ECONOMY

Further bids are expected for a stake in Romania’s SNP Petrom

CERNAVODA, Romania – Russian oil company TNK-BP filed a letter of interest in Romania’s national oil firm SNP Petrom, a government minister said yesterday, becoming the second regional player eyeing the long-delayed privatization. The sale is seen as a test case for post-communist Romania’s willingness to let go of strategic assets and is expected to draw interest from regional companies seeking to expand in a growing retail market. TNK-BP, Russia’s third-largest oil firm and half-owned by oil giant BP, is the first to file an application ahead of a Friday deadline, although Poland’s PKN Orlen said this month it was seeking partners for a bidding consortium. «As of this morning we had received one letter of interest, from TNK-BP,» Economy Minister Dan Popescu told reporters in the southern town of Cernavoda. The sale of a controlling stake in Petrom to a strategic investor or consortium is expected to be worth up to $1 billion and is a key element of Romania’s accords with international lenders. The Economy Ministry plans to sell 33.34 percent in Petrom outright, while the bidder would also have to buy newly issued shares to raise its stake to 51 percent. The sale is scheduled to be completed by the end of March 2004. «We are in contact by telephone with other major companies and we hope they will submit (letters of interest) by today,» Popescu said. «We don’t exclude American companies.» Analysts said Russian and regional companies, vying to consolidate central Europe’s fragmented fuel sector and betting on consumption growth among the aspiring European Union members, are sure to bid. «It’s an interesting announcement,» said Florin Petria, editor in chief of a prominent Romanian business magazine. «It shows that Lukoil doesn’t have a monopoly on interest in the region.» Russia’s Lukoil already owns a refinery and several petrol stations in Romania and last month beat Hungary’s MOL in a bid to buy 70 percent of Serbia’s second-largest fuel chain, Beopetrol. Russian companies are looking for retail business in central Europe, which could also be used as a springboard to take their cheaper oil to western European markets, analysts say. At the same time, MOL, Austria’s OMV and Poland’s PKN are all trying to consolidate. Romanian officials had initially said bidders for Petrom, which has around 60 percent of the domestic market, could include US giant Chevron Texaco, France’s Total or Royal Dutch/Shell. «We had a number of talks with Chevron, but they are more interested in an international project for a pipeline linking (Black Sea port) Constanta with Trieste and less in Petrom’s privatization,» Popescu told Reuters. Petrom, with a work force of over 60,000, has both upstream facilities – drilling 6.0 million tons of crude and 6.1 billion cubic meters of natural gas per year – and downstream operations such as refining and retail sales. But analysts say multinational companies, more focused on upstream facilities, are unlikely to be interested in Petrom. «Investing into downstream projects would have a negative effect on their share price as returns are lower,» said Tamas Pletser, regional oil sector analyst at Erste Bank. Popescu said the deadline was end-November for non-binding bids and early 2004 for binding bids.