U.S. News

Eni, Enel Win YUKOS Auction after Gazprom Deal


Italian energy groups Eni and Enel won a Russian state auction for the gas assets of bankrupt oil firm YUKOS on Wednesday, paying 151.536 billion roubles ($5.83 billion).

The win gives Eni and Enel a coveted foothold in the Russian upstream sector and follows months of talks with Russian gas monopoly Gazprom, which said on Wednesday it had an option to repurchase the main YUKOS asset from the winners.

"The results were predicted a long time ago and once again confirm that there cannot be surprises when it comes to sales of big energy assets in Russia," said Valery Nesterov, an oil analyst from Troika Dialog brokerage.

Russia's President Vladimir Putin and Italian Prime Minister Romano Prodi talked on Tuesday, a discussion the Kremlin said covered economic cooperation as well as other topics.

Putin's approval is key to any large energy deal for foreign firms in Russia as the Kremlin has been tightening its grip over the economy, especially the energy sector.

The sale on Wednesday included YUKOS's gas production firms Arcticgas and Urengoil and a 20% stake in Gazprom Neft, the oil subsidiary of Gazprom.

Gazprom has said it has a call option to buy the Gazprom Neft stake from Eni and Enel in case their vehicle Enineftegas won the auction. It did not disclose the price.

Enineftegas is 60% owned by Eni and 40% by Enel, the two firms said after the auction.

Reserves at a Premium

The Gazprom Neft stake has a market value of $4 billion, which implies Eni and Enel paid $1.8 billion for the rest.

Nesterov said his data showed Urengoil has 1.46 billion barrels of oil equivalent in reserves, while Arcticgas has 2.78 billion boe. He put the total reserves value of both firms at $540 million.

Enineftegas outbid Russian state-controlled oil firm Rosneft and Yunitex. Russia's number two gas firm Novatek, itself 20% owned by Gazprom, had said it had a call option with Yunitex for some assets of YUKOS.

"We have always believed that the apparent competitiveness for Lot 2 was superficial, and that Gazprom continues to heavily influence the composition of the bidders and the result of the auction," said Alexander Burgansky at Renaissance Capital before the auction.

YUKOS shareholders say the sell-off is illegal and have threatened to sue anyone buying YUKOS assets, alleging that the Kremlin has deliberately destroyed what was once Russia's most valuable company in order to punish the political ambitions of its main owner, Mikhail Khodorkovsky, and to cement control of Russia's energy industry.

The auction was the second YUKOS sell-off and it went according to the Kremlin's script like the first, analysts said.

Russia has already sold off YUKOS's 9.4% stake in Rosneft, which Rosneft itself bought for $7.6 billion, and plans to sell its other assets within months to pay off its $26 billion debts.

Analysts say Rosneft is widely expected to win the lion's share of the series of auctions and has arranged a $22 billion credit line that helped fund its win at the first auction last week.