugra as the Most Vertically Integrated Oil Company, performed by the administration of Khanty-Mansi Autonomous Okrug (2004)
• The awardee of the contest “Acting Persons of the Century” in the nomination “Breakthrough of 2005”, organized by the Russian Academy of Sciences
• Winner of the contest Best Company of 2005 arranged by the Ministry of Energy of the Russian Federation
• Awardee of the contest “Company of the Year”, organized by the Ministry of Regional Development and Trade and Industrial Chamber of the Russian Federation.
• Awardee of the Russian award Company of the Year, 2011, arranged by the State Duma of the Russian Federation.
• Awardee of the International contest “Award of the millennium ”for application and efficient use of hi-end modern technologies, held by the Ministry of Economic Development of Russia (2012).

See also[]

• List of petroleum companies

References[]