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Gazprom Neft May Be Integrated into Parent Company
The board of directors of Gazprom will consider two strategies for the company's oil business on September 27. The board has to decide whether to preserve Gazprom Neft's independence or to make it a division of Gazprom. Consultants to the monopoly are telling it that integration into the parent company could reduce its capitalization. The Gazprom press service revealed the agenda of the board meeting yesterday. The main issue board members will face is choosing a strategy to meet the goal set at their May 25 meeting of increasing the monopoly's oil production from 45 million metric tons in 2005 to 80 million tons in 2020.
However, according to information obtained by Kommersant, that strategy has been a source of conflict between the two deputy chairmen of the Gazprom management board Alexander Ryazanov, who is also president of Gazprom Neft, and Alexander Ananenkov, who manages domestic sales of all of Gazprom's energy resources. Ryazanov favors the preservation of Gazprom Neft as a vertically integrated part of Gazprom and of transferring all the monopoly's oil assets to it. He is ready to change Gazprom Neft from a joint stock society (Russian OAO) to a limited liability society (Russian OOO) as well.
McKinsey and Citigroup prepared potential development strategies for the Gazprom board. McKinsey advised that there were more advantages to preserving the independence of Gazprom Neft. In particular, its report notes that its capitalization will remain higher than if it is “dissolved” in the gas company, since that corresponds to the market's expectations of financial transparency. An advantage of integrating Gazprom Neft in the parent company, however, would be a reduction of management positions in the structure Gazprom, although it would cost about $3 billion to buy out the minority shareholders in Gazprom Neft. A high-placed Gazprom source said that Gazprom Neft's fate is so far up in the air, but would be decisively settled tomorrow.
www.kommersant.com
All the Article in Russian as of Sep. 26, 2006
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